Bubbles Message Board - Msg: 33938192

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Non-Tech : Bubbles

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To: Harshu Vyas who wrote (43)	7/27/2022 2:26:05 PM
From: Frank Sully	Read Replies (1) of 47

Harsh, Schedule D is mostly a listing of bonds, which are valued at amortized cost, which is book value. You can look at the biggest bond holdings to compare the fair (or market) value to the book value and compare the interest rates on the bonds to current and future forecast interest rates. This might give some insight. The valuation of an insurance company, it’s surplus or net worth, is the Assets minus the Liabilities. As noted above there is some potential misstatement of the Assets due to coupon rates versus current interest rates. But the real unknown is the Liabilities, or Loss Reserves. These are computed for Life Insurers on a policy by policy basis as a future contingent annuity, which takes into account the mortality table and forecast interest rates. Evaluating this analysis which is performed by the company actuaries is difficult for the layman. Actuarial Reports are somewhat specialized. An independent actuary must submit a loss reserve Opinion Letter but these are frequently just rubber stamps on the company actuarial analysis. I would advise you to focus on valuing different businesses. Insurance is notoriously difficult to value. Cheers, Frank

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