Hi, Can someone explain why would we compare asset share with reserve for assessing feasibility of terminal bonus? I understand that we compare asset share with maturity benefit (including RB only) for TB assessment but why reserve and AS? Please help.
Yes but reserve would also subtract PV of premiums from PV benefits. The final payout is equal to maturity benefit only. Reserve would be lower than maturity benefit and if we compare asset share with reserve, would it not indicate a higher terminal bonus vs comparing asset share with maturity benefit? My question is how can we use reserve vs maturity payout interchangeably here.
It is just different ways of going about the calculation but they should give you similar results: One way is projecting asset share and comparing to the guaranteed maturity benefit, the projected asset share will take into considerations projected premiums, expenses, etc. And the other way is comparing the current asset share with a discounted value (reserve) where the reserve will take into account the premiums, expenses, etc. Hope this helps. Thanks Em
