Embedded value is the total of the net worth of the company and the future profits from policies that have already been sold. It also takes into account lapse of policies, mortality charges and other expenses.With the disclosure of the embedded value, it becomes easier to calculate the valuation of life insurance companies. For arriving at the actual valuation, other factors such as goodwill and business potential will have to be taken into account. The EV disclosures will pave the way for insurance companies to list.
HDFC Standard Life was the first private insurance company in India to disclose the embedded value.