Max Life embedded value at Rs 5,363 crore as of Sep 30

Max India today said embedded value (EV) for its life insurance business, Max Life, was at Rs 5,363 crore as of September 30.
The Value of New Business (VNB) in the first half of 2015-16 was at Rs 163 crore with the new business margin at 20.2 per cent, before the cost overrun, and 17 per cent after the cost overrun, it said.
EV and VNB are important metrics for the valuation of a life insurance business as the company is generally valued at a multiple to its EV.
"The growth is supported by strong fundamentals both on the existing business as well as a continued focus on new profitable business," the company said in a release.

Max Life had transitioned its EV calculation to a market consistent methodology from the earlier traditional approach (Traditional Embedded Value-TEV) in 2014-15.
This follows market practice in developed markets, where life insurers have moved to adopt market consistent methodologies, it said.
Max said a market consistent methodology approach better reflects the embedded value of an insurance company by explicitly allowing for insurance and economic risks rather than using an implicit overall allowance for risks through a Risk Discount Rate (RDR) in the traditional approach.
In addition, the market-consistent approach is more objective where asset and liability cash flows are valued using assumptions consistent with those applied to similar cash flows in the capital markets, it added.