Would like some clarifications on page 21 chapter 7 CMP Notes "If BLAGAB losses are set against profits other than BLAGAB trade profits..., an equivalent adjustment is made in the I-E computation to ensure that the same loss is not deducted twice." Would like to check what this "equivalent adjustment" actually is. So suppose I-E is 10 but BLAGAB trade profit is -2, my understanding is that shareholder's share is zeroized, in effect offsetting policyholder's share (i.e. instead of 12 taxable at policyholder's rate, only 10). But if BLAGAB trade profit is used to offset non-BLAGAB trade profit say, then I-E will increase to 12 and hence p/h share also 12, to make sure that the company cannot offset twice i.e. non-BLAGAB trade profit and policyholder's share? Thanks for any replies.
If the losses are utilised in the period in which they arose there is a reduction made to the BLAGAB management expenses calculation. So in your example, if this adjustment wasn't made, then the I-E would equal 10 (-2 is zeroised). But this adjustment means that management expenses are increased by 2 so that I-E would equal 12. And this 2 would be offset somewhere else. Does this make sense? Thanks Em
