Embedded value of Asia's life insurers grows 7.2% in 2023

Japan and Taiwan post strong gains in insurer-embedded value.

The embedded value (EV) of Asia’s multinational corporations (MNCs) and domestic life insurers represented a growth average of 7.2% in 2023. However, results varied across different markets. 

In line with global trends, bond yields decreased in most Asian markets during 2023, resulting in diverse responses throughout the region, unveiled Milliman’s 2023 embedded value results: Asia.

On a per-market basis, India (+24.1%), Taiwan (+15.4%), and Japan (+17.9%) reported significant increases in EV. 

Hong Kong (+4.4%) and Singapore (+4.2%) saw modest gains, while China (-0.4%), Thailand (+1.0%), Malaysia (-1.1%), and Vietnam (+1.1%) had flat results. 

Indonesia experienced a notable decline in EV, down 17.7%. India's growth was driven by a high discount rate, a strong equity market, and new business contributions. Taiwan's increase was primarily due to unrealised capital gains on fixed-income assets. 

For MNCs, EV growth ranged from -6.3% to +6.9%, with Japan showing the widest variance between -24.3% and +41.9%. 

The general decrease in bond yields led to an increase in the adjusted net worth (ANW) of insurers due to higher market values of bonds. 

Most Asian markets saw growth in the value in force (VIF), except China, Malaysia, Singapore, and Vietnam, with Japan posting the highest VIF growth at 36.4%.

New business value (VNB) in Asia rose overall by 9.9%. Hong Kong reported a dramatic increase of 102.8%, driven by the return of Mainland Chinese visitors after travel resumed in February 2023. 

Thailand, Indonesia, and China saw VNB increases of 17.1%, 13.6%, and 6.5%, respectively, while Vietnam and Japan experienced declines of 66.7% and 4.1% due to reduced sales volumes and lower new business margins. 

New business margins (NBM) generally contracted in 2023, with Taiwan and Hong Kong seeing decreases of 6.2% and 9.4%, respectively, due to shifts towards longer premium payment terms and changes in product mix.

Price-to-embedded-value ratios remain below 100%, except for AIA and private-sector Indian life insurers. 

The return on embedded value (ROEV) measure, primarily reported by Indian insurers, saw significant reductions in 2023 due to EV growth. 

EV methodologies vary across the region, including traditional embedded value (TEV), European embedded value (EEV), market-consistent embedded value (MCEV), and Indian embedded value (IEV). 

Chinese and Taiwanese insurers report on a TEV basis, whilst Japanese insurers use MCEV, market-consistent EEV, or modified MCEV approaches. Most Indian insurers report EV on an IEV/MCEV basis. 

The implementation of IFRS 17 from 1 January 2023, in certain markets has impacted EV reporting, with European MNCs like AXA and Generali no longer reporting EV results for their Asian subsidiaries.