According to the different protection functions of net assets to policies, we divide net assets into two parts:
Part of the net assets is used to deal with the unexpected risks of the policy and ensure that the company will not go bankrupt when the economic situation is unfavorable. This is the "solvency limit" mentioned in the financial report, which is called "required capital" in the embedded value standard. With the passage of time, this part of venture capital will be gradually released from the state of guaranteeing unexpected risks, and the released principal and investment income will become smaller due to factors such as time value. The missing interest is called "the cost of holding solvency limits" and "the cost of required capital" according to embedded value standards. It can also be understood that because the use of required capital is restricted, its actual value is lower than the book value, and the difference between them is the opportunity cost loss of legally required capital. From another perspective, the required cost of capital is another reserve to prevent unexpected risks when calculating embedded value.
Other funds in the net assets can be freely controlled by the company. These funds are called "free capital" or "free surplus".
It should be noted that required capital = confirmed assets-confirmed liabilities; Not a specific asset. The classification of net assets here is to explain the meaning of capital requirement cost. Company books are hard to distinguish. The CIRC determines the minimum required capital value, and the insurance company calculates the required capital cost according to the minimum required capital value, and deducts the embedded value value as a deduction in the embedded value report, which makes the calculated embedded value more conservative and credible.
(2) Secondly, calculate the effective commercial value. The financial report is called "the value of the company's effective life business". All valid policies held at the end of the year should be counted, including new policies of 20 12 years.
How to calculate? The future after-tax distributable profit of the policy (renewal income+investment income-expenses-reserve withdrawal-tax) is converted into the current amount at the discount rate (1 1%) (a large part of the estimated expenditure is the "reserve withdrawal of insurance contract" that we often hear).
(3) At this time, the financial report tells everyone that the policy value before June 1999 is-8 billion; After June 1999, the policy value was153.7 billion. The net assets revalued at market price are 654.38+0654 billion; The holding cost of solvency margin is 2.51100 million (calculated according to minimum capital requirement = minimum solvency margin).
China Ping An embedded value (EV) =1654+(-80+1537)-251= 285.9 billion.
(4) How do life insurance companies calculate financial analysis? -Continuous calculation based on previous calculation results.
2012ev = 2011ev+expected return at the beginning of the year (expected new value of existing policies) +20 12 new single value in the current year+forecast error before correction+change in market value of net assets+financing-dividend.
Specific data of Ping An Life Insurance Company of China: embedded value in 2002 =150+163+22+56+0-60 =1775.
The hypothetical link of embedded value's calculation is that when calculating the value of each policy, many hypothetical conditions are used-risk discount rate (return on capital), return on investment, mortality and illness rate, expense rate, tax rate and so on.
I haven't been able to study whether this assumption is reasonable. But one of them "the cost of holding the solvency line" caught my attention.
(2) the solvency margin and the cost of holding the solvency margin
"The cost of holding the solvency margin" has been explained before, and it is called "the required capital cost" in the embedded value Standard. This cost is essentially an unexpected risk reserve. As the deduction of embedded value in the embedded value Report, it is invisible on the company's books. The policy is there, right there, always there, and the amount calculated by compound interest is huge. After this treatment, embedded value will be more real.
Then, how is the "holding solvency line cost" of 2.51100 million in Ping An Financial Report calculated? This is my calculation: the minimum capital requirement for 20 12 is 485-[485+485x5.5% x (1-25% income tax)]/(1+11%) = 30.
According to the Regulations on the Management of the Solvency of Insurance Companies, the solvency adequacy ratio is the ratio of the actual capital to the minimum capital. When the solvency adequacy ratio of an insurance company is lower than 100%, China CIRC will take some necessary regulatory measures according to the specific situation, including but not limited to limiting dividends. When the solvency adequacy ratio of an insurance company is between 100% and 150%, the CIRC of China may require the insurance company to submit and implement a plan to prevent solvency deficiency. If the solvency adequacy ratio of an insurance company is higher than 150%, but there are significant solvency risks, the China CIRC may require it to rectify or take necessary regulatory measures.