Extras 12 Flashcards
How can withdrawal rate be calculated
1-(#pols at end of year)/#pols at start (exclude deaths and maturities)
Why do an AOS for monitoring experience?
MI on experience
Regulations
Show financial effect of NB
Show financial effect of divergence between actual and expected assumptions
Check valuation data and process
Identify one-off surplus items, enable decisions on WP bonuses
Why do an AOEV
MI Account information Validate calculations/data/assumptions used Reconcile values for successive years Exec Remuneration
What will you do once a experience investigation, AOS, AOEV is complete?
Update views regarding future experience
Change assumps/models in pricing/valuation
Actuaries aren’t fortune tellers, so if we do it a million times we still won’t exactly be right
Split expenses into 2 groups
Direct (related directly to Volume of NB or level of in force)
Overheads (balance, relate to general management and service)
Split non-commission expenses into 4
Initial/renewal/terminal/investment
What are the expense amounts proportional to?
contracts written/in force
SA written/in force
Premium written/in force
How do we proportion out marketing/ underwriting/ investment expenses
Related to init commission paid
related to size of benefit
percentage of funds under management
4 Main types of expense and examples
Salary/salary related
Property (rent/heat/light/cleaning)
Computer
Investment (commission/stamp duty/investments department)
Features of Unitised
Fund value guaranteed to grow at minimum rate (possibly 0)
Bonuses added in excess of that minimum
Share in profits/losses of fund
Explicit relationship in premiums/benefits value
Operates like UL, unit price not calculated same
FV has Increase in unit price/number of units
Surr = bid val - surr pen - MVR
Mat = bid val + TB
Death = max(guarantee, bid val + TB)
Prem = single/recurring lump sum or regular
Explicit or Implicit charges (bonus reduction)
Explicit Charges = AMC/Pol fee/B-O spread/Allocation rate
How to determine AS
Retrospective accumulation of past premiums minus deductions, RECURSIVELY @ actual investment return achieved
Approximations to actual investment return may be needed e.g. index
Individual policy or group calculations
May be smoothed
Deductions include…
What’s the 2 AS deduction usually forget
Cost of capital support required in early years
Commissions paid
Individual Asset Share formula
AS(t+1)=AS(t)+P-E(t) - q * S(t) - T(t) all over (1-q)
q = average mortality rate during year
T = transfer to shareholders
S = average amount paid out on death at end of year (includes RB and TB)
Costs of distribution channels
Mainly variable Salary Commission Set-Up for direct-sales Marketing Administration (IT/Underwriting)
Payments of Sales Channels
IFA - Commission/fee
Direct Sales - Commission/Salary/mix
Tied - Commission/Salary + Bonuses
