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Unitized With Profits Asset Share

R

Rajat gupta

Ton up Member
Hi Everyone,

Can somebody please explain why it is appropriate to use actual expenses for 90/10 business and product charges for 0/100 business while determining Unitized With Profits Asset Share?

Regards,
Rajat
 
Rajat gupta said:
Hi Everyone,

Can somebody please explain why it is appropriate to use actual expenses for 90/10 business and product charges for 0/100 business while determining Unitized With Profits Asset Share?

Regards,
Rajat
Click to expand...

Hi

By using product charges, then the difference between actual expenses and charges (actual vs expected) will be borne by the estate or outside the estate and so will be paid for by the shareholder, ie 0% of risk borne by policyholder and 100% by shareholder. Which is how the non-investment risks should be shared for a 0:100 fund.
Whereas, if actual expenses are used, any difference in actual over expected expenses would result in lower asset shares and ultimately lower bonuses and lower shareholder transfers. In a 90:10 fund, this expense risk would be shared between policyholder and shareholder 90%, 10% respectively.
 
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