U
unarthur
Member
Hi!
I think I'm much confused about "smoothing cost" of WP business now, hope someone can help me with this.
QUESTION1
SA2 September 2009 examer's report:
Question 2(iii)(d) : Impact of higher equity returns on Peak2 working capital
"However the cost of smoothing liability (part of the future policy related liabilities) would be expected to increase, and overall this should have a neutral effect on working capital."
I feel very confused about this. In my point of view, higher equity return will tend to reduce the difference between my unsmoothed asset share and my current payout level, this will act to reduce(not increase) my future smoothing cost, Isn't it?
QUESTION2
If a company charges the cost of smoothing when calculating asset share. Then,how to determine the amout of charges in practice? Can someone give me a simplest example to clarify this? It must be very helpful to me.
I think I'm much confused about "smoothing cost" of WP business now, hope someone can help me with this.
QUESTION1
SA2 September 2009 examer's report:
Question 2(iii)(d) : Impact of higher equity returns on Peak2 working capital
"However the cost of smoothing liability (part of the future policy related liabilities) would be expected to increase, and overall this should have a neutral effect on working capital."
I feel very confused about this. In my point of view, higher equity return will tend to reduce the difference between my unsmoothed asset share and my current payout level, this will act to reduce(not increase) my future smoothing cost, Isn't it?
QUESTION2
If a company charges the cost of smoothing when calculating asset share. Then,how to determine the amout of charges in practice? Can someone give me a simplest example to clarify this? It must be very helpful to me.