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Profit "released"

P

Phani Vasantarao

Member
When talking about alterations in terms, what do we mean by "profit released"?
 
Phani Vasantarao said:
When talking about alterations in terms, what do we mean by "profit released"?
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Hello Phani

We can calculate the terms for an altered contract by equating the value of the old contract with the value of the new contract.

The profit released is the asset share less the value the insurer gives to the old contract. The asset share is the money we have accumulated so far on the old contract. So if we value the contract at less than the asset share then the insurer will be making a profit as it is crediting the policyholder with less than the total funds it has available, ie we have released this profit at the time of the alteration.

Best wishes

Mark
 
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