Guidelines on the Differential Premium Systems - PIDM

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Ref No DI/GL2-A1/2011(DPS) Issued on 4 March 2011TITLE<strong>Guidelines</strong> on The Differential Premium SystemsA member’s return on risk-weighted assets ratio shall be scored based on thefollowing range of results:Table 5: Score Range for Return on Risk-weighted Assets RatioReturn on Risk-weighted Assets RatioRange of ResultsScoreReturn on Risk-weighted Assets Ratio ≥ 2.75% 8Return on Risk-weighted Assets Ratio ≥ 2.25% but < 2.75% 6Return on Risk-weighted Assets Ratio ≥ 1.75% but < 2.25% 4Return on Risk-weighted Assets Ratio ≥ 1.00% but < 1.75% 2Return on Risk-weighted Assets Ratio < 1.00% 0(d)Mean adjusted return volatilityMean adjusted return volatility is calculated as the semi-standard deviation of amember’s profit or loss before tax and zakat over a three-year period divided by itsmean profit or loss before tax and zakat over the same period.A member’s mean adjusted return volatility shall be scored based on the followingrange of results:Table 6: Score Range for Mean Adjusted Return VolatilityMean Adjusted Return VolatilityRange of ResultsMean Adjusted Return Volatility ≥ 0 but ≤ 0.3 7Mean Adjusted Return Volatility > 0.3 but ≤ 0.7 4Mean Adjusted Return Volatility > 0.7 0Mean Adjusted Return Volatility is negative or the mean profit / (loss)before tax and zakat is zeroScore0Notes:A member which has less than three years of profit or loss before tax and zakat datashall not be assigned a score for this ratio. The scores for this ratio shall bedetermined on a proportionate basis as specified in paragraph 4.5 (InsufficientQuantitative Information).Page 7
Ref No DI/GL2-A1/2011(DPS) Issued on 4 March 2011TITLE<strong>Guidelines</strong> on The Differential Premium SystemsIllustration 1: Computation of Mean Adjusted Return VolatilityMember AProfit before tax for 2008 (RM’ mil): 100Profit before tax for 2009 (RM’ mil): 150Profit before tax for 2010 (RM’ mil): 110Mean = 100 + 150 + 1103= 120Semi-standard deviation =(100120)500=2= 15.81Mean adjusted return volatility= Semi-deviation of profit before taxMean profit before tax= 15.81120= 0.13Member BProfit before tax for 2008 (RM’ mil): 100Profit before tax for 2009 (RM’ mil): 150Loss before tax for 2010 (RM’ mil): (60)Mean = 100 + 150 - 603= 63.3322(0)(110120)(31)2Page 8
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Guidelines on the Differential Premium Systems - PIDM

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