2014 net reserve at 36mos is 900,000. This is the amount retained by primary, at 75%. So, the ceded amount, which is now commuted back, is 300,000, corresponding to the 25%.
Could you explain why we set the target taxable income to -37,500 when solving rather than +37,500? Having a hard time grasping what is going on conceptually.
Achieving no income tax means that we have to offset the 37500 taxable income by way of the effect of the commutation. So we equate -37500 to the effect of commutation.
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2014 net reserve at 36mos is 900,000. This is the amount retained by primary, at 75%. So, the ceded amount, which is now commuted back, is 300,000, corresponding to the 25%.
Could you explain why we set the target taxable income to -37,500 when solving rather than +37,500? Having a hard time grasping what is going on conceptually.
Achieving no income tax means that we have to offset the 37500 taxable income by way of the effect of the commutation. So we equate -37500 to the effect of commutation.