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Flashcards in Extras 10 Deck (20)
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1
Q

What is EAS-SV(pricing)

SV(pricing)-SV(actual surrender assumps used)

A

Profit made to date

Value of profit that would arise in future due to prem rate and surrender value assumption differences

2
Q

How do you choose assumptions for SV?

A

Somewhere between best estimate from now (profit that would be made is policy continues) and pricing assumptions (profit made to date)

3
Q

What basis on assumptions would be used for the prospective assumptions? Why?

A

Blended, pricing near start, best estimate near end

Depends on how early want to claim profit as if not surrendered

4
Q

How can you avoid lapse and re-entry to do with surrender values?

A

Make sure SV not above EAS

5
Q

What actual experience is used in retrospective SV calcs?

A

Investment earnings
mortality
expenses
tax

6
Q

Why won’t actual investment earnings be used in regular premium Retro SV’s?

A

Smooth the value

7
Q

What assumptions will be used to find prospective SV’s. What is the most important?

A
Interest (most important)
Expenses
Inflation
Mortality
Tax
8
Q

How to pick interest rate assumption in Prospective SV?

A

Premium basis if using those assumptions

Weighted average redemptions yield of FI liabs that it holds to back liabs

9
Q

How to pick expense assumptions in Pros SV?
BE/Prudent?
What allowance needs to be made?

A

Recent expense investigation
Those used in recent pricing
BE
Renewal commission

10
Q

How to pick inflation rate assumption in Pros SV?

A

Consistent with investment return

Use real return - investment return on FI to get inflation

11
Q

How is mort assumption different from past experience in Pros SV?
Is it important?

A

Expected future mortality of those surrendering
Which is LIGHTER than those not
Will not have much effect on results

12
Q

What happens when make a policy PUP, what stays the same?

A

Stop paying premiums, SA reduces

T’s and C’s stay same

13
Q

What is making a policy paid up, equivalent of doing?

A

Using value of the original policy to purchase a single premium policy for new SA at PUP date

14
Q

Give 2 reasons why PUP basis would be different than SV basis?

A

Alteration cost is different

Mortality selection reduces as policy still in force (mortality for those left won’t be as bad as in surrenders)

15
Q

Why might a policy be altered?

A

Mismatch between policy and risks ph faces changes

16
Q

How can P/H match current risks?

A

Purchase additional policy/alter current one

17
Q

3 alteration examples

A

SA change
Premium change
Term change

18
Q

How do you change term of a WOL

A

Convert to EA

19
Q

Equivalent of reducing term to 0?
Equivalent of reduce SA so no premiums needed?
Equivalent of increasing SA?

A

SV
Paid up SA
Purchase new policy for increment at current rates

20
Q

Principles on calculating PUP SA

What is the key one for all alterations?

A

Should be:
Supported by EAS at date of conversion and expected future experience (key)
Consistent with Mat Vals at later duration, reduced for just premiums not recieved
Surrender values before and after conversion approximately equal