Life Office Research Articles

Neue Grundlagen für die Berufsunfähigkeitsversicherung als Zusatzversicherung zur Kapital- und Rentenversicherung

Till now, cover for the disability risk has not usually been provided by the German Life Offices. As an increase in the demand for such coverage is to be expected, the „Verband der Deutschen Lebensversicherungsunternehmen“ — the Association of German life insurance institutions — appointed a special committee to examine the existing experiences and to develop new bases of calculation. This Committee has analysed material from Germany and other countries. Because of the differences with regard to the definition of disability, the practice with regard to disablement, the insured persons, the types of disability benefits and the economic conditions, a great range of variation in the rates of disablement was observed. Generally, the rates of disablement increase with age much more under conditions as they are found in social insurance systems than in the case of individual life insurance. Moreover, during an economic boom the rates of disablement are noticeably lower than in periods of unemployment. In consideration of the conditions of individual life insurance in Germany the following disablement rates are recommended: During the present economic conditions of full-employment these rates guarantee a high degree of security and will also be sufficient after a diminution of the present economic boom, especially if the rates of recovery are excluded from the bases of calculation and if instead of the select death rates for invalids the aggregate rates are used. For medium entry ages the premium reserve calculated on the recommended disablement rates has the magnitude of a yearly premium. As, moreover, disability insurance is a risk insurance, no surrender values should be given to active persons in case of cancellation. During the present economic situation a profit may be expected also on the new bases of calculation. Therefore a distribution of profits is advisable. As a part of the realised profit will be needed in periods of increasing disablement rates, the profit should be cautiously distributed and to a certain extent with a time lag (bonus).

An Introduction to Boolean Algebra

At the Annual General Meeting of the Students' Society in 1961, a motion was passed that articles of a less serious nature than those normally published in the past be accepted by the Editors ofJ.S.S.It is in the spirit of this motion that this article is offered. It does not pretend to advance actuarial science in any way, and its only purpose is to introduce members of the profession to a technique which is interesting in that it is different from our normal techniques and to show that it has possibilities in the actuarial field by demonstrating its applications in other fields.This is not the first time that the subject has been written about in an actuarial journal. Edmund C. Berkeley (1937) wrote a paper for the American Institute of Actuaries going into the subject in some detail, and it is from this paper that I have taken my examples of applications to life office practice.

The Selection and Maintenance of a Gilt-Edged Portfolio

This paper is primarily concerned with investment by life offices and pension funds in British Government stocks with lives of more than 5 years, although there are important implications for all classes of investors. Investing in British Government stocks over the post-war period has become a highly technical process. The advent of the electronic computer has opened up an entirely new field of statistical data thus making some of the old methods obsolete. The paper illustrates some of the new techniques developed by the author and his colleagues. Other actuaries have also been developing new approaches and it is hoped that they will contribute to a lively and constructive discussion.

Mortality of Pensioners Under Life Office “Works” Pension Schemes: Experience for 1961-1963

Mortality of Pensioners Under Life Office “Works” Pension Schemes: Experience for 1961-1963

Mortality of Pensioners Under Life Office Pension Schemes: Experience for 1959-62

Mortality of Pensioners Under Life Office Pension Schemes: Experience for 1959-62

The Problems of a New Life Office

It might at first be thought that this paper is limited to the problems of those few who hope to establish a new office in a highly organized and competitive life assurance market. Yet all offices wishing to expand will be faced with problems of a similar nature. This is evident when contemplating a development overseas and was the subject of a paper to the Faculty in March 1960 by R. G. Mallett (T.F.A.26, 547).

Some Practical Aspects of Mortgage Lending.

1. A mortgage is defined as ‘a conditional conveyance of, or lien upon, land or other property as security for the performance of some condition, as the payment of money, becoming void on the performance of the condition’.2. The emphasis is on ‘the performance of some condition’, and it is with this aspect that the lender is mainly concerned. The ‘payment of money’ will include interest on the amount advanced and repayment of principal by an agreed method—the latter by paying the premiums on a suitable policy, where the majority of new life office mortgages are concerned.

Some Considerations Affecting the Investment Overseas of Life Funds

The last paper presented to the Institute on the general subject of investments was that by J. G. Day (J.I.A. 85, 123) in October 1958. He summarized and commented upon the actuarial approach as disclosed in the major post-war papers and the subsequent discussions on this subject and set forth succinctly the position that had been reached, so that there is no necessity for doing so again. However, a major development in the investment policies of life offices since then has been the increased interest in overseas investment, and it is the purpose of this paper to set forth some of the considerations affecting investment in this field.

A Review of the Mortgage Lending of Life Offices

SynopsisThe paper is divided into five sections. The first deals with the historical aspect of mortgage lending and the reasons which, over some 200 years, have modified the percentage of life funds applied in this way.The second section considers the place of this type of investment in the modern portfolio—particularly in the light of changing ideas on the relation of assets to liabilities.In the third section, the importance of the selection of suitable loans is stressed, and the general principles which should govern this discussed.The fourth section details certain classes of security and the factors affecting transactions in each class.In the concluding part, the author deals with the essentials of the mortgage contract.

A Review of the Mortgage Lending of Life Offices

A Review of the Mortgage Lending of Life Offices

Life Office Property Investments

It will no doubt be readily admitted that in these days investment profit makes the greatest contribution to surplus in life funds and it is not surprising, therefore, that many actuaries are called upon to devote a great deal of their time to investment problems. What is surprising, however, is the fact that property has so rarely been discussed at this Institute despite the large amount of life funds now invested therein.

