Annual premium equivalent

It is common (in the UK) to use annual premium equivalent (APE) to allow comparisons of the amount of new business (policies written during the period) gained in a period by insurance companies with different proportions of single premium and regular premium business.

It is clearly not possible to compare the total amounts of premiums as single premium policies bring in more money up front than equivalent regular premium policies.

Annual premium equivalent is the total amount of regular premiums from new business + 10% of the total amount of single premiums on business written during the year.

PVNBP is a more sophisticated alternative that is part of the European Embedded Value standards.

Copyright © 2005-2016