F
Frances
Member
Hi,
I have just attempted this question and actually I had a few different answers compared to the answers.
My argument was that more smoothing could have been applied, which would have the effect of increasing smoothed asset share (possibly beyond the guaranteed benefits amount), and therefore making the cost of smoothing positive (as, after all, the cost of smoothing has increased when the company introduced the management actions).
Similarly, I went the other way on surrenders as well and said that increased withdrawals would reduce the cost of guarantees and either not impact the cost of smoothing (or reduce the cost of smoothing if other management actions had made this positive).
I get the logic behind the answers (which have these going the other way), but I wouldn't have thought to start from that given that the impacts aren't going in the direction of the change in CoG and CoS. Would I still have got some credit for the above, or was this not what the examiners were looking for? Please could you explain what the logic is for starting from reduction in smoothing and reduction in surrenders?
Thanks,
Fran
I have just attempted this question and actually I had a few different answers compared to the answers.
My argument was that more smoothing could have been applied, which would have the effect of increasing smoothed asset share (possibly beyond the guaranteed benefits amount), and therefore making the cost of smoothing positive (as, after all, the cost of smoothing has increased when the company introduced the management actions).
Similarly, I went the other way on surrenders as well and said that increased withdrawals would reduce the cost of guarantees and either not impact the cost of smoothing (or reduce the cost of smoothing if other management actions had made this positive).
I get the logic behind the answers (which have these going the other way), but I wouldn't have thought to start from that given that the impacts aren't going in the direction of the change in CoG and CoS. Would I still have got some credit for the above, or was this not what the examiners were looking for? Please could you explain what the logic is for starting from reduction in smoothing and reduction in surrenders?
Thanks,
Fran