| The study object of this thesis is Embedded Value. Embedded Value is the sum of the value of in-force business and the adjusted net worth of life insurance company, which is a special financial reporting and value measuring tool in life insurance company. In foreign countries, Embedded Value has been used to assist managing and making decisions in life insurance companies. At home, it is mainly used to measure life insurance company's value when the company increases it's capital and issues stock. The CIRC's proclaim about to fulfill the promise when China joined in WTO indicates that China insurance industry had opened on Dec 11th 2004. Facing the competition of international big life insurance companies which are far off better than domestic companies in capital, experience, management and technology, China life insurance companies must improve their strength entirely, in this process, Embedded Value have many uses. In the course of issuing stock, increasing capital, enhancing solvency, evaluating Embedded Value is the key step; in the aspects of improving levels of managing and making decisions and implementing value-based management, Embedded Value is a very effective tool. While now in China, the study on Embedded Value is fewer, in order to extend the application of Embedded Value in China, this thesis focuses on embedded value.The study sequence of this thesis is as below: first, it explains the valuation principle of Embedded Value in the perspective of company; second, it studies the sensitivity of Embedded Value to the actuarial assumptions in the perspective of products; finally, it states the author's thought of application of Embedded Value in China life insurance industry.In the sequence, this thesis includes a preface and three chapters.In the preface, it firstly explains the study signification both in theory and reality. In theory, measuring the life insurance company's performance using Embedded Value is an important problem in international life insurance industry in recent years; in reality, Embedded Value is an effective tool for China life insurance companies to improve their levels of managing and making decisions and their competition completely. Then, it explains the study status in quo at home. There are fewer study on Embedded Value and the study is not systemic and profound. For the convenience of following study, it also gives the definitions of Embedded Value in perspective of both company and product.In the chapter one, it mainly expounds the principle and method of evaluating Embedded Value in the perspective of company. There are four sections in this chapter. The section one introduces Embedded Value in the sequence of development history, present application, main advantages and limitations, newly development. The section two presents relation between Embedded Value and the value of company and analyzes the variance of Embedded Value. The variance of Embedded Value can be divided into three parts: the variance of the value of in-force business, the variance of the adjusted net worth, and the mutual transformation of the in-force business and the adjusted net worth. The section three explains the valuating method of Embedded Value. There are five steps in calculating Embedded Value: grouping policies, setting parameters, forecasting the cash flow and discounting, variance analysis, sensitivity analysis. The parameters that need to be set are risk discount rate, investment return, mortality, lapse rate, expenses rate and reserve parameters. The section four introduces the development background and valuation principle of Fair Value and compares Embedded Value and Fair Value. It concludes that both Embedded Value and Fair Value can be used in financial reporting in future but Embedded Value is the certain choice of China life insurance companies at present.In the chapter two, it mainly studies the sensitivity of actuarial assumptions in evaluating Embedded Value in the perspective of products. There are five sections in this chapter. The first four sections set... |
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