Chapter 8

Question 1

Describe the technique of asset shares

Answer 1

E

Question 2

Explain how an asset share may be built up using a recursive formula

Answer 2

AS^(t+1)=((AS^t+P-E^t)(1+i^t)-Sq(x+t))/(1-q(x+t))
Components of asset share:
“Please Check Carefully That Real Transfers Cover Contributions.”
* P = Premiums
* C = Commissions & expenses (net of tax)
* C = Cost of benefits > asset share
* T = Tax on investment income
* R = Reserves for future liabilities
* T = Transfers to shareholders
* C = Cost of capital for new business strain
* C = Contribution to undistributed surplus

Question 3

Explain the main uses of asset shares

Answer 3

• With profit surplus distribution
• Surrenders