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general doubts

S

Sagar_sagar

Member
Q1. what is the use of bid price on offer basis and
offer price on bed basis ?

Q2. Why for with-profit business present value of profit is calculated as PV of shareholder transfer under EV calculation. why not full business profit is considered ?
 
Q1: bid price on offer basis = to pay out claims (p/hs cashing in their units) if the company is pricing under an offer basis (even if there is a net inflow of cash, there will still be some claims that need to be paid out)
offer price on bid basis = to use to purchase units with premiums coming in, if the company is pricing under a bid basis (even if there is a net outflow of cash, some p/hs are likely to still be paying premiums in)

Q2: EV = value of shareholders' interest in the company. Thus it includes PV future shareholder profits = PV future shareholder transfers.
[Wouldn't count the full business profit as a lot of this would go to the policyholders, not shareholders.]
 
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