Breaking Down Appraisal Value: NAV, VIF, and VNB

An actuarial appraisal value is built from three core components: Net Asset Value (NAV), Value of In-Force (VIF), and Value of New Business (VNB). Each driven by different factors.

Net Asset Value (NAV)

NAV represents the value of shareholders’ funds at the valuation date. It is largely driven by:

• Historical performance

• Accounting values of assets and liabilities

• Capital position and solvency

• Past management decisions

NAV reflects what already exists on the balance sheet.

Value of In-Force (VIF)

VIF captures the expected future profits from the existing portfolio of policies. It is driven by:

• Persistency and lapse behavior

• Claims and expense experience

• Investment returns

• Discount rates and risk allowances

VIF reflects how well the current book of business is expected to perform over time.

Value of New Business (VNB)

VNB reflects the value generated from future business that has not yet been written. It is driven by:

• New business volumes

• Pricing margins

• Product mix

• Distribution effectiveness

• Execution against the business plan

VNB is typically the most judgmental and most scrutinized component, as it relies heavily on assumptions about future strategy and execution.

Understanding how NAV, VIF, and VNB interact is essential. Improvements in one area may come at the expense of another, and sustainable value creation requires balance across all three.

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