Xu Yifei explained in detail the significance of the embedded value Report: the life insurance company established by shareholders is a profitable long-term insurance business. However, according to the traditional accounting principle, the profit and loss is calculated on the basis of the actual profit of the year, excluding the future profit of the valid policy. In this way, due to the high cost of sales and computer network construction and the conservative liability reserve, insurance companies can still show losses on their books even if their business has been profitable in the year of rapid sales growth. It will take several years before the policy takes effect to generate profits. Because traditional accounting methods can't reflect the value of an insurance company, developed countries in the insurance industry use the concept of embedded value to complete the listing, value analysis and merger of insurance companies. Xu Yifei said that in China, the scale of premium has always been used as an indicator to measure the value of insurance companies, but this can only reflect the quantity of a company's business, but not its quality. So we also need a more scientific measure like embedded value's. Embedded value includes the current net assets of insurance companies and the future profit value of effective policies. It can accurately reflect a company's operating conditions and the management level of the company's management, which is very important for the company's long-term stable development. Related hot words: insurance company value
Further reading: How to buy insurance, which is good, and teach you how to avoid these "pits" of insurance.