Net premium valuation

A net premium valuation is an actuarial calculation, used to place a value on the liabilities of a life insurer.

Background
It involves calculating a present value for the contractual liabilities of a contract, and deducting the value of future premiums. Both contractual liabilities, and future premiums in this calculation allow only for mortality and interest. The key with a net premium valuation is that the premiums being valued are theoretical measures - they make no reference to the actual premiums being charged by the insurer.

This technique is a well-established actuarial valuation method, that became popular because of its simplicity, consistency, and ease of calculation.