Hi Mark, can you help me understand this part on page 19 Solutions: "If the average size of withdrawing policies is larger than those that remain, then there will be less contribution per remaining policy, on average, to cover per-policy expenses. So profits may fall if withdrawal rates increase, even if the amount of per-policy expenses were to be unaffected." Is it because larger policies contribute larger profits?
Hi Kimiko Yes that's right. Larger policies contribute larger profits if the expense loading is calculated as a proportion of the premium. Best wishes Mark
