Annual premium equivalent

Annual premium equivalent (APE) is used for comparison of cost by determining what the price would be if paid once for a year's period. This is particularly used when the sales contain both single premium and regular premium business. This is used in insurance industry to allow comparisons of the amount of new business gained in a period by insurance companies. [ [http://moneyterms.co.uk/annual-premium-equivalent Annual premium equivalent ] ]

There can be single payment premiums which is actually the sales spread over a period of long time. (In contrast to the recurring premiums which involves payment of premiums every year). So APE is a measure to normalize the single premium payments to the recurring payment premium equivalent. This helps in comparing the sales accurately.

Related categories

* Insurance
* PVNBP (Present value of new business premium)
* European embedded value (EEV)

References


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