Hi I had a few doubts in Ch 19 asset share as per 2019 notes: 1 In Sec 3.7 Tax deductions,didn't understand the following line- Allowance might be made for deferral of tax relief on acquisition expenses being spread over seven years. 2.In Sec 3.9,didn't understand the meaning of the answer to the question- Charging this cost to the asset share of those policies becoming claims won’t work, because the guarantee is overriding the asset share anyway for those policies. 3.In Ques 19.5,how would the answer change if it was for a proprietary company and not a mutual company.? Thanks
See Chapter 7 (Taxation (2)), near the top of page 10, which explains that in the UK BLAGAB acquisition expenses are spread over a period of seven years within the 'I-E' tax calculations. If you are using 2019 notes, that won't have included in it any of the new tax content (there are two completely new chapters on tax that have been added since then) which will put you at a significant disadvantage. You need to use the most up-to-date notes for the exams.
This is saying that there is no point attempting to recover the cost of guarantees biting from WP policies becoming claims, because the insurer has to pay the higher of the guarantee and the asset share. If the guaranteed benefit is biting, reducing the asset share (by deducting the 'cost of guarantees' from it) is meaningless, because the insurer still has to pay the guaranteed benefit.
I think you mean question 18.5? (I have also changed the heading of this thread to refer to Chapter 18, per the current notes, to avoid confusion for other students) The main difference would be the deduction of shareholder transfers. There could also be differences arising if the WP business is written on a basis whereby the shareholders have a charging arrangement in place and/or where they are eligible for (say) all of the insurance profits but none of the investment profit (see Section 2.3 of Chapter 19 (Surplus distribution) for reference to this variation).
