According to the paper Embedded Value/Fair Value–Different Approaches, Same
Goal (115.4 KB)
One way of valuing a life insurance company is to see how many years of Value of New Business (VNB) the price is discounting after deducting Embedded Value from Market Capitalization of the company.
Market Capitalization on 25/Oct/17 = 56,212 crores
EV (Q2FY18) = 17,200 crores
MCap - EV = 39,012 crores
Value of New Business (VNB) (FY17) = 666
Most surprising aspect of the company is very high growth in VNB, according to q2fy18 report vnb is growing at 70% with is really mind boggling growth.
Assuming a vnb growth of 60% next 10 years
According to this the price is discounting a VNB growth of next eight years. The paper suggest the price should discount next 15 years of growth.
If we agree to this valuation metric and company could deliver 60% VNB growth for next 10 years the stock is massively undervalued.