Hi, Can someone please explain why shareholders get 12-13% of surplus on reversionary bonus declaration in a 90:10 fund? My understanding is that: - policyholders' addition to benefits, from the bonus, is valued on the supervisory basis and so this places a higher value on the bonus. - therefore the shareholder also gets a higher bonus now. But policyholders will actually only get 87-88% of the bonus. Also, why this is fair between policyholders and shareholders? Thanks.
Your first question: I think the answer is in "But policyholders will actually only get 87-88% of the bonus" of your text. Second question: "Fairness" in this case is how it is interpretated. If interpreted to the letter of the rules, using supervisory basis, which leads more than the 10%, is not inappropriate. However in substance/principle, fairness is arguable since more than the required percentage of 10% is being allocated to shareholders. Hope it helps.
