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Old Today, 07:43 AM
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Im not entirely sure. Mcclenahans paper never considers expenses paid at t=0 and nothing in his words seems to hint that expenses at t=0 should be treated differently except for this paragraph.

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The opportunity cost should be calculated based upon the cash flows associated with the line of business, and should reflect the fact that not al1 cash flows go through invested assets - some portion being required for the infrastructure of the insurer. The buildings and desks and computer software which were originally purchased with someone else’s premium dollars are now dedicated to providing service to current policyholders and should be viewed as being purchased at the beginning of the policy period and sold at the end.
And i dont really know what that means
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Old Today, 07:54 AM
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Ya i think that must be a mistake in TIA1
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Old Today, 07:59 AM
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Ya i think that must be a mistake in TIA1
Which part. The furniture being part of opportunity cost calculation. Or the fact he ignores premium...
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Old Today, 09:05 AM
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Which part. The furniture being part of opportunity cost calculation. Or the fact he ignores premium...
I think angeloa explains that premium is not included because we only care about the difference in PV of future UW cash flows. He mentioned in the forums that his method ignores premium because they arent written at a combined ratio of 100% like the example in mcclenahan.
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