sa long-term valuation bases
DESCRIPTION
SA long-term valuation bases. Presented to ASSA members 2 November 2004 – Johannesburg 4 November 2004 – Cape Town. Why are we here?. A repeat of sessional meeting held last year, but updated with 2003 statutory returns. What will we show you?. - PowerPoint PPT PresentationTRANSCRIPT
SA long-term valuation basesSA long-term valuation bases
Presented to ASSA members2 November 2004 – Johannesburg4 November 2004 – Cape Town
Why are we here?Why are we here?
A repeat of sessional meeting held last year, but updated with 2003 statutory returns.
What will we show you?What will we show you? Some key risks and trends in the insurance sector Anticipated changes for the future Information on new Analysis of Surplus in LT2000 Give you brief overview of the LT Insurance
market in 2003. Review some valuation assumptions in the LT2000
and compare these with the resulting AOS.
What will we show you?What will we show you? Some key risks and trends in the insurance sector Anticipated changes for the futureAnticipated changes for the future Information on new Analysis of Surplus in LT2000Information on new Analysis of Surplus in LT2000 Give you brief overview of the LT Insurance Give you brief overview of the LT Insurance
market in 2003.market in 2003. Review some valuation assumptions in the LT2000 Review some valuation assumptions in the LT2000
and compare these with the resulting AOS.and compare these with the resulting AOS.
Key risks and trends in the Key risks and trends in the insurance sectorinsurance sector
Drivers of change: Financial Sector Charter & BEE
Low interest rate environment Growing consumerism Legislative and regulatory changes
(especially FAIS) LT insurers believe marketplace is
overcrowded – major readjustments to marketing strategies expected
Source: Emