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With profit EEV

Discussion in 'SA2' started by Jishnu Bhatia, Mar 2, 2019.

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WP EEV

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  1. Jishnu Bhatia

    Jishnu Bhatia Member

    Hi,

    Could someone please explain the following with profit logics :

    1. What is the formula for EEV in WP under SII? According to me It’s PVST+PVRE*REF

    2. What is the difference between PVST taken in SII balance sheet and PVST taken in EEV under SII?

    3. What is PVRE & REF exactly and how does PVRE build up?

    4. What is Estate in with profit?
    Can i say that FS + SCR = Estate ?

    Thanks in advance.
     
    Jishnu Bhatia, Mar 2, 2019
    #1
  2. Em Francis

    Em Francis ActEd Tutor Staff Member

    It may help to try and think of the ‘formula’ as: PVST + {OF+RM – PVST- coh} x F
    where:
    • F is the WP fund shareholder participation factor (eg 10% in a 90/10 fund)
    • OF = Solvency II own funds
    • coh = cost of holding required capital
    [/QUOTE]
    It will depend on how companies determine PVST under EEV, there is more discretion than that under SII.
    [/QUOTE]
    I am not 100% sure, where did you find these abbreviations. When you say PVRE are you referring to Retained earnings? If so, these are built up from under distribution.
    Are you referring to the inherited estate. If so, as it says in the Core Reading: The inherited estate is broadly that part of the with-profits fund over and above that which is required to meet the realistic liabilities
    It could be used to cover the SCR.
     
    Em Francis, Mar 8, 2019
    #2
  3. yogesh167

    yogesh167 Member

    So EV of with profit means sum of present value of retained earnings (PVRE) and present value of shareholder transfers(PVST).

    So lets suppose we are currently in the middle of projection term.

    Then, PVRE will include sum of present value of under distribution of profits from past as well as present value of expected retained earning from future profits at each time period until end of projection period.
    PVST will include shareholder transfer from past RB, future RB and future TB.

    Am I right? please confirm

    thanks in advance
     
    yogesh167, Jul 24, 2019
    #3
  4. Em Francis

    Em Francis ActEd Tutor Staff Member


    Please note PVRE is not SA2 terminology so I would avoid using. WP EV is made up of shareholder’s % of net assets, ie F%*(OF-PVST+RM-coh) + PVST. PVST will only contain shareholder transfers from future bonus declarations. Past declarations would already be part of net assets.

    Thanks
    Em
     
    Last edited: Sep 30, 2019
    Em Francis, Jul 25, 2019
    #4

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