I've read in a past paper solution that the embedded value equals the "present value of shareholder transfers. e.g. as generated by bonus declarations". When it comes to shareholder transfers under a 90:10 fund - are there two components to it as follows: 1. 1/9th of the present value of the future cost of the bonuses that are paid to policyholders. 2. The shareholder's share of net assets. (e.g. 10% of the estate under a 90:10 fund). I'm interested to know whether shareholder transfers includes or excludes the point in bold above. I am studying for SA2 but want to understand this which comes from SP2. Thanks in advance.
In SP2 an EV has two parts: shareholders share of net assets (2. in your post) and present value of future transfers (1. in your post). Best wishes Mark
