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Chapter 9

T

tde123

Member
On page 11 of the CMP, the following is said:

"So to jusitfy the I-E calculation we can consider the classic revenue account statement of profit as follows:
Shareholder profit = premiums + income and gains - expenses - claims

Here, claims can be considered to be increases in policy reserves plus a claim payment in excess of the opening policy reserve.

Policyholder profit is therefore equal to Claims - Premiums and we can re-express the equality as:
Shareholder profit + policyholder profit = I - E, as required."

My question: the last paragraph where policyholder profit is said to equal claims - premiums is what I do not get? How does this work?
 
From a policyholder's perspective, he/she receive in benefits (or claims) and pay out premiums. So, a policyholder's profit is C-P.

Sarah
 
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