Regulation 24 Implicit items: future profits
The implicit item relating to future profits may be valued at not more than 50 per cent. of the full amount of future profits.
For the purposes of paragraph (1) above, the full amount of future profits shall be obtained by multiplying the estimated annual profit by a factor which shall as nearly as may be represent the average number of years remaining to run on policies but shall, if it exceeds 10, be reduced to 10.
For the purposes of paragraph (2) above—
the estimated annual profit shall be taken to be one-fifth of the profits made in long term business over a period of five years (“the relevant period”) ending on the last day of the most recent financial year for which a valuation under section 18 of the Act has been carried out, substantial items of an exceptional nature being excluded, and
the average number of years remaining to run on policies shall be calculated—
by multiplying the number of years to run on each policy by the actuarial value of the benefits payable under the policy, adding together the products so obtained and dividing the total by the aggregate of the actuarial values of the benefits payable under all the policies, or
by an approximation to this method of calculation suitable to the circumstances of the case, including, where appropriate, an approximation involving the grouping of contracts,
appropriate allowance being made in either case for premature termination of contracts.
For the purposes of paragraph (3)(a) above—
where a valuation under section 18 of the Act has been carried out annually in relation to the relevant period, the profits made in long term business for any particular year of the relevant period shall be taken to be the surplus (if any) arising in the long term fund since the last such valuation, and the profits so made for that period shall be taken to be the aggregate of those surpluses less any deficiencies in the long term fund during that period;
where an insurance company has carried on long term business throughout the relevant period but valuations under section 18 of the Act have not been made annually in that period, the profits so made for that period shall be taken to be the aggregate of surpluses arising in the long term fund since the last valuation preceding the relevant period less any deficiencies in the long term fund since that last valuation, except that the surplus or deficiency arising in the period ending with the first valuation within the relevant period shall be proportionately reduced to allow for any period of time falling outside the relevant period;
where an insurance company has not carried on long term business throughout the relevant period, the profits made in long term business for the relevant period shall be taken to be the aggregate of any surpluses arising in the long term fund during that part of the relevant period for which long term business was carried on less any deficiencies in the long term fund during that part of that period.