A critical note on MCEV calculations used in the life insurance industry

Fabian Suarez, Steven Vanduffel

Research output: Contribution to journalArticlepeer-review


Since the beginning of the development of the so-called embedded value methodology, actuaries have been using the present value of future profits as yardstick when valuing life insurance activities. However, using profits as a fundamental input is subject to criticism because profits are no actual cash flows. In an attempt to create more transparency and robustness the CFO forum (2008) has set a definition for market consistent embedded value (MCEV). Nevertheless, this definition refers again to the present value of future profits. In this note we show that such a definition is misleading and, instead of creating more transparency, it could end up in creating more confusion.
Original languageEnglish
Pages (from-to)54-59
Number of pages6
JournalBelgian Actuarial Bulletin
Issue number1
Publication statusPublished - 2008


  • embedded value
  • MCEV
  • fair value
  • cash flow projections
  • business valuation
  • profits
  • cash flows


Dive into the research topics of 'A critical note on MCEV calculations used in the life insurance industry'. Together they form a unique fingerprint.

Cite this