This paper deals with the valuation of portfolios of insurances of the person. To this purpose, the basic aspects of the insurance business, i.e. the management of financial resources, the profitability and the management of the capital invested into the business are analysed, adopting a three-fold approach. The main contribution in this paper consists in embedding this perspective into a time-continuous Markov model, which represents the natural setting for life insurance valuations. Several concepts and the relevant relationships clearly emerge within the context of the three-sided valuation model. In particular, interesting relations between the concepts of life fund and mathematical reserve appear. Moreover, several concepts of profit are derived, generalising the traditional one. Finally, the investment of shareholders’ equity into the portfolio is analysed.
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Paper provided by Department of Economics, Parma University (Italy) in its series Economics Department Working Papers with number
2001-ME03.