Hi General questions: 1) When calculating an EV, can you take account of future NB levels when calculating the contribution to overheads from the existing business? i.e. in the per policy expense assumptions? 2) In the solution for question 3 paper 1 of April 2001, it mentions that some of the free estate will be needed to make up the difference between the realistic and statutory value of the without profits liabilities. . .what about for the with profits liabilities ? 3) In a closed WP fund, can shareholders inject money into it as not to restrict investment freedom They can still benefit from increased regular bonuses can they not? Thanks Em
These questions were covered in a recent thread. Shareholders can always add money to a fund if they wish (whether its closed or not). However, its unlikley that shareholders would be happy to inject capital. In a 90/10 fund, if the shareholders added 100 to the estate, they would only be entitled to take out 10% of the accumulated value of that extra estate. The shareholders would also get 10% of the extra surplus from the investment freedom, but this would have to be very large to compensate for losing 90% of the capital injected. There is no guarantee that a riskier investment strategy will lead to higher surplus too. The shareholders might be prepared to inject capital if the split of any surplus was changed, eg to 85/15. Effectively this has happened in the past when 100/0 funds have demutualised to become 90/10 funds. However, this is still more likely to happen for open funds (that can generate future surpluses on new business) than closed funds. Best wishes Mark
