^aFortis, Rue Royale 20, Boulevard Emile Jacqmain 53 – 1JQ7A, Brussels BE-1000, Belgium.

Abstract

The financial crisis has also affected the credibility of financial institutions' financial reporting. Life insurers, like other financial institutions, therefore, need to revamp their reporting to the investment community. The quality of reporting would benefit from explicit forward-looking statements, less emphasis on precision and more on ranges of possible outcomes and worst cases, and an increase in reporting frequency. Furthermore, internal and external financial reporting needs to be better aligned. Market-consistent fair value is defended as the preferred basis to measure assets, liabilities and earnings. As no single reporting view can provide a comprehensive picture, various views could be publicised. In addition to International Financial Reporting Standards fair value (phase II), Market-Consistent Embedded Value and Value of New Business, a third complementary view, labelled Source of Profit Analysis is proposed. This view is already used by many life insurance managers, and thus could help to better align external and internal reporting.