Actuarial Valuation of Property/Casualty Insurance Companies [Author's Reply]

My paper points out that, in spite of voluminous readings in the Society of Actuaries literature, our Proceedings do not deal with this subject at all. The reviews by Mr. Lowe and by Messrs. Rothman and Deutsch have added significantly to the discussion, and subsequently to my deeper understanding of the underlying interrelationships affecting company valuations. My paper is largely a synthesis of classical life literature. Thus, I was somewhat taken aback by the Rothman-Deutsch review suggesting that the present value of future cash flows was a better method than present value of future earnings. Nowhere in my review of the life insurance literature had this been suggested. Further, I had no intuitive understanding of what the real difference was between the two methods. So, I set about to reconcile the two approaches.