Hi All, Can somebody please explain what are the drawbacks of using IFRS and US GAAP (Profit Reporting) as realistic measures of profitability for life insurance company over EV reporting? Why EV is still an important measure ? Regards, Rajat
Whatever reporting approach is used, the total profits arising on a cohort of contracts over time are unchanged - the method purely impacts the pace at which these profits emerge. IFRS and US GAAP attempt to smooth profit recognition over the duration of a contract. EV 'accelerates' profit recognition. It gives the overall (realistic) value of the shareholders' interest in a company at a particular point in time, including the value of expected future profits.
