If your unit of pink horrors suffers 7 wounds, its up to you to allocate those wounds to your models, one at a time, even if hits were fast rolled. So, one pink dies, and splits into two blues. Now you can allocate the next wound to a blue, if it dies, it splits into two brims, now you can allocate the next two wounds to a brim, if they die you have no more brims left, so you allocate to a blue, if it dies, it can split into two brims, now you allocate the next two wounds to the brims. If i counted correctly you now have allocated all wounds to models in your unit. You only lost one pink horror, but, of course, you have to pay reinforcement points to split them in matched play.
When pinks return, they simply return as the daemonic icon rule says, no other models are removed.
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