Financial statements are suppose to be measuring the health of a company at a point in time. For an insurance company, this is difficult because of a funky liability called reserves. While it is based on sound mathematical and statistical principles, there is a certain level of subjectivity involved; that's why I have a job :).
Some might criticize the insurance business for this; even going as far as to say financial statements of life insurers are useless because all sorts of stuff can be "hidden" in the reserves. All they show is a stream of smoothed earnings.
When the market is doing well and the insurer doesn't realize gains by releasing capital or reserves, he's being prudent. When the market is down and the lose is being cushioned by releasing reserves, the insurer is making stuff up. Leave it to the actuary to have a long term outlook! I'm reminded of a CIA ad that compares actuaries to other professionals like stock brokers and investment analysts. See page 10 of this issue's Beyond Risk (PDF).
Words never uttered by mortals flowed incessantly from its many mouths.
About Me
- p51dray
- I am a FSA with a BSc in actuarial science from SFU and a former PoMo IB slave who is working towards his FCAS; hence I must be a masochistic exam lover.
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