Embedded value

Abstract: Third party insurance is obligatory in Iran. Therefore a large proportion of portfolio in insurance companies dedicates to car policy, especially third party policy. Regarding to this misbalanced portfolio, we decided to represent a suitable model for heteroskedasticity of car insurance data in Dana insurance company. Conditional heteroskedasticity can increase the certitude of value at risk estimation considerably. The results showed that the best models for estimating conditional variance of collision and third party insurance profits are GJR(1,1) and EGARCH(1,1) models alternatively. Then we calculated value at risk with student's t-distribution and observed that this value in third party insurance is about % and much more than collision insurance value at risk. Thus insurance companies are persuaded to sell collision policy and represent an accurate rate to calculate premium. So value at risk can provide an instruction for more profitability in insurance companies.

Abstract: The paper builds on the current discussion on reforming insurance regulation in light of the EU’s move towards the Solvency II regime and studies the agency problem in a life insurance environment. It compares dierent regulatory regimes in their eectiveness to control the owner’s incentive for excessive risk taking, both in an analytically tractable life insurance model as well as in the realistic market consistent valuation framework. As such it is the rst paper to investigate the Solvency I & II regimes in an analytical framework going back to ??, as well as extend the analysis to the industry standard market-consistent embedded value (MCEV) methodology to address valuation, solvency, and agency questions in a life insurance context. The results suggest that the new Solvency regime eliminates an unfair subsidy of equity holders at the expense of policyholders in bad states of the world. By imposing an implicit restriction on asset performance through the link of capital requirements to asset performance, Solvency II makes policyholder protection compatible with the shareholder incentive of equity value maximization with positive impact on welfare. In the MCEV setup, it is further shown that the value of future operations reduces the owner’s incentive for excessive risk taking. Lastly, low market yields can threaten solvency and, despite the optionality of the liabilities, the default put option can dominate equity payos.

Abstract: With the fast development of the Financial Accounting on the usefulness for decision,there is the present situation that the accounting is based on the value.What is the assets' value? This paper points out that first of all,the value is not the utility evaluation of individual corporations,but the utility evaluation of the market;second,it is meaningless to talk about the value of individual asset without linking the integral.The individual asset's value is the contributive share of corporations' whole economic interest.

Abstract: The paper proposes to compare a series of indicators used for measuring shareholders value such as: total shareholder value, economic value added, market value added, cash value added or cash flow return on investment.