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2026-03-12T14:55:09Z

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🏷️ '''New business value''' represents the expected economic profit, measured at the point of sale, generated by [[Definition:Life insurance | life insurance]] and savings contracts written during a given reporting period. It captures the [[Definition:Present value | present value]] of all projected future profits attributable to newly acquired policies — after accounting for the cost of required [[Definition:Regulatory capital | regulatory capital]], expected [[Definition:Claim | claims]], [[Definition:Commission | commissions]], expenses, and the [[Definition:Time value of money | time value of money]]. As a forward-looking indicator, new business value sits at the heart of the [[Definition:Embedded value | embedded value]] reporting framework used by life insurers across Europe, Asia, and other major markets to communicate value creation to shareholders.

📐 Calculating new business value involves projecting the cash flows that a cohort of newly sold policies will produce over their lifetime, applying assumptions for [[Definition:Persistency | persistency]], [[Definition:Mortality | mortality]], [[Definition:Morbidity | morbidity]], investment returns, and expenses, then discounting those cash flows at a rate that reflects the risks involved. The discount rate methodology differs depending on the valuation framework: [[Definition:Traditional embedded value (TEV) | traditional embedded value]] uses a single risk-adjusted discount rate, while [[Definition:Market consistent embedded value (MCEV) | market consistent embedded value]] relies on risk-free rates plus explicit adjustments for [[Definition:Non-hedgeable risk | non-hedgeable risks]]. Sensitivities to key assumptions — interest rates, lapse rates, and expense inflation — are typically disclosed alongside the headline figure, giving stakeholders a window into how volatile the metric may prove. Under [[Definition:IFRS 17 | IFRS 17]], the analogous concept at inception is the [[Definition:Contractual service margin (CSM) | contractual service margin]] recognized for each group of contracts, though the two measures are constructed differently and are not directly interchangeable.

🌐 For life insurers, new business value functions as the primary gauge of growth quality — it answers the question of whether new sales are actually adding economic value or merely adding volume. A company that grows [[Definition:Gross written premium (GWP) | premium]] rapidly but with thin or negative new business value is effectively destroying shareholder capital, a pattern that has afflicted insurers in highly competitive savings and annuity markets. Conversely, strong new business value growth, especially when paired with a healthy [[Definition:New business margin | new business margin]], signals disciplined [[Definition:Pricing | pricing]] and a favorable product mix. Analysts following major life groups globally — from European composites to large Chinese life insurers — treat new business value as perhaps the single most important metric for assessing management's ability to allocate capital and create long-term value.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:New business margin]]
* [[Definition:Embedded value]]
* [[Definition:Contractual service margin (CSM)]]
* [[Definition:Market consistent embedded value (MCEV)]]
* [[Definition:Value of in-force business (VIF)]]
* [[Definition:Annualized premium equivalent (APE)]]
{{Div col end}}

Definition:New business value - Revision history

PlumBot: Bot: Creating new article from JSON