By Dr. Nigokhos Kanaryan, CPA — Managing Partner, Axarion
10/10/2025
This article summarizes key insights from my presentation at the Annual Insurance Conference, jointly organized by the Tsenov Academy of Economics (Svishtov), the Velislav Gavriiski Foundation, the Association of Bulgarian Insurers, the Bulgarian Association of Supplementary Pension Security Companies, and the Financial Supervision Commission.
The transition to IFRS 17 Insurance Contracts has transformed how insurers recognize, measure, and present their results — and as a result, it challenges long-standing valuation practices based on market multiples such as Price/Book and Price/Premium.
1. When Accounting Changes, Valuation Logic Must Follow
The market approach is built on the Law of One Price — identical assets should trade at identical prices. Yet, with IFRS 17 redefining what “insurance revenue” means, appraisers can no longer apply the same valuation formulas mechanically.
Traditional multiples such as Price/Premium and Price/Book rely on data that are no longer directly comparable across insurers.Under IFRS 17, insurance revenues exclude gross written premiums, while investment income is separated from operating performance. This redefinition reshapes the numerator and denominator in valuation ratios, forcing analysts to adjust how they interpret profitability and risk.
In short — the inputs have changed, so must the valuation thinking.
2. The Price/Premium Multiple under IFRS 17
Classic models (Massari et al., 2018; Nissim, 2013) treat the P/Premiums multiple as a function of value drivers such as combined ratio, investment leverage, and the cost of equity.However, under IFRS 17, several critical shifts occur:
• Insurers now aggregate contracts into portfolios and groups based on similar risk characteristics.
• Insurance revenue reflects earned premiums, adjusted for financing and investment components.
• Investment results are presented separately under IFRS 9.
• Discount rates and service margins introduce new layers of subjectivity.
The result: P/Premiums is no longer a simple measure of efficiency or market confidence. To interpret it properly, valuers must examine underwriting profitability, investment strategy, and contract grouping logic.
3. The Role of Other Comprehensive Income in the Price/Book Ratio
Valuation analysts often underestimate the role of Other Comprehensive Income (OCI) in insurers’ equity. Under IFRS 17, OCI can include changes in discount rates and remeasurement of financial assets under IFRS 9.
Ignoring these components distorts both book value and return on equity (ROE).Research by Nissim (2013) shows that including OCI in the book value improves valuation accuracy because it captures unrealized economic gains and losses.
Appraisers should therefore consider total comprehensive income when applying P/B multiples — or, in some cases, use Solvency II own funds as a denominator to align valuation with regulatory capital logic.
4. The Data Trap: When Standardization Becomes Distortion
The growing use of Fintech data platforms (Finbox, Refinitiv, etc.) has made valuation faster but not always better.As observed in Patev & Kanaryan (2024), standardized datasets often aggregate financial statement items, losing the nuances of insurance-specific reporting.
For example, data providers may merge insurance revenues, investment income, and financial results into one “Revenue” line — making P/Premiums effectively a P/Revenue ratio.Such aggregation destroys the analytical logic behind valuation models.
Appraisers must therefore manually extract and adjust data from original financial statements, ensuring that insurance revenues, combined ratios, and OCI are treated correctly. Automation cannot replace professional reasoning.
5. Moving Forward: Precision through Professional Judgment
Valuing insurers in the IFRS 17 era requires more than technical compliance — it demands critical thinking and methodological refinement.
Professionals should:
• Align valuation inputs with the new definition of insurance revenue;
• Adjust multiples to reflect OCI and fair-value volatility;
• Reassess data sources and avoid overreliance on automated feeds;
• Integrate insights from both IFRS 17 and Solvency II frameworks.
IFRS 17 does not make valuation impossible — it simply demands more expertise, transparency, and analytical precision.
Final Thought
The introduction of IFRS 17 marks a turning point for valuation professionals.It replaces formulaic methods with a principles-based ecosystem — one where accounting, valuation, and risk management converge