Embedded Value (Insurance)

The present value of future profits from existing business, plus adjusted net asset value. Originally developed for insurance companies, the concept is increasingly applied to any business with long-duration revenue streams, subscription contracts, or intangible assets that generate predictable future cash flows.

A visual and analytical framework that reconciles the difference between two valuations — typically entry and exit, or book value and market value — by attributing value changes to specific drivers such as revenue growth, margin improvement, multiple expansion, and intangible asset creation. Value bridges are widely used in private equity reporting and portfolio company management.

The total value of a company's or fund's assets minus its liabilities. For investment funds, NAV represents the per-share or per-unit value.

The estimated value of a business or asset beyond the explicit forecast period in a discounted cash flow analysis, representing the bulk of total enterprise value for long-lived assets. Terminal value is calculated using either a perpetuity growth model or an exit multiple approach and is particularly significant for intangible-intensive companies with long-duration competitive advantages.

The intangible premium that a business commands above the fair value of its net tangible assets, reflecting factors such as brand strength, regulatory licences, customer loyalty, and market position. Franchise value is a critical concept in financial services and regulated industries where the right to operate carries significant economic worth.

The International Financial Reporting Standard that defines fair value, establishes a framework for measuring it, and requires disclosures about fair value measurements. IFRS 13 introduces a three-level hierarchy based on observable market inputs and is foundational to the valuation of intangible assets in financial reporting.

The net asset value of a company as recorded on its balance sheet, calculated as total assets minus total liabilities. Book value often significantly understates the true worth of intangible-rich businesses because many intangible assets are not recognised under accounting standards.

The present value of the future cash flows expected to be derived from an asset or cash generating unit, calculated using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Under IAS 36, value in use is one of two measures (alongside fair value less costs of disposal) used to determine recoverable amount for impairment testing.