A
ActuaryEye
Member
Good day
Can someone help me understand the calculation of the present value of in-force business (PVIF) for with-profits endowment assurance policies. The profit participation rule is 90/10 - where 90% of the profits go to policyholders and 10% is for shareholders. So what I really want to understand is how the future shareholder transfers are calculated through the bonus distribution.
For example let us say we are projecting cashflows to arise in year one of the projection period. So, for a single policy, we have Premium - Expenses - Cost of benefits (surrenders, death claims, maturities) + investment income - increase in reserves. Does this give us the profit that should then be split 90/10? I am thinking the policyholder has already benefited by the increase in reserves, so it is not making sense to give them 90% of this profit.
Should the cost of benefits in my example above include the bonus for the year? I understand how this would work when the policy is not a with-profits policy.
Please help
Regards
Can someone help me understand the calculation of the present value of in-force business (PVIF) for with-profits endowment assurance policies. The profit participation rule is 90/10 - where 90% of the profits go to policyholders and 10% is for shareholders. So what I really want to understand is how the future shareholder transfers are calculated through the bonus distribution.
For example let us say we are projecting cashflows to arise in year one of the projection period. So, for a single policy, we have Premium - Expenses - Cost of benefits (surrenders, death claims, maturities) + investment income - increase in reserves. Does this give us the profit that should then be split 90/10? I am thinking the policyholder has already benefited by the increase in reserves, so it is not making sense to give them 90% of this profit.
Should the cost of benefits in my example above include the bonus for the year? I understand how this would work when the policy is not a with-profits policy.
Please help
Regards