A.1 Whole Life

Question 1

Product Classification for WL

Answer 1

• WL has terms that are fixed and gtd

- DB and NF benefits are gtd at issue for life as long as premium is paid

Question 2

Min CSV and RPU requirements under SNL

Answer 2

Min CSV:
Min CSV = max (PVFB - PV adj Prem, 0)
adj Prem = adjusted premium for the first policy year
= (EA + PVFB @ 0) / a(x)
EA = 1% face + 1.25 * Min(4% face, NFNLP)
NFNLP = PVFB(0) / a(x)
- if the face amount is not level, use the average over the first 10 years
- mortality - use the prevailing CSO table at issue
- Max NF IR:
a. Pre op date: 125% of max valuation IR under SVL
b. Post op date: max(4%, 125% stat valuation IR for the NPR)

Reduced Paid Up RPU
RPU = Min CSV (x+t) / A(x+t)

Question 3

how are PH dividends determined

Answer 3

• Dividend Scale - set of rates that details how divisible surplus will be distributed to par policies
• dividend surplus = aggregate amount of capital to be distributed as policy dividends
• The board is advised by a senior dividend actuary with experience in determining PH dividends
• when determining the amount of distributable surplus, the board must consider
  a. withholding enough surplus to absorb shock
  b. distributing surplus to its owners

Contributory principle: allocate divisible surplus to policies proportionally based on each policy’s contributions

3 factor dividend formula:

1. expense factor
2. mortality factor
3. interest factor
   - the experience of these 3 factors will determine PH dividends. if the factor actual results are more favorable than expected = higher dividend

Question 4

analysis of increase in reserves for a WL policy

Answer 4

End reserve =
Tabular net premiums
+ Tabular interest
- tabular cost

calculate successive stat reserves as:
Current V = [(Last period V + NP) * (1 + i) - q] / (1 - q)

Question 5

calculate deficiency reserves

Answer 5

deficiency reserves occur when the GP < NP

total reserves = max(a,b)
a = reserves calculated according to the method, mortality table, and IR used for the policy
b = reserves calculated by method used for policy, but using min valuation standard of mortality and IR. and replacing the valuation NP by actual GP in each year where GP < NP

deficiency reserve si the excess of (b) over (a)