2012 embedded value results generating value

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By Emma McWilliam, Richard See Toh, Philip Simpson, Stuart Reynolds | 19 June 2013

Although 2012 was another economically challenging year, embedded value remained a key part of European companies’ disclosures, demonstrating value generation and financial robustness. In this publication, we focus on embedded value results as at year-end 2012. In addition to providing an overview of the methodology companies used and commenting on any developments, the paper covers a range of current hot topics that companies may wish to consider when developing and enhancing their embedded value approaches in the future. These include:

  • Determining the risk discount rate
  • Calculating the cost of capital
  • Assessing the cost of residual non-hedgeable risks
  • Evaluating the time value of options and guarantees
  • Disclosures in embedded value reporting
  • Other measures of value (market capitalization, IFRS and Solvency II)

The report also provides a high-level overview of some of the key components of an embedded value calculation.