Chapter 13, page 17: core reading text says "For without profits business, embedded value is effectively the release of any margins within the supervisory reserves relative to the assumptions used within the embedded value calculation." What do we mean here by release of margins? Does this simply mean that the EV is equal to the difference in NPV due to the additional prudence in the reserving basis, relative to the basis used to calculate the EV?
Yes, the present value of future profits is the NPV of the release over time of the extra margins in the reserves (determined on a more prudent basis) compared to the EV projection basis (best estimate basis)
