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📐 '''Appraisal value''' is an estimate of the total economic worth of a [[Definition:Life insurance | life insurance]] company, combining its [[Definition:Adjusted net worth | adjusted net worth]] with the present value of expected future distributable profits from both the [[Definition:In-force business | in-force book]] and anticipated new business. The concept originated in actuarial practice as a way to capture value that conventional accounting frameworks — whether [[Definition:Statutory accounting | statutory]], [[Definition:US GAAP | GAAP]], or older [[Definition:IFRS | IFRS]] standards — fail to reflect on the [[Definition:Balance sheet | balance sheet]], since these frameworks generally do not allow insurers to capitalize profits they expect to earn in the future. Appraisal value therefore provides a more complete picture of what a life insurer would be worth to a willing buyer in an arm's-length transaction.

🔍 The calculation builds on the [[Definition:Embedded value | embedded value]] methodology, which itself sums adjusted net worth and the [[Definition:Value of in-force business (VIF) | value of in-force business]]. Appraisal value goes one step further by adding the value of projected future new business — essentially the [[Definition:Value of new business (VNB) | value of new business]] multiplied by a capitalisation factor (or new business multiple) that reflects expected growth, persistency, and competitive position. The assumptions underpinning this projection — discount rates, [[Definition:Lapse rate | lapse rates]], [[Definition:Mortality rate | mortality assumptions]], expense inflation, and investment returns — are subject to significant judgment and vary across markets. In Europe, the [[Definition:Market consistent embedded value (MCEV) | market consistent embedded value]] framework standardized many of these assumptions using market-observable inputs, while in some Asian markets traditional embedded value or appraisal value approaches with deterministic assumptions remain common.

💡 For [[Definition:Mergers and acquisitions (M&A) | M&A]] practitioners, investors, and strategic planners, appraisal value serves as the primary valuation anchor in life insurance transactions. Unlike price-to-earnings or price-to-book ratios, which can be misleading for life insurers due to the long-tail nature of their liabilities, appraisal value reflects the time-value-of-money-adjusted cash flows an owner can expect over the remaining life of the portfolio and beyond. Investment banks advising on life insurer sales or IPOs routinely prepare appraisal-value analyses, and the implied new business multiple becomes a key negotiation point. The concept has also influenced how listed life insurers communicate value to public-market investors — many publish embedded value reports as supplements to their statutory financial statements, effectively providing a building block that external analysts can convert into an appraisal value by layering on their own new business growth assumptions.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Embedded value]]
* [[Definition:Value of in-force business (VIF)]]
* [[Definition:Value of new business (VNB)]]
* [[Definition:Market consistent embedded value (MCEV)]]
* [[Definition:Adjusted net worth]]
* [[Definition:Mergers and acquisitions (M&A)]]
{{Div col end}}

Definition:Appraisal value - Revision history

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