Treatment of Dividend to Policyholders and Other U/W expenses in TBI calculation
The chapter stated that (TBI = TBEP-TBIL+InvInc), but I keep seeing that there are expenses and dividend to PH in practice questions. Should the complete formula be (TBI = TBEP-TBIL+InvInc-Expenses-P/H Dividend) instead?
Comments
Which practice questions are you referring to?
In 2013 Fall#18, direct method answer. There is one line saying "Regular Taxable Income = Tax EP – Tax IL – Exp + Tax Inv Inc – P/H Div"
Yes, uw income does include deductions for uw expenses, as stated in the IS section. The fact that uw expense and policyholder dividends are not found in the TBI formula is an omission. Note that some old exam problems expected you to calculate tax without giving you uw expenses or policyholder dividends. That formula was made with those problems in mind.