Insurance valuation: P/B, embedded value and dividends
Justified P/B, value in force, dividend discount.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: insurance valuation: p/b, embedded value and dividends.Updated 30 October 2026
What it does
Three views of an insurer’s equity. The justified price to book, (ROE - g) / (cost of equity - g), values the business as a going concern. An embedded-value style figure adds to tangible net assets the after-tax value of the business already on the books (the unearned premium earned out, and the investment income on today’s reserves as they run off, less the cost of the capital held against them) and nothing written after today, so the gap between the two is what the market pays for future business. A dividend discount on the forecast’s payouts is the cross-check.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 88–91: Risk-free rate, Equity beta, Equity risk premium, Long-term growth
- Valuation, rows 6–7: Cost of equity, Discount factor
- Valuation, rows 10–15: Book value, FY0A, Forward ROE: FY1E net income / FY0A equity, Justified price to book, Equity value at the justified multiple…
- Valuation, rows 18–33: Net asset value: tangible equity, FY0A, Expected margin on unearned premium, Value of the unearned premium, Motor: FY0A reserves still unpaid…
- Valuation, rows 36–42: Dividends, Present value of dividends, FY5E ROE, Terminal value at end of FY5E…
What a reviewer looks for
- A DCF of free cash flow to the firm for an insurer, whose liabilities are its business.
- An embedded value quoted as if it included business not yet written.
- A justified multiple on an ROE that includes a one-off reserve release.
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