In this workout, we've been told that an insurance company has written a portfolio of insurance policies on the last day of year one, and we've been asked to use the information below to calculate total insurance reserves and underwriting profits from years one to four. So let's have a look at the information that we've been given in a bit more detail. So we've been given the unearned premium reserves and the claims reserves throughout years one to four, and all the movements within those reserves. And you can see that the premiums written of 100 which were written on the last day of year one you can see that flowing into the reserves in year one. But you can also see those premiums being earned throughout years two and three, so clearly these were two year policies. Now finally, if we have a look at the bottom line there you can see the ending reserves throughout years one to four, and you can really see how they start off at 100, that's the premium written in year one, and gradually that goes down as those premiums are released to revenues and to earnings. Now looking at the claims reserves, you can see the opposite. So that starts off at nil, as there are no claims incurred when the policy is written. But then that reserve starts to build as the claims are incurred in years two and three. But then it starts to diminish again as the claims are actually paid out. So by the end of year four, the claims reserve is only five. So in terms of calculating total reserves that's a pretty straightforward calculation, 'cause we can simply take the information from above, so the unearned premium reserve at the end of year one, and the claims reserve at the end of year one as well. And then we just sum those together and that gives us total insurance reserves, and that will be shown on the face of the balance sheet. And then we can roll forward this information for years two three, and four. But let's just stop there and have a quick look at what we've got. Now clearly the total insurance reserves are 100 at the start, and that's all unearned premium. But then actually what happens over time is that the total reserves they start to diminish. But some of that is because of the premiums being released to earnings. But some of it is also due to the claims reserves, which although initially building, they gradually then reduce over time as the claims are paid. Now that we've done that, let's have a go at calculating our underwriting profits from these policies. So this can be very straightforward. Again, we're just gonna take the numbers from above. We're gonna have to put a minus sign in because our premiums earned are showing us negative above. We want those to show as a positive 'cause those are revenue. And for the claims expense, again, we're gonna put a minus sign in because they're actually showing as positive in the table above, and we want those to be shown as a cost. So then we sum those together and that gives us our underwriting profit. Now clearly that's not very exciting in year one 'cause it's all nil, but when we roll that forward you can actually see all the numbers flowing through. And in particular you can see the earned premiums of 15, years two and three, and you can see the claims expense, which actually flows through years two, three, and four. And so you can see the underwriting profits of 15 and 10 which are effectively coming out of the reserves. So you've got the premiums and the claims expense being drawn out of the reserves and flowing through into the profits of the insurance company.