The embedded value (EV) of life insurers across Asia experienced an average growth of 7.2% in 2023, according to Milliman’s latest report. However, this growth was not uniform, with significant variations across different markets.
The report highlights that global trends, including a decline in bond yields, influenced the regional outcomes. This decrease in bond yields affected various markets in distinct ways.
In particular, India (+24.1%), Taiwan (+15.4%), and Japan (+17.9%) reported substantial increases in their embedded value. Conversely, Hong Kong (+4.4%) and Singapore (+4.2%) experienced more modest gains. Other markets such as China (-0.4%), Thailand (+1.0%), Malaysia (-1.1%), and Vietnam (+1.1%) saw little change or declines.
Indonesia faced a sharp decline in embedded value, dropping by 17.7%. The significant growth in India was attributed to high discount rates, a robust equity market, and contributions from new business. Taiwan’s increase was largely due to unrealized capital gains from fixed-income assets.
Multinational corporations (MNCs) in the region showed a varied range of EV growth, from -6.3% to +6.9%, with Japan exhibiting the widest range, from -24.3% to +41.9%.
The overall decrease in bond yields led to a rise in insurers’ adjusted net worth (ANW) due to increased market values of bonds. Most Asian markets saw an increase in the value in force (VIF), except for China, Malaysia, Singapore, and Vietnam. Japan led with the highest VIF growth at 36.4%.
New business value (VNB) across Asia grew by 9.9%. Hong Kong saw a dramatic rise of 102.8%, driven by the resurgence of Mainland Chinese visitors following the resumption of travel in February 2023. Thailand, Indonesia, and China experienced increases of 17.1%, 13.6%, and 6.5%, respectively. However, Vietnam and Japan saw declines of 66.7% and 4.1% due to reduced sales volumes and lower margins on new business.
New business margins (NBM) generally contracted in 2023. Taiwan and Hong Kong saw reductions of 6.2% and 9.4%, respectively, due to shifts towards longer premium payment terms and changes in product mix.
Price-to-embedded-value ratios remain below 100% for most insurers, with exceptions for AIA and some private-sector Indian life insurers. The return on embedded value (ROEV), particularly reported by Indian insurers, saw notable reductions in 2023.
Embedded value methodologies vary across the region, including traditional embedded value (TEV), European embedded value (EEV), market-consistent embedded value (MCEV), and Indian embedded value (IEV). Chinese and Taiwanese insurers report using a TEV basis, while Japanese insurers utilize MCEV, market-consistent EEV, or modified MCEV approaches. Most Indian insurers report EV on an IEV/MCEV basis.
The introduction of IFRS 17 on January 1, 2023, has impacted EV reporting, with European MNCs like AXA and Generali discontinuing EV reports for their Asian subsidiaries.
