A.1 Valuation Assumptions

Question 1

Overview of the prevailing CSO and IAM tables

Answer 1

1941
-attained age, aggregate level, ages 0-99

1958
- age setback for females

1980

• removed age setbacks for females
• introduced a distinct rate for females
• smoker/nonsmoker versions available for male and female
• unisex tables as well w/ smoker and nonsmoker status
• each table has a ‘age last bday’ and ‘age nearest bday’
• 10 year select factors

2001 CSO
- max age extended to 120
select period increased to 25 year
* Super preferred nonsmoker
* Preferred nonsmoker
* Residual standard nonsmoker
* Preferred smoker
* Residual standard smoker

2017

• ‘may’ use VM after 2017
• ‘must’ use VM after 2020

Question 2

how to calculate a generational mortality rate

Answer 2

a mortality table whose rates decreased from one year to the next for a given age based on:

• a Period Table (2012 IAM mortality rates)
• a projection scale (G2)
• this takes into account mortality improvement
  formula:

q [x] + t = q [x+t] ‘ * (1 - improvement (x) ) ^ (n + t)

Question 3

Dynamic valuation IRs

purpose and main idea. Criteria that impact this

Answer 3

helps account for large shifts in IR

dynamic IR formula:

i = 3% + w1 * (r1 - 3%) + 0.5 * w2 * (r2 - 9%)

• where r1 is a reference rate or at 9%
• r2 = reference or 9%, but 0 if not “other annuities” product

reference rate:
- r = lesser of 36 mo and 12 mo average of Moody’s composite yield on corporate bonds

w = weighting factor prescribed by the SVL

• existence of cash settlement options or future interest gts will generally lower the IR (higher reserves)

plan types for annuities that impact disintermediation:
type A
- withdrawal prohibited or has MVA
- highest IR

type B

• withdraws prohibited during the IR gt period
• IR: B < A

type C

• Can withdraw before gt IR expires
• IR: C < B < A