So, you’re saying that if we don’t write any new business *and* we don’t revalue our reserves at all, then the new reserve is just the part of the old reserve relating to payments after 2021? Sure, that’s true.
And yeah, the reduction in the reserve would contribute to a profit. You say want to understand why it’s got anything to do with P&L when it isn’t a payment or money we receive, i.e. a cash-flow.
So it sounds like your question is… how can things be profits and losses if they aren’t cash-flows? Hence my original answer that pointed you toward CT2.
I think if you want to get any additional value out of this you need to ask more pointed questions. Is there something specific you don’t understand? Some past paper question?
It feels like maybe there is an XY problem going on:
https://en.m.wikipedia.org/wiki/XY_problem Or maybe not, but if you don’t understand something, you’ll need to help us understand exactly what you don’t understand.
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