Line 25: “Unamortized acquisition cash flows at Dec 31, 2025”.
I included this line when calculating caquisition cash flows yet to be amortized but the solution did not. Why is it?
Sorry, can you please rephrase your question? I do not know what you are asking for here
A question for part d:
Why is the interest accretion on RA and Effect of changes in discount rates on RA not included in IFIE?
Why do you need DAC yet to be expenses?
The risk adjustment relates exclusively to non-financial risk, while IFIE is strictly only for the effects of the time value of money and financial risk
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Acquisition costs yet to be expensed (acquisition cost paid - acquisition cost amortized in the reporting period)
I still do not know understand - That’s not used anywhere in the question
Closing LRC = Opening LRC + Prem paid - Ins rev - ACF paid + ACF amortized
So I thought that the green line would increase closing LRC, but it was not used at all.
Let’s say you start with your full DAC which is in the opening LRC (Call it X). During the period, you amortize 0.25X. That means you should now have 0.75X left for in your closing LRC which is what is happening in the sample solution as you subtract the acquisition costs amortized in the period from the opening LRC. If you re-add back the unamortized acquisition cash flows to your closing LRC, you end up with 1.5X which is more than what you started with!