Abstract: This study integrates general measurements of the information electronics industry based on the concepts of the balanced scorecard, intellectual capital, and intangible assets. The reasons for the difference between the corporate market value and book value are also analyzed, and the impacts of both financial and nonfinancial perspectives on the corporate value are explored. The component items of net income are found to be more effective in explaining the value of a company than merely looking at the bottom line. It is concluded that RI and EVA have significant and similar explanatory power in terms of evaluating the performance of the information electronics industry. Moreover, a review of the nonfinancial performance of information electronics companies on the basis of segmented samples reveals significant results in terms of explaining the value of the upstream, midstream, and downstream companies.

Abstract: In May 2004 the CFO Forum harmonized the various efforts of reporting the embedded valueof life insurance companies by issuing the European Embedded Value (EEV) Principles.In this working paper a methodology is proposed to derive a maximum lending amountfrom EEV figures without much additional data requirements from the originating insurer. The approach chosen is similar to that of other financing areas, e.g. real estate finance, where first a prudent best estimate valuation is done and later risk deductions are performed in the form of applying loan to value ratios, e.g. 60-80 % of the prudent amount. Here, this prudent value is called bankable embedded value and the loan to value analysis presented leads to the maximum lending amount. The deductions proposed to arrive at a maximum lending amount are based on parameter adjustments and risk allowances for unexpected risks. There is an analogy with insurers for determining their own capital needs. The methodology proposed is based on the stress test approach which increasingly gains popularity with insurance supervisors in Europe.

Abstract: INTRODUCTION One of the fundamental tenets of financial economics is that insurance companies, just as other financial and non-financial firms, have a very strong incentive to maximize current shareholder value. (1) This seemingly simple observation leads to a wide variety of managerial behavior. (2) In this article we will review a simple decomposition of the value of an insurance company. The decomposition illuminates the motivation for a variety of strategies that can be observed in practice. These strategies run the gamut from accounting manipulation through risk transfer schemes to positive net present value (NPV) "project" selection. We will review these in some detail below. Then we will illustrate these techniques from our experience with every major U.S. life insurer insolvency since Baldwin United in 1984. COMPONENTS OF From VALUE The market value of insurance company owners' equity is defined as the difference between the market value of assets and the market value of liabilities. For purposes of valuation, it is helpful to partition more finely the components of equity value. In this section, we will partition the value of insurance company owners' equity, or stock in the case of a stock company, into its four major components: franchise value, market value of tangible assets, present value of liabilities, and put option value (see Figure 1). The first two of these components are clearly assets. The third component is related to liability value. The put option value can be treated as part of the liability value as a contra-liability or as an asset. We will discuss each component in turn. [FIGURE 1 OMITTED] The franchise value stems from what economists call "economic quasi-rents." It is the present value of the "quasi-rents" that an insurer is expected to garner because it has scarce resources, scarce capital, charter value, licenses, a distribution network, personnel, reputation, and so forth. It includes renewal business. (3) Franchise value is dependent on firm insolvency risk. The less insolvency risk there is, the more likely the firm is to remain solvent long enough to capture all the available economic rents arising from its renewal business, its distribution network, its reputation, and so forth. (4) The market value of liabilities includes pricing of all contingencies within the insurance liabilities. In our decomposition we have elected to separate out the risk of the insurance company defaulting on its obligations. The risk of such a default is captured by the put option. Other contingencies, including such risks as interest rate contingencies, mortality contingencies, or equity market contingencies, are included in the present value of liabilities. Thus, the present value of liabilities is the present value of all promised liability cash flows discounted at Treasury rates rather than discounting at rates that would reflect the possibility of default. In the case of interest sensitive cash flows, it is the value of the Treasury security portfolio (including derivatives as needed) that fully defeases the liabilities with all non-default contingencies fully hedged. This quantity will be larger than the market value of liabilities where the promised liability cash flows are discounted at rates that reflect the risk of failure to make the promised cash flows. Merton (1974) initially observed that the value of a debt obligation could be expressed as the value of a default-risk free bond minus a put option. The put option represents the value to the issuer of the possibility of defaulting on the obligation. The same holds true for insurance liability obligations. The market value of liabilities can be expressed as the present value of liabilities minus the put option that represents the value to the issuer of potentially defaulting on the obligations. (5) The market value of tangible assets and the present value of liabilities can be netted together, producing what we will call "net tangible value. …

Abstract: This paper reviews the developments in reporting of traditional embedded value and summarises some of the reasons why this is now undergoing change. It considers the purpose of an embedded value calculation and the effect of differing attitudes to risk. It comments on the recently developed European Embedded Value Principles and sets out the main areas where scope remains to apply judgement.The paper proposes the market-consistent embedded value framework as a way forward to help provide guidance in some of these areas, in particular on the choice of discount rate and on calibration of stochastic techniques used to value embedded options and guarantees. The paper recognises that market-consistent embedded values are in relative infancy and sets out areas for possible future development.

Abstract: Owing to the increasing prevalence of value-based methodologies and the competitive and political pressures faced by the industry to improve its performance, the U.K. life insurance industry provides an interesting environment in which to examine whether senior management uses accounting vs. projected cash-flow-based financial performance measures for both managerial performance evaluation and strategic budgetary planning and control purposes. A survey is employed to examine what economic and organizational factors could condition managerial propensity to use three alternative measures: traditional accounting-based measures, Economic Value Added (EVA) and multiperiod, actuarial cash flow based measures such as embedded value (EV). Survey evidence suggests that life insurance CEOs are more likely to use EV for strategic management planning and control purposes, and that this preference is strongly conditioned by the firm's ownership structure. These results support the managerial incentive hypothesis, after controlling for the effects of other organizational structural and behavioural variables that potentially influence the choice of financial performance measure.

Abstract: In recent years, the leading standard setters for financial reporting have shown an increasing preference for fair value measurement However, present value is often the only acceptable method of estimating fair value and therefore the actual result of the swing to fair value is likely to be increased use of present value in financial reporting This paper addresses the issue of interpretation of a change in present value between successive reporting dates and shows that the change can be analyzed by use of the familiar variance analysis framework widely used in management accounting

Abstract: Rapid developments in retail electronic payments industry increase complexity and result in fragmented view of the market. Key players in the domain need compact tools for analysis and decision support. This paper proposes a generic value framework for retail electronic payments industry, which is based on the concept of value network and consists part of an ongoing work towards an integrated decision support environment for actors in the payments industry. We use value network approach for the analysis of retail electronic payments aiming to provide a useful tool for better understanding of payments domain.