Dave Kester said:
On 12/18/2008 4:22:33 PM
When calculating the minimum cash values, there are potentially 4 sets of calculations that need to be performed. The minimum cash values will be the greatest, by duration, of each of these 4 sets of calculations. These sets of calculations are as follows:
1. Traditional unitary calculation consistent with SNFL section 3 and 5c using the guaranteed premiums.
2. According to AG CCC Section A, you also need to calculate cash values during the endowment period. The "expense allowance" is a combination of the same as that was used in set 1 (1% of AAI) and consistent with assumptions in step 2 (nonforfeiture NLP). However, the "death benefit" will be the premiums that could be returned at each duration. The ending period is when the end of the ROP period is. For example, for a 20 year ROP plan, the benefit period is 20 years, the policy would endow at 20 years for the amount of premiums returned (presumably the sum of the premiums paid during the first 20 years), the "death benefit" (referred to as the "incremental death benefits") are the premiums that would be returned if the insured dies during that period. Guaranteed premiums are used. Section B documents the comparison of sets 1 and 2.
3. According to section A3, another calculation must be performed similar to set 1 above except using current premiums rather than guaranteed premiums. The greater cash values will be used.
4. According to section A3, another calculation must be performed similar to set 2 above except using current premiums rather than guaranteed premiums. The greater cash values will be used.
Dave Kester said:
On 1/7/2009 3:33:21 PM
Once the 4 sets of calculations are performed as defined above, the minimum cash values are the greatest cash values produced by those 4 calculations. Logically, this comparison would need to be made on a duration by duration basis. The most likely comparison would be to compare terminal cash values. Once these cash values are determined, Actuarial Guideline CCC and the Standard Nonforfeiture Law require a smoothness test based upon section 8. Basic cash values are calculated using a "non forfeiture factor" (NFF). These NFF are to be a constant percentage of the adjusted premiums. With the advent of AG CCC, a question arises as to which Adjusted premiums should be used. There will be at least 2, if not 4, sets of projections produced and the minimum cash values could come from any combination of these sets. One option would be to use the adjusted premiums that corresponded to the cash values that were generated. For example, if the minimum cash values for duration 1-4 are derived from set 1 and for durations 5+ they are derived from set 2, then the adjusted premiums used in the smoothness test during the endowment period will not be level. Thus, the NFF will potentially not be level during each segment.
Dave Kester said:
On 2/17/2009 4:03:23 PM
An alternative approach to determine which adjusted premiums to use is to use the adjusted premiums from the 1980 Standard Nonforfeiture Law unitary method. Some regulators are advocating this method. It does simplify the process and would result in level adjusted premiums during the endowment period if the gross premiums are level.
Dave Kester said:
On 5/4/2009 1:55:12 PM
What are the different names used for Actuarial Guideline CCC? In addition to Actuarial Guideline CCC, the official name is Actuarial Guideline 45 or more appropriately labeled Actuarial Guideline XLV.