Embedded Value and Appraisal Value
Introduction
3.1.In this chapter, I will define two terms—embedded value and appraisal value— discuss how they are calculated, and specify their relation to the share price of the company.
What is embedded value?
3.2.Simply put, embedded value is the total value to the shareholders of the business currently on the company’s books. This value is the sum of all the profits the shareholders will earn in the future from the in-force policies discounted to the present date and the value of the extra assets that belong to the shareholders. This calculation makes no allowance for the future business that the company will write and looks at only the policies in the company’s books.
What are the basic differences ...
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