Estate Duty in Relation to Life Assurance and Annuity Policies

It is probably fair to say that during the last decade problems of internal administration have faded into insignificance besides the legal problems which now arise out of a life office's relationship with its policy-holders—in particular in regard to estate duty matters.Before examining the position in detail I would like to make some general remarks regarding the burden of estate duty on life assurance policies today. Rates of duty are progressive, as the table on page 399 shows, and bear most heavily on the large estates. Therefore, not surprisingly, a good deal of interest and effort has centred in recent years in reducing this burden.

The Rhythm of Life Office Surplus and Bonus Distribution under Modern Conditions

The question of bonus distributions has been much in the minds of actuaries during the post-war period. In October 1959 a paper was submitted by Benz to the Institute of Actuaries which he introduced with the following remarks: ‘Recent financial events have caused new problems to come before actuaries when advising on the finances of life offices and, in particular, on bonus distributions to with-profit policyholders. These problems may be said very briefly to centre around the question of what circumstances make it appropriate for an office to depart from the normal procedure for distributing bonuses.’

Options in Life Assurance

When one considers the variety of ‘options’ available to policyholders and the large number of lives assured who are in a position to exercise an option, one might be haunted by a vision of legions of operators speculating on the optimum moment at which to make a deliberate choice advantageous to themselves and detrimental to the financial stability of life offices. The fact that offices are prepared to encourage various types of options clearly indicates one of two things, either (a) that the skill of the operators is not held in high esteem, or (b) that the skill of the offices is high enough to overcome intelligent selection by the option-holders. If it were true that the value of any particular option could be accurately stated by a mathematical expression and if the incidence of the exercising of the option were established to universal satisfaction, (b) would be mercifully true. This condition, however, does not hold for many options, and it is this element of the unknown which gives spice to the subject and justification for further comments.

An Address Given to the Faculty of Actuaries Students' Society on 10 October 1960

When your invitation came I thought what better subject is there to discuss than the problems facing our own institutions and in particular the problems that are likely to be left to your generation to solve or to suffer under. I therefore intend to deal in this address with one or two of the more controversial issues of the present time—issues which I feel will leave their mark on our business and our profession.At the end of the 1914–18 War, Life Offices pondered and considered how they could regain their strength. Not only had war claims been heavy but they had suffered severe depreciation on their investments, due to the increase in the market rate of interest. The solution that the great majority found to this problem of regaining strength was to pass their bonus.

The Effect of Taxation on Comparative Yields on Life Office Investments

SynopsisThe paper points out that, owing to the increasing complexities of U.K. tax legislation, it is no longer possible in the majority of cases to use unadjusted yields for comparative purposes in the selection or review of investments. The three main types of investment in respect of which yield adjustments to allow for the effect of taxation require to be made are considered, which are as follows :—(1)Redeemable investments.(2)Shares of U.K. companies which receive Double Taxation Relief because of their overseas interests.(3)Shares of foreign companies in respect of the dividends on which U.K. shareholders are entitled to claim Double Taxation Relief.The taxation assumptions which require to be made for the calculation of correct comparative yields on the above types of investments are discussed and formulae are given which make allowance for the effect of these assumptions. Comparative tables are also given showing the yields brought out on differing tax assumptions and on two different basic methods of calculating redemption yields.In the body of the paper the assumptions discussed and formulae given refer to a British life office or life fund doing business in the U.K. only; but in a short appendix mention is made of some further adjustments which may be required in the case of life offices which also do business abroad.

An Investigation Into the Mortality of Impaired Lives

SynopsisThe paper describes an investigation which is being conducted by a life office into the mortality experienced by certain classes of impaired lives. The investigation was initiated in 1947 and the results for the period 1947-1958 are compared with a control experience of first-class lives.It is emphasised that owing to the limited amount of data, and also to a certain lack of strict comparability in the control experience, the results must be regarded with some caution. The purpose of the paper is, in fact, not so much to communicate statistical information as to describe the methods followed in planning the investigation and to promote a discussion of the feasibility of setting up an investigation under the auspices of the Joint Mortality Investigation Committee to which all life offices operating in Great Britain would be invited to contribute data.The paper presents a coding system for the impairments covered and discusses briefly the results so far obtained within the main groups. For some of the larger groups it has been possible to include a summary analysis by cause of death.

Continuous Investigation Into the Mortality of Pensioners Under Life Office Pension Schemes: Report on the Experience for the Period 1955-58

Continuous Investigation Into the Mortality of Pensioners Under Life Office Pension Schemes: Report on the Experience for the Period 1955-58

Controlled Funding Methods for Group Pension Schemes

The costing technique known variously as Controlled Funding, Stabilized Costing and Aggregate Costing, is a comparatively recent development in the field of Life Office group pension schemes. Before explaining and discussing the methods used, it may be helpful to outline the principal types of Life Office group pension scheme, and to examine the more traditional methods of costing employed. It should be made clear at the outset that the term ‘group pension scheme’ relates to schemes insured by means of group deferred annuity contracts and approved under section 388(1) or section 379(3) of the Income Tax Act, 1952—endowment assurance schemes and group life assurance schemes are not within the scope of this paper.

Some Notes on Bonus Distributions by Life Offices

1. The finances of life offices have been discussed by actuaries for more than a century and it seems entirely safe to predict that these discussions will continue into the future, with no diminution either of enthusiasm or of topics of general interest. The developing nature of many of these topics needs no emphasis, either from the viewpoint of changing external circumstances, or of the length of time which has elapsed since the first mention; for example, bonus reserve valuations were referred to in an Institute discussion nearly a century ago, investments in ordinary shares were mentioned before the close of the last century and variable assurances were touched upon over 30 years ago.