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📈 '''Value of new business''' (VNB) quantifies the economic profit an [[Definition:Insurance carrier | insurer]] expects to earn from policies written during a specific reporting period, expressed as a present-value figure at the point of sale. It is a cornerstone metric in [[Definition:Life insurance | life insurance]] and long-duration [[Definition:Health insurance | health insurance]], where the gap between when [[Definition:Premium | premiums]] are collected and when [[Definition:Claim | claims]] and expenses fully materialize can stretch over decades. VNB strips away the noise of short-term accounting results to reveal whether new business is genuinely creating or destroying shareholder value after accounting for the cost of the [[Definition:Capital requirement | capital]] tied up to support those policies.

⚙️ Calculating VNB requires projecting all future cash flows — premiums, claims, commissions, operating expenses, [[Definition:Investment income | investment income]], and taxes — associated with policies sold in the period, then discounting them to the present using a risk-adjusted discount rate or, under [[Definition:Market consistent embedded value (MCEV) | market consistent embedded value]] frameworks, market-consistent assumptions. The cost of required capital, often driven by local [[Definition:Solvency | solvency]] regimes such as [[Definition:Solvency II | Solvency II]] in Europe, [[Definition:C-ROSS | C-ROSS]] in China, or the [[Definition:Risk-based capital (RBC) | RBC]] framework in the United States, is deducted because capital locked against new business cannot be deployed elsewhere. Under [[Definition:IFRS 17 | IFRS 17]], the analogous concept manifests through the initial recognition of the [[Definition:Contractual service margin (CSM) | contractual service margin]], which captures expected future profit at inception. A positive VNB indicates that new sales are priced above their economic cost; a negative figure signals that the insurer is effectively paying customers to buy its products — a pattern that erodes [[Definition:Embedded value (EV) | embedded value]] over time.

💡 For analysts, investors, and boards of directors, VNB serves as a litmus test of an insurer's pricing discipline and strategic direction. Large life insurers across Europe and Asia — including major players in Japan, Hong Kong, and Singapore — routinely disclose VNB alongside the new business margin (VNB as a percentage of the present value of new business premiums) to signal profitability quality. A high new business margin combined with strong volume growth is the hallmark of a franchise firing on all cylinders, while volume growth paired with a declining margin may indicate unsustainable competitive aggression. [[Definition:Reinsurance | Reinsurers]] and [[Definition:Private equity | private equity]] investors scrutinize VNB when evaluating partnerships, acquisitions, or [[Definition:Block transaction | block transactions]], because it directly informs the expected return trajectory of the acquired obligations.

'''Related concepts:'''
{{Div col|colwidth=20em}}
* [[Definition:Embedded value (EV)]]
* [[Definition:Market consistent embedded value (MCEV)]]
* [[Definition:Contractual service margin (CSM)]]
* [[Definition:New business strain]]
* [[Definition:Cost of capital]]
* [[Definition:Life insurance]]
{{Div col end}}

Definition:Value of new business - Revision history

PlumBot: Bot: Creating new article from JSON