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Old 08-06-2018, 05:54 PM
zhenyuan zhenyuan is offline
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Default Definition of PVDE

hello, I recently came across a concept called PVDE, which is the PV of the earnings considering the cost of solvency capital cost. However, I am little confused whether PVDE only includes the profit for existing business(e.g. profit will earned by an inforce policy in 20 years) or it includes future business (e.g. new policy the company expect to write next year)

Thanks.
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Old 08-07-2018, 06:59 AM
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Carol Marler
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Originally Posted by zhenyuan View Post
hello, I recently came across a concept called PVDE, which is the PV of the earnings considering the cost of solvency capital cost. However, I am little confused whether PVDE only includes the profit for existing business(e.g. profit will earned by an inforce policy in 20 years) or it includes future business (e.g. new policy the company expect to write next year)

Thanks.
Depends on the purpose and nature of the calculation. If it includes future new business, that entry will be separate from the projection of existing in force.
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Old 08-27-2018, 01:46 PM
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As JMO said, it definitely depends on the context. However, "PVDE" is commonly used in EV and MCEV contexts (embedded value). If you're doing EV, you would never include the value of future business that will be issued in the future.

However, if the context is appraisal value or a total market valuation of the company, you would want to account for the value of future NB. Fundamentally, PVDE is the same kind of calculation for future NB, but you would need assumptions for future sales volume.
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