I am struggling to understand why the calculation of asset shares is more important for with profits contracts and not so much for without profits. Is the reason the payment/calculation of bonuses? Even so, if a settlement value is available on withdrawal, the same principles will apply to both so why is one more important than the other (in terms of asset share)? I'd really appreciate any input.
As far as I can remember Asset shares are used for Helping set bonus rates RB, TB for WP products Help calculate profitability of contract retrospectively I think ? And helping determine SV 1st point is just WP products 2nd and 3rd point I think for all products Hence, a bit more important for WP products My memory of it is a bit sketchy so maybe tutor can advise
Hi Good question. Good answer too Schuey, your memory's not as sketchy as you think! Yes, for with-profits asset shares are used to set the bonus rates. So, asset shares are used in deciding what to pay on maturity, on surrender, on death. For without-profits, the benefits on death and maturity are normally zero or guaranteed monetary amounts. You're correct that if a company was going to pay a benefit on withdrawal, it could use asset share as a guide to setting it (or to establishing how much profit it would make). Chapter 21 describes this. In practice though, many without-profits contracts don't normally pay a withdrawal benefit, eg term assurance, annuities. So, asset shares end up being far more relevant to with-profits. Hope this helps Lynn
