Can I just clarify that... when a question talks about all the business written in a with-profits fund (e.g. Q1 Apr 2010) that the with-profits policyholders are entitled to share of profits emerging from all the without-profits contracts. Whereas for a company with one Long-term fund (e.g. Q1 Sept 2010) that contains with and without profit products written in it; some without-profits products will have profits shared with WP policyholders and some without-profits products will have profits only going to shareholders? Is that was 'participating' means, that WP policyholders can participate in the profits from a certain product/fund?
Yes with profits policyholders participate in the profits (and losses) of the WP fund. So WP policyholders should benefit from the profits from any without profits business written in the WP fund. So in Q1 Sept 2010 where there is only one fund, this is a WP fund and the WP policyholders would be entitled to a share in all the profits. However, this issue is not important in this question as it is concerned with solvency rather than profit distribution. If the shareholders want to keep all the profits from without profits policies, then they will have to write this business in a separate without profits fund. Best wishes Mark
Just to confuse things, you can also get UWP business written in a 0/100 fund, alongside NP business. Here the UWP policyholders participate in the investment surplus only (which is added via the accumulation rate and TB), but not in the non-investment surplus on their own policies or in the profit/loss on the NP business. There isn't universal agreement on whether such funds should be referred to as WP funds, but any exam question should explain how profits are shared if it's important, rather than simply using an ambiguous label. (Personally, I'd label any fund containing WP business as a WP fund, but I know there are people out there who would reserve that label for 90/10-type funds.)
