ST1 vs SP1

Hi,

Subject SP1 is largely the same as Subject ST1.

There are a number of fairly minor changes to the Core Reading and ActEd materials, and three more significant ones:

(1) Chapter 17, Section 1 - The section on IP pricing has been reduced and no longer contains formulae.

(2) Chapter 20, Section 2 - The section on valuing options has been rewritten. The Core Reading no longer makes explicit reference to the conventional and North American methods, although these methods are still covered implicitly under a more general (cashflow) approach.

(3) Chapter 30 - A new chapter has been added on problem solving. There is very little new Core Reading on this as problem solving is a skill rather than something to learn by reading, however, the new chapter discusses how you might go about solving problems.

More details of these changes, plus changes to the syllabus will be provided in the CMP Upgrade, which will be available from the ActEd website in due course.

I hope this helps.

Anna

 

We don't have anything exactly like this I'm afraid. However, the ASET and Revision Books are updated each year for any changes to the syllabus or Core Reading. Revision books break down the past exam questions into broad groups. ASET contains a grid of past exam questions broken down by chapter.

I've had a look through the past ST1 questions. The only question that jumped out at me as being unsuitable today is September 2011 Q1(i). This question covered the Groupe Consultatif reserving principles. These principles are no longer on the syllabus. They were examined frequently in ST2, but this is the only question I spotted in ST1.

Good luck with your studies.

Mark

 

No, there isn't any additional reading for SP1. There should be plenty for you to read in the Course Notes.

Best wishes

Mark

 

The CMP upgrades are available on the ActEd website under the Products menu, then Core Study Materials.

This link will take you to the relevant page:
https://www.acted.co.uk/paper_cmp_upgrade.html

Kind regards
Sarah

 

Hello

Thank you for your question. This is a tricky question as the approach to calculating embedded values can vary a lot. The short answer is that it can be either.

In SP1 we have just two components to the embedded value: the present value of future profits (PVFP) and the net assets. When calculating the PVFP we can allocate whatever reserves/required capital that we wish. We must then be consistent in the way we calculate the net assets.

A numerical example might help. An insurer has assets of 100, reserves of 60, solvency capital requirement (SCR) of 15, and so free capital of 25.

We could allocate assets equal to just the reserve to calculate the PVFP. So we would need to project assets of 60 and the future reserves to work out the future profit releases - let's say the PVFP is 10. The net assets would then be the full available capital of 100-60=40. So we could take the EV as 10+40=50. However, some of the net assets are there to cover the SCR, so we may want to reduce the net assets to reflect that part of them is locked in to cover the capital requirement, so perhaps we reduce the net assets to 37 and have an EV of 47.

Alternatively we could allocate assets equal to the reserve plus SCR. So we would need to project assets of 75 and the future reserves plus SCR to work out the future profit releases - let's say the PVFP is 22 (higher than the answer in the example above because we now include the release of the SCR in our profits). The net assets would then be just the free capital of 100-75=25. So we could take the EV as 22+25=47 (which is the same as the number we got in the example above once we'd allowed for the cost of lock in).

In Subject SP1, it's most likely that EV questions will be based on just the reserves (ie an answer of 50 as in the first example).

However, in Subject SA1 we go into this in more detail. We have three components to the EV by explicitly adding a component for the capital (15) less the cost of holding the capital (3). We also briefly discuss which approach might be used and how that would depend on the regulations in SA1.

I hope that helps.

Best wishes

Mark