It is a construct from the field of actuarial science which allows insurance companies to be valued.
The difference, combined with income on and release of statutory reserves, represents future profit.
It is a conservative measure of the insurer's value in the sense that it only considers future profits from existing policies and so ignores the possibility that the insurer may sell new policies in future.
Embedded Value is calculated as follows: where European embedded value (EEV) is a variation of EV which was set up by the CFO Forum which allows for a more formalised method of choosing the parameters and doing the calculations, to enable greater transparency and comparability.
Market Consistent Embedded Value is a more generalised methodology, of which EEV is one example.