7 main uses of asset shares

Below is a question from Smart Revise.

What is the difference between use (1) and use (3)?

Thanks!


List the 7 main uses of asset shares in respect of with-profits business.
Answer:

1. As a benchmark for determining the level of payouts

2. As a tool for the consideration and quantification of TCF

3. As a guide for determining maturity values and surrender values

4. To help the smoothing process for maturity values

5. As a guide to the appropriate level of regular annual bonus

6. To help with projections for various documents

7. Establishing a realistic solvency position for reporting purposes

 

I am guessing level of payout in (1) includes regular reversionary bonus and terminal bonus

 

Are you saying that (3) (... As a guide for determining maturity values and surrender values ...) does not include RB and TB? How does that work?

 

3 is as a guide for maturity and surrender - so this would be more about TCF and what is in PPFM as to surrender values. I.e surr value can't be less than AS.

 

I think maturity values consider TB.
(1) is more on the sustainable rate of future bonus

 

I think by benchmark here they mean the target range as per PPFM where firms must specify target ranges around 100% of unsmoothed asset share within which 90% of maturity payouts must lie (including SVs).
Asset share is used as a guide for MVs and SVs to determine how much TB or MVA they can/should apply. There is a level of discretion here subject to the above PPFM. Other considerations such as competitive pressure may come into it and smoothing etc.
This is how I understand it...

 

That makes sense!

Thank you - much appreciated.