Annual Premium Equivalent - APE

What is an 'Annual Premium Equivalent - APE'

An annual premium equivalent (APE) is a common sales measure technique used by insurance companies in the United Kingdom where the sales of a given entity are estimated by taking the value of regular premiums, plus 10% of any new single premiums written for the fiscal year. The premiums earned by a firm can be extended to include all revenues of a given firm.

BREAKING DOWN 'Annual Premium Equivalent - APE'

When estimating any future metric, it is important to consider any unforeseen events, and how these events may impact your estimate. For example, when forecasting a firm's sales revenues, you would want to consider the competition and what there product lines and pricing strategy will be over the forecasting period.

This will allow you to fine-tune your estimate, which will hopefully be more applicable, and provide you with a margin of safety.

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