Hi,
On page 4 of this chapter it says that a special reversionary bonus might be declared to maintain guarantees on policies where uniform regular bonuses are being cut.
Why would a company choose to use this method rather than defining a different bonus rate for the targeted class of policy?
On page 13, it states that if a company only uses regular bonuses then:
It may smooth its reversionary bonus rates more than if they also were awarding a TB, because the RB is the only tool it has to smooth payouts.
But it also says,
it may smooth by less than other companies, because the RB is the only tool it has for adjusting payouts.
I don't really understand how these opposing statements can both be true.
On page 15 it states that for supportability of bonus rate investigations that a realistic value for assets might mean market value, or it might mean discounted value of asset proceeds (e.g. majority of assets held are fixed in nature).
- Why might we use a discounted value in this particular scenario?
- And in what other scenarios might we use a discounted value?
Thank you,
Last edited: Feb 13, 2024