tax

[misterh]

"Profit can be measured as premiums plus investment return less expenses less claims (including the increase in reserves). However, as these products are savings contracts, we expect that premiums will be lower than claims/reserves increase. Hence, the minimum profit is likely to be smaller than the I - E figure, ie the minimum profits test is unlikely to bite."
I don't follow the middle sentence? Also is the probability of the mp test biting a function of the product mix if the above is correct?
thanks

 

[Mark Willder]

"Profit can be measured as premiums plus investment return less expenses less claims (including the increase in reserves). However, as these products are savings contracts, we expect that premiums will be lower than claims/reserves increase. Hence, the minimum profit is likely to be smaller than the I - E figure, ie the minimum profits test is unlikely to bite."
I don't follow the middle sentence? Also is the probability of the mp test biting a function of the product mix if the above is correct?
thanks

For a savings contract the policyholder will expect to get back more than they put in, so premiums will be lower than claims/increase in reserves.

The opposite would be true for protection contracts, so business mix would matter. However, as new business for these contracts is no longer part of BLAGAB, it won't matter what the business mix is in the future.

Best wishes

Mark