Life insurers are best read through a small dashboard of terms. Here’s an explanation of the key terms and what each tells an investor.

Embedded Value (EV): This is the insurer’s net worth plus the present value of profits expected from policies already on the books. EV is a better “core value” anchor than earnings for life insurers; steady EV growth usually signals a compounding franchise.

Embedded Value Operating Profit (EVOP): EVOP is the change in embedded value from the start to the end of the period, after removing market or economic variances, changes in actuarial assumptions or models, and capital movements such as dividends, buybacks or fresh capital injections. Track EVOP alongside EV growth to judge whether value creation is coming from core execution rather than market tailwinds or assumption resets.

Price-to-Embedded Value (P/EV): This is measured by stock price divided by EV. It is the most-used valuation multiple for life insurers. Compared to peers, a low P/EV can mean value, or a deserved discount.

Linked products (market-linked): In these products (ULIPs), benefits depend on market performance. Linked-heavy mix can boost volumes in bull markets, but growth and margins can become more cycle-sensitive.

Non-linked products (non-market-linked): In these products, benefits are not tied to markets; outcomes come from guarantees, declared bonuses or fixed benefit structures.

This bucket includes three sub-buckets:

Non-linked savings: Under it are par and non-par plans. In par (participating), policyholders have a share in surplus via bonuses as declared by the insurer. Common products include traditional participating endowment plans, moneyback plans (often sold as par) and participating savings plans. They can support stability and franchise, but profitability depends on bonus discipline and investment returns. In non-par, there is no surplus sharing; guarantees/pricing are explicit upfront in these plans that include guaranteed return plans, non-par endowments and fixed-benefit savings plans. They can be margin-accretive if priced right, but sensitive to interest rates and ALM (asset-liability management).

Protection (usually non-linked): These plans are pure risk cover (term-style economics), not savings-led. Common product names include term plans, return of premium term plans and group term. They carry higher margins and improve “quality” of growth, but require disciplined underwriting and claims management.

Annuity / pension (usually non-linked): These are long-duration income products with fixed/declared payouts. They are stable if ALM is strong; watch investment yield, duration matching and solvency.

Group business: These are group insurance/pension-style business sourced from institutions. Group can add scale, but may be price-competitive and lower-margin; it can also be more sensitive to large-ticket renewals.

APE (Annual Premium Equivalent): It is calculated as the full annualised value of regular (recurring) premiums written during the period, plus 10 per cent of single premiums written during the period. APE is the go-to “growth” line for life insurers; track it with product mix, so you don’t confuse volume with quality.

NBP (New Business Premium): This is total premium from policies sold during the period (single premium + first-year premiums). NBP can look strong even when quality is weak; always pair it with APE, mix and margins.

VNB (Value of New Business): This is present value of profits expected from policies sold in the period. VNB is the best single metric for profitable growth; rising VNB with stable assumptions is a strong signal.

VNB margin: This is VNB as a percentage of APE (or new business premium, depending on disclosure). This margin tells you if growth is being “bought” via pricing cuts or higher commissions; sustainable re-rating usually needs stable-to-rising VNB margin.

Persistency: This is the share of policies still in force after 13/25/37/49/61 months. Persistency is a direct driver of EV and VNB quality; weak persistency often explains why a stock stays at a discount. Note that the 61st month is the ultimate test of stickiness.

Solvency ratio: It tells you how many times the insurer’s available capital buffer covers the minimum required buffer. Strong solvency gives room to grow and absorb shocks; low solvency constrains growth and increases downside in stress scenarios.

Published on December 20, 2025