Chapter 8: Asset Shares

Question 1

Asset share

Answer 1

Premiums received to date, rolled up at earned interest rate less expenses and cost of cover

Question 2

Asset share CFs

Answer 2

Monies in:

• premiums
• investment income
• profits on WP

Monies out:

• Expenses
• Cost of Cover
• Deductions

Question 3

“Deductions” (6)

Answer 3

• commissions paid and expenses
• cost of providing benfs in excess of asset share
• tax on investment income
• transfers of profits to SHs
• costs of capital to support in early years
• contribution to undistributed surplus in with profits fund – support smoothing of bonusses and ability to exercise greater investment flexibility.

Question 4

For n policies aggregate asset share at t+1:

Answer 4

n(ASt + P -Et)(1+it) – Snqx+t

• P – annual prem
• Et – per policy expenses at t
• it – invest ret in t to t+1
• S - death benf SA
• qx+t – actual mort rate t to t+1

Individual:
ASt+1=( n(ASt + P -Et)(1+it)- Snqx+t )/(n(1-qx+t))

Question 5

Reduce new business strain by (3)

Answer 5

• Negative non-unit reserves
• Actuarial funding
• Reinsurance

Question 6

How AS moves after inception depends on how the following balance out (3)

Answer 6

• Components of renewal expenses
• Investment income
• Cost of life cover