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Profit metrics (!!! Costing & Risk Analysis (Non-economic assumptions,…

- - - - New money
      - Portfolio average
  - - - Simplifying assumption
      - historical data
      - correlated assumption
    - - Projection frequency
      - number of scenarios
      - Variance reduction techniques
- - - - add liquidity spread to risk-free rate in EVL calc
    - - add credit spread to risk-free rate in EVL calc
  - - - securitization => transfer to investors
      - reinsurance
      - Hedging
    - - set extra capitals in excess of req. to maintain ratings
- - - - Environmental
        
        Interest rate
        
        Expense
        
        Mortality
      - Policyholder behavior
        
        Lapse
        
        Annuitization
  - - - Implication to shareholders
    - - Level of guarantees
      - asset risks
      - mgmt discretion (crediting rates)
    - - products with above 3 factors (accumulation) are deemed to be riskier
      - protection v.s. accumulation
- - - - Stat Profits => Stat Earnings
      - Interest in Stat Surplus (t-1)
        
        Stat Surplus (t)
        
        Stat Income (t)
        
        Dividends (t)
        
        Stat Surplus (t-1)
    - - DAC Amort(t)
        
        DAC(0)/ annuity factor
        
        minus g * DAC(t-1)
  - - - Stat Income(t-1) + Change in DAC
- - - - XXX (ART)
      - Resolutions
        (Pros & Cons)
        
        securitization
        
        increased stochastic modeling
        
        Reinsurance
    - - Guarantees
        
        Basic/preliminary
        
        max COI/exp/charge
        
        GME rider
        
        Min. int. cred
        
        Secondary
        
        Prem guar.
        
        Shadow account
      - Resolutions
        
        Stochastic modeling (PBR) => good
        
        reinsurance => rare
        
        securitization => no