I am yet to read anybody's posts that show they actually understand the accounting of this business. I can't see how you would invest in the business if you can't answer that basic question.
It really isn't that difficult to understand the accounts.
They charge fees for managing assets on behalf of their clients and they also make a small spread on what those assets yield compared to they yield their clients are happy to accept.
That constitutes the underlying earnings. [1]
And then, while that's happening, capital markets go up and down, meaning the value of assets that support their life business go up and down accordingly.
And that's the "investment experience" earnings. [2]
Add [1] and [2] and you get statutory reported earnings.
But the question one needs to ask oneself is:
When it comes to the thing that drives fundamental value - namely the organic Cash Flow generated by a company's operations - based on the following two charts, which compare Cash Flow from Operations with:
a.) Reported Profit (which, recall, includes the impact of market movements), and
b.) Underlying Profit (i.e., stripping out the impact of market volatility)...
....which one of these measures of profit performance really matters?
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