Chl policy

Values Reserves

Fully continuous continousPremium pay at 4

Benefit

Fully Discrete Premium at thebeginning ofyear Benefit pay at k.tl

semi continousiPremiumDiscurete.BE tpayaL practical

Net Reserves W
eV EthelTx
t

EpvfB EPVLFP Prospective

AAVLPP AAV 131 Retrospective f yield identical results

Continon
received
Tilly
eV Varlet
whole
life A e Foix.ie CHITGAME Axie

nyearterm
Axit na Foixie nay
0 if ten

Flax.nl a ek I ofinsurance
accumulated cost

Ayearendowment
p axtt inuT HIg5 4Ixtt nTl AItt n
t iif
t.in
L n
Tesurvival Benefit

E t na
Ayearpureendowment nFd
Htt 451AM Extent if teh
h payment
wholelife ehf A
onlyh premium Axte if teh
Premium DifferenceFormula ettax Exte DIEDdue PTA 4 PLAIDaxt

paidup Insurance Formula etthx Axtell FIFE

Fully discrete

semi continous

Recursive Formula

to SumInsured
Be survival Benefit
pi Net premium
tP Hi Exit I Sel t thatLett t Be1

UDD
id Z zcm
a'Y NM a PCM where 21mF
cm
jcm'd
PCM
jomidem

note installment XM x I
given
Ch2 Policy Values with Expenses

initial expense eo t GG

renewal expense e t cG
termination expense E C expenses ofcuttingthepolicy
otherexpense

HPVofexpenseeotGGt
itGG1axin7tEAx.n gwssfutuvelossr.v.LgrossPrem
So Pr Benefits 1PutExpenses Pul and

It EthelTx t

EUNFB LECRAE EUNGP

AAV GP HAV B t AAVLED

Itt Ge CtGe eeldt H Stdt GetE e Mxtedttlttlxtedtkud.VE

dater foe elfA Geo El et M e

HI
SetEe
death strain at risk
doeEV Ge ell T ke Mxtelse et

Euler's Methodwithstepsiah
TV
Forward Approximation day off tthroth

trot en
VS
Backward Approximation e.org
dd
k
Fullydiscrete policy withexpenses
8
t GH CH ed Hi fuelStatEta tpx.ie 8tBeD

Expense Policy Value

PE Ge Pe expensepremium expense loading1

I t.vn 1 are

Annual Profits

tilth policyyear f Itu

Re actual no of inforcepolicies at e
I't actual interest rate at Lt ttt
e't actualexpenses at t
E ex actual expense at 41
BIH actual survival Benefit at t 11
Annual Profits in It 11 th year at ttl
nelTUSt Ge et HIE Ent n Stateit IthealB'eatkN8D
he kite A Pxie
onepolicy
first Ge e't Hie Ext Ist nTE't tPx Beit VID
decarnuefwmu.la transformation
Decomposition
of Annual Profits

useactual data after exists Use assumptionsfirst

interestprofit heleft1Gt et II't ie
expense profit niet ee'tCHi't It 9 1Eet Eet
profit he PxtelBett Biti
Survival

mortalityprofit he 9xte 9x.ie xlSttitEE BE e

uV8
u y

Assetshares
Retrospective tht based on actual Elite Eiti et IE Bit
Aso 0
LAST t Ge et HIE EitelStatEitiHRIIB.intAsta
RecursiveFormula

PolicyValues atfractionalyears

InterimPolicyValue SECO Il

EisV I S t V t Pe t S CH V

UnearnedPremium

Annualpremiumpolicies unearnedpremium l s Pe at tts

Policy Alterations

1 Surrender Value

2 PaidupsumInsured nopremium reducedsumInsured policystillinforce

ch3 Multi state Models

epxiiprlYHtttjlYKI i
pxii prlylyt iu yt x.at YkI i
I occupancy probability

ttspxit ipxikxspx.ie Ghapman Kolmogorov equations

Z
For continoustime Multiple statemodel

nxii hiz.HR hoax

ekii expf ftf.IE inIIsds

sumof forces outfromstate i

iexik.nl e iPxi4EM'Eu
dik
At
E ftp.k.niiii tpxiiniiiij E
4 0 Hj

ii tPxii.E niie
dat 1 FIinii
Euler's Method withstepsize h

ERT hRF Backward Approximation

daff
ft
equation
Kolmogorov forward
 State Contigent Cashflows

transition similar to Benefitpayments A

1 Payments made dueto
Payment attheendofyear

if transfrom
discrete cashflow

ibkatytt tAxif
A
iLcTk1 ECePxit.PE
Fo
t Vxk discountfactor

aged x atstatei
transition
assume it C I
Apr payments at the endoftheyearof
µµ
Aia
X ou uj
E Vk
U
44 Rak
O j
assume
K
APV payments at transition from i to se

