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Analysis

2014 Embedded Value Results Overview

Focus on Switzerland

Deloitte's Actuarial & Insurance Solutions practice produced the 2015 Swiss edition of Deloitte’s analysis of the Embedded Value (EV) publications of major European insurers. The seven insurance groups with the largest direct life insurance operations in Switzerland (Allianz, AXA, Baloise, Generali, Helvetia, Swiss Life and Zurich) were selected and their 2014 results and methodologies were analyzed to highlight similarities and differences.

Most insurers in our sample published their EV results in line with market consistent principles (except for Helvetia who used a traditional EV approach as in previous years).

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In 2014 most companies (with the notable exception of Swiss Life) saw their positive operating earnings diminished by a negative economic variance. The main reason behind this adverse development is the marked decrease of interest rates. Despite this, all insurers reported a positive New Business value, on average with broadly stable margins thanks to operational improvements. However, the further decline of interest rates in early 2015 will put more pressure on life insurers’ profitability and business models.

There were no major changes in EV or Swiss Solvency Test methodologies in 2014. IFRS 4 Phase II has a likely effective date of January 2019. The coming into force of Solvency II for 2016 now looks certain, and some key technical specifications were published in 2014. Except for the determination of the reference yield curves, no significant impact on EV methodologies has been observed yet. We expect that going forward EV may have a more limited stand-alone relevance when Solvency II results are publicly disclosed. We still believe, however, that EV techniques will remain at the center of profitability discussions.

The report presents the results of our analysis, which is based solely on publicly available information from the companies’ EV reports and financial statements. We aimed to provide as many relevant comparisons as possible, but as insurers use different approaches and disclose different levels of details, not all information was (publicly) available for all companies. We also assumed that the reader is already familiar with EV.

2014 Embedded Value Results Overview.
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