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Life Insurance Taxation (2) - XSE

V

Viki2010

Member
section 4.

A company may temporarily beocme excess E due to:
1. Large BLAGAB profits, for example from a weakening of the liability valuation basis, which would result in the minimum profit test biting.


Question: which component of I-E computetation would the above come in? It would need to either decrease I or increase E or both, correct?
 
Weakening the liability valuation basis means that reserves are reduced, which increases profit. So "I-E" stays the same but the BLAGAB profit increases, hence there is more chance that the minimum profit test bites (i.e. that profit > I-E).
 
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