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Effect of Value of New Business on Life Insurance Company Performance

Abstract

The value of new business is an important actuarial measure used to assess the economic contribution of newly written life insurance policies to an insurer. It reflects the present value of expected future profits from new business after allowing for relevant expenses, risks, and capital requirements. Changes in the value of new business can therefore provide important information about the financial contribution of new policies and may influence the overall performance of life insurance companies. This study examines the effect of value of new business on life insurance company performance. The study will assess how variations in the value generated from newly issued policies influence the financial performance of life insurance companies. It will also examine the relationship between new business value, premium income, profitability, and other indicators of insurance company performance. The study will focus on factors associated with value of new business, including new policy volumes, premium levels, product mix, expected future profits, acquisition expenses, mortality assumptions, lapse rates, and investment return assumptions. Life insurance company performance will be assessed using measures such as profitability, return on assets, return on equity, premium growth, and operating performance. Actuarial valuation techniques will be applied to estimate the value generated by new business and assess its relationship with company performance. A quantitative research approach will be adopted using financial and actuarial data from selected life insurance companies. Data on new business values, premiums, expenses, profitability, assets, equity, and other relevant performance indicators will be analysed. Descriptive statistics, correlation analysis, and regression techniques will be used to examine the relationship between value of new business and life insurance company performance. The study is expected to reveal that changes in the value of new business have a measurable effect on life insurance company performance. Higher values of new business may be associated with stronger profitability, premium growth, and improved financial performance when newly written policies generate sufficient future economic value. The findings may also indicate that high volumes of new policies do not necessarily translate into stronger performance where acquisition expenses, risk exposure, or unfavourable policy assumptions reduce the underlying value of new business. The study will provide useful information for actuaries, life insurance managers, investors, regulators, and other stakeholders interested in evaluating insurance company performance. Understanding the contribution of new business value may support better product pricing, business planning, performance measurement, capital allocation, and strategic decision-making. The findings may also assist insurers in evaluating whether their new business activities are generating sustainable economic value. The study concludes that value of new business is an important indicator of the economic contribution of newly written life insurance contracts and may influence overall company performance. It is therefore recommended that life insurance companies regularly monitor and evaluate the value generated by new business alongside conventional financial performance indicators. Effective management of new business value may support sustainable profitability and strengthen the long-term financial performance of life insurance companies.

Keywords: Value of new business, life insurance, company performance, new business value, actuarial valuation, life insurance profitability, premium income, policy acquisition, expected future profits, insurance performance, product mix, acquisition expenses, actuarial assumptions, financial performance, life insurance management.