Axii
St T Pi Mxie dt
f e h ti

a
2 Payments made if in a certainstate

iix iLcD eEoCePxiiJCtCxlEVxHDfifinstatej.thunget payment

discrete Payment atthebeginning year
x
of if in state j
ii Ev taxis
to

a f e 84th Idt
RecursiveFormula fardiscrete
A A mtMfEmPx Ax'im
iii a iii rm.fy.mpxii.atm1

PolicyValues and Thiele's Differential Equation disabled

seenotes Alive
0 I
szldeath

fever aoxycan apply1

Euler'smethod
summary

it expf fotf.FM
sIdsEltPxikaiIe
delfxiitPii.nx'ti
KO.k
t ftta.PEepxii.FI fhiIy Euler'sMethod

aik.F.eu E
tPxii PiIEltIii ffestGEkePxiiniE de

a'ix EortePxii iii ftp.epxiidt

iii kmtvmgEmPxi a xEm

A AYEmtrm.fm AiiiemiiY 0

notes
for PolicyValue ofeach state see
Chapter 4 Multi DecrementModels
1 Death due to
Decrement I
Decrement 2
0 2 Death dueto
Aline Detath
due to Decrementn
u
n

Multi DecrementTable no ofdeath between Xand a

K total

O radix
f
to dax di di d dit di't tdxn
noofdeathdue to Decrement 1
between X and xt

00 LEM alive at Hnl

np Prl
4 Cfo
l l Mtn
eprix die atKtm KimMD
Mmpi m
400
PE dig
e
1302 d
l
ni
k mPx00npo Xtm
min k.FIgIm
Associatedwith thisforContinous timemodel
oPx I ortho
MY jEMI

tpxo tPE expff.tn sdsY fI

ePxo ePxoi
Pxo l tPfo

lots ON sdsfor 5 1,2 n ELT t.tk Mx edt

It iki de
Is PII
Sto
KH O
Pini
 17 15 xapjo efexpf fjay.dz
expffouisdig
radix
dxo_exo 1 004 149 1004 expffit'm dy
mm

Max too a e ddlx

da
o DOS
P to'sPx sds
ed P fishing sds ego

Fractional Age octet

UDD
epxoi
t.pt data tpxw.mx I
Px
PII
epx0
e.p9i ItPxi if7x00 l tP0x
o ftp9 pxo

Uffe t.pe
Moine
II pg

CostantForce

Nxt't no NIEMI
17
00
117004 1700 1 17399

ik
4 Mx Mx
epxoi.fiy ipxo
nxoiCtCPx99
 v.v approach of multipledecrement model
Tx T 1sttimeof Transition out of state 0 fur
J J i casueof decrementJ JE Ll 3 NY

sure
ft Jlt j joint density tp nt
n ne
If HI 4700 Witt
f
j I
fjjt ff
0
H.it dt
FTHK ipx ftp.fotfik
d epjt
fotfTjls j ds
f sPxMxIsdstpio 41 feels.Ilds

min PI Effmm ft et jidt

HEMEE
Moxie thot diff n Ie ftp.oot.is Rio

Ex t.PE dt

7ependent Probabilities and central rates

of decrement
05 dependentrate Moxis is involved
is a
4
fotspxoo.mx sds ftexpf
fs.nxiuduyMxisd
i no
atce
tae
central Rates
of Decrement
use no oflives at thebeginning of aperiod CentralRateuse avg.no oflives
dox MOI
moi Ld
t
no of personyears fo e de
 If UDDduringtheyear
life exo t do

ex e Ed e

Maja d KY
eF Ido 1 Ipo
da ein wit
MOI no
If furtherassume UDD foreachdecrement motµE

Associated single Decrement Model

independent probability of decrement

epio expfftuitisds Rio
ooo

epxoicepjoi
TRY
It ik c Iki
Octa
Assume UDD in Multiple Decrement Table MUDD during theyear

epgi t.pji.PE I t.PE

MEE IIIpg
xi expf ft.iE.uoIsIds3 fIiRi
ik ftp.ig iPxoo

t.pi.PE Ki Odi
epi I Ll un pity Y 1K9g GAME
After adjustp
PE Intl Ki H Pii
00
where17 711400
pika NRF
Octa
Assume UDD in single Decrement Table SURD
duringtheyear

