Hi - I've few queries pertaining to BLAGAB minimum profits.
- While calculating minimum profits, deduction has to be made in respect of policyholder's current or deferred tax. Why is it required?
Presumably, policyholder tax is based on profit calculated as C-P, however Appendix 7 calculates it as (I-E) - Minimum profit which appears to be cross circularity in calculation.
- Treatment of BLAGAB losses in Section 6.2: Does BLAGAB losses refer to I-E losses or shareholders' loss within I-E? Shouldn't it refer to the former, however it looks like it refers to the latter.
- I-E in Year t is 1000, minimum profit = 400, policyholders' share = 600. Company was in XSE in Year t-1 to the extent of 200. In Year t, minimum profit is reduced by 100 (subject o 50% rule), policyholders should still be charged tax at 600. Is this correct?
- Question 7.3: Year X: Can Non-BLAGAB losses be sett off against BLAGAB profit as per Non-BLAGAB set off rules? If it can be then set off should be against minimum profits of BLAGAB (400-150 = 250), with no change in policyholders' share (300).
Year X+2: Isn't the treatment of 50% rule incorrect, shouldn't be 400 - 75 (50% of 150) = 325?
- On a different note, is there any adjustment of reinsurance in Non-BLAGAB as is done in BLAGAB?
Last edited by a moderator: Feb 17, 2019