MCEV – the quest for market consistency
After the extreme volatility of 2008 spoiled the MCEV launch party, investors have been understandably wary of the way some firms have taken a hardline stance on market consistency. Now the variance in how non-hedgable risks are assessed is what is preventing a full convergence. Laurie Carver reports
If you believed in the validity of market-consistent embedded value (MCEV) as a metric for valuing insurance companies at the end of 2008, then Allianz Life, the US subsidiary of Munich-based Allianz, must have looked an interesting takeover prospect. MCEV’s harsh treatment of embedded guarantees and long-dated products means Allianz Life was worth €3.3 billion (£2.7 billion) – a 215% fall in the company’s MCEV in the space of a year. So if MCEV was a truly accurate reflection of company value
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