Pj Piti tPx
ftp.jo ekiooihux.ie
p
t

ekiieffspxoo.mxisds ftfIIsPx I Mitsds

Rio ski
g
dFpiE Esp ds
sometimes notsuitable
maybestepfunction

pit p I 5 Ki t's EE FxotPY

PET
Is Pii if no assumption and discretedecrement

Premium Benefits fun Multiple Decrement Model

kipxoi FZ.ovktl.kpxwpxi
Aoi
or
aoI ffe st.ep.imiede ifMPDthen III Is AI
for hontinous singlepremium
SV P if 4
5UT p
Varkol ECE E Lotpp pie
if I
S 5 it ftp.ioa eteKioaxiiIde pr
Chapter5 MultipleLife Models
01
Both alive MH t Only alive
0 1
02 03
Mxttiyte tilde µ
U
23 3
only g alive Myte Both dead
2

ekiyttpiiyttpxijttpi.gs I
occupacy probability outgoforce
ekig efxiyi expffiui.is sdsydtdEI ePxiig Mii I
eking expf ftmx.isy stMxis stM s sdsYtPx expE ftMx'tids
y y
i
A ytMx.isyistMxtsy s dtdI ekY.uxIo
Transition Probability

sPxisds
epifJ.skiMxis i
tP0x3y JfsPxyMxFs 1 ski'M spija ds coots is recurrent
none e x axis
dtIII eexyoux.in

dtPxy
de
ekigmxti.us ttPxyd'xitttPxijNy7e
in in in
Joint Distribution In
02 Oo
s
fTx lyttis os O
Fxiylt.SI 1 Stx 44 11
Tyl e Tx
generally

JointLife Txy minCTx.ly kxy LTxy

t9xy F ykl t Pxy tkyttpxytepxy t9at Ay Faiykie

Tyr
epxy Shytl tpxy Sx.tytt.tl 104
tPYyLM taking
02
1
fxykkdtofff e
d KY
DI
elkydxaiy.tt X 0Y
f Tx
Mxtuytq FTYK fh.ge
Sixyty
tpj
prlkxy ty PrlkcHYEKHI kpxy ktpxy kpxyhxtk
ytk k19gg
KPxwyfftk.ytk PEH.ytktpoxtkiy d KPxypxtkiy.ua

LastSurvivor TIy maxlTx 1g

aTH ia HT atxta.l
Txyttxy Txtty xytxy T.ly
xyt PIy tPxttPyt9xyt 9xy e9xtEYJk.SIIbYay
fTxyt4Tftxyt4 fTxHl fTyH1
thy_FTxykt tpxy t9xt 9y tlxy FT.tyk.es
tpxy S l t.AT
 y y
ftxykt dtdIT.de
fF ePxM ut PyNytt tPxyMxt yet

tPiyM e yet tekijwxtettkiyn.tt

MayLtt
FTHKl fTty t
Stayth no
thy

prtkxy H klfxy fk.lk tfkylkl fkxylk fhylk

kl9xTk19y kiExy Kitty Katy 4 HE
KPx k Px t KPy k Pg KPxy Kathy

Exytext ExtEy exytext extey

21ftEhydt Exp VarLT 1 214 epxydt ey
6VLTxy
VakTxyl

hyt GKTx.ly tCEx ExyKEy Exy

3 Lives inclusionEthyl
exclusion
Exey

t9xyz tqxt 9yt Ez f 9xyttfyzt 9IE t t9xyz

tpxyz tpxt pyt pz ltpxyttpx

zttpyzlttpxy tpxyzt
9xyz.tl

t 9xyz thxt 9ytt.EE

t9xztt9xytt9yz1tt9xy tPxyz
tPxt tpyttpz
ltpxzttpxyttpyzlttpxy
Katz I
tpxyt.tt
Peminms Denefits
forMultipleLifeModel
03
Axy oV kpxy hxtk.ytk AYytAxy Axyckl9xytkky.cl kiytk
kPx9xtktkPy9ytk KPxyExtkiytic
Aiy A g oV e
dt
frig r Mf y f faut 449M
Axy
ffe st.ttxgMxetyedt AQytIIytTtYy
ttxy ttogy ffe st.lt7xMxtettPyMytt ePxyMxte yttIdt
AxytAxy AxtAy AxytAIy AxtAy

Varlaxyt 2Axy Axyt VarcExy 4Ixy Chigi

VarlAxyt 2Axy Heyl tart'AtyI 2Axy tIyP
Endownment Term

Item IIIE.my mExy fome8t.ePxyMxteytedttVMmPxy

Aig my tIxyim7 Axim7tAy m

m
m KPxy
axq.my_Env
icky
a'xyimt f.gov kPxy

tpxigttkijttkiy axg.me
ome st uPxydI Taxy.mn mest.ePxyd
city.mntaaxyi.atao
aFymy y.my

l Admin
avg.mtdxyimt axtayiixg.net tdMm7cixy my

Oxy mntdxym iixtdy axy.my t AGMma

ey.me 1 Again
 8
Var oiyy.my
Axyim7 CAxymy12
d
Recursion Formula notsuitablefor nyt
Axton in
Axy UExy t VPxy Axely u Aig Mt MExy y
Axy Airym t mExyAxton ytm

