April 2019Q2 vii

[User 1234]

In ASET suggested solution, under the additional points of shareholder transfers, original text is "These also appear to be quite high at around 4% of total claims. Reversionary bonus rates might be relatively high"

I guess I understand the point that majority of the $400 shareholder transfers relates to reversionary bonuses. Because if it were relating to terminal bonus, then the implied terminal bonus rate is almost 32% (=400*9/ 11,200 where 11,200 is the total claims amount).

What I don't follow is that, how can we tell the reversionary bonus rates is high from the given information? I thought, in order to derive the reversionary bonus rate (=400*9 / sum assured), we have to know the sum assured in the denominator?

Thanks a lot in advance for your help.

 

[Em Francis]

In ASET suggested solution, under the additional points of shareholder transfers, original text is "These also appear to be quite high at around 4% of total claims. Reversionary bonus rates might be relatively high"

I guess I understand the point that majority of the $400 shareholder transfers relates to reversionary bonuses. Because if it were relating to terminal bonus, then the implied terminal bonus rate is almost 32% (=400*9/ 11,200 where 11,200 is the total claims amount).

What I don't follow is that, how can we tell the reversionary bonus rates is high from the given information? I thought, in order to derive the reversionary bonus rate (=400*9 / sum assured), we have to know the sum assured in the denominator?

Thanks a lot in advance for your help.

All this is saying that because it is large (larger than it would be if associated to TB alone) then it will likely be due to high reversionary bonuses. And then if there are high reversionary bonuses then this may imply smaller terminal bonuses.

 

[User 1234]

All this is saying that because it is large (larger than it would be if associated to TB alone) then it will likely be due to high reversionary bonuses. And then if there are high reversionary bonuses then this may imply smaller terminal bonuses.

Thanks !!!