a'xy It vpxytvpxy.pxti.yt.ci dxy.m7tmExycixtm

2
ytz ym
day Oxy my tmExyaxtmiy.im

CarthyTty GhTxTy t Ex Exy teyExy

CovLvTHVTH Guwit V l t
Ix Atty Ay Axy

Reversionary Annuity

payforresiduallifetimeof g afterCM'sdeath
St
any a
y Ixy city fide tpxijdtffest.fikyooMxtsigs esPyYd
ffvs.sRiyMaxisyes aItsds

ayix ax axy aoty ffe st.tly'do

when H is x th
payforresiduallifetimeof g afterCly'sdeath or
taxany oiy axym iaiig.mn
payforresiduallifetimeof g afterCly'sdeathbutstopwhen y th
tianya.my a ma a
y xym
pay to ly if die within ears andbefore yl
my
t
mtxylaxtmly.im
day
notofficial
limitno of PmtsI
payto lyafter deathofLx but stop m years of payments

Apu
f e
se
epiiy.ie I.yeAyte mdt

payto lx after Max X's death my

taly.my x aI ax lyim7 ax axy ax m7taxymy

4
Ink Joint

ax a x t a Yim I x yim
ly my
oixtla yta m ay.my Lax ta y tamy a
xy
t

a x m t ayim t A x m7
y
xy tax
a m a xxim
Order Probability andpremiumBenefits

mkiy PKTxcty.Txemlf.MS fTx.Tylx.y7dydx fomePxydx.ie

d m9ky
y

PrlTx5ly.TxEm fomJofTxTyLx.y1dydx fomepxijmxf.dk

n
ly m
MAY
MAY
me
ma
i Tx
ma

m9ky m9xy2tmPxy m9xiy m9xytmPxj

This L ua maxytmexi ma.us

wheneverPrlTx
m9x'ytm9xy m9x Tyl o

I'xy SINA.tylx.yldydx ffvtekiyMxE.yt.cat

x
fTxylxipdyd
AIy foJfv
AxipffffvY.fi ylx.yidxdy f7vt.tPxyth't y dt

A'xyi ffEVY.fi

ylx.y1dxd fyAxytAxiy
AxyAxytAxy _tiny for A aswell
4
Ax'ytAxy Ax Ax'ytAxy Ay
 ie7xy9x'tkytkHhisoueeasier
A'xy oV

Independent Survival Model

Mitte
0 I 00
MHiy.ie0 47 424 ik
Mma X M
v s u
3
2
Ntc
TxHTy FTx.tylt.tk xHlFTyHlSTx.Tyk.tl
STxHlSTxH lovCTx.Tyl

ftPxy
tpx tpytlkyz tpxtpy.tk
they t9x thy t9 yz t9xHy Elz
Mxttiyie dmxtethfy.ie
fixykl 9xltlkmfielt 9ylck.ME
My Saget I t9x thy

Prlkey 14 149 kpxy 9xtk.ytk kpx.KPyll llxtkpytk

2
kf.LK7y ktlPxkttPy

prtkxy kl 149xy k 9xk 9y

k9xk9
lex bvtx.ly Exy1lEy exy
 mkiy fm.tpx.tk Mmxttdt
M9xytmPx.m9
fom Px dyUnited m9xy m9 moldy
Myttgedtf
mkiy fh ipx.tk m9kytm9x.mPy

m9xy fomt9x.tkMyttdt m9y

m9x' m9xy
m9xytmfxym9xy m9xituohy m9 m9y

I p I
Aky ffvt ipx.tkMmedtfA'xytAx'y
Axy IxytA
xy tIxy
Ay
ffv 9 14MY dt
y Axy Ay
Ex'ytITxy Ax

ai.ie EvttifTEiftPxii
in
PxIElAii ffestfIEfePxi axillae

iii ETHER iii.ES e se.ePxiidt

Chapter 6 Profit Testing

nonparticipating n year term life ou nv o

G ti ee i SetBe
I
t I t thyear t

ji inflation expense ee exut j t l

2acc interest

InForceExpected Net CashFlow

Cite Ge i ee il Hima Ext h Se t Kitty Bt

no consideration of TV
Expected emerging use

EG etPx Cf L by Equivalence Principle IV Ect 01

Suppose shareholders should get thesurplus or provideaddtionalfundevery

year

Increase in Reserve

I Rt Px e il EV t IV Hiu
In Force profit for shareholders
PRE CFe IR t

Profit signature
re Px PRI
Profit Measures
NPV
t
Npr City Oe
requiredrate hurdle rate
ofreturn
t
if F Iau then NPV CHiacy Ect

Profit Margin at im
t
NPV using im Him Oe
e
EPVLGrossPremiumusing im n th
t RiGe l Him
E
Discounted Payback Period

PPP smallest K such that NPVk FE Hr the 30

InternalReekofReturn
2 LH i444 toe O
21212 iIRR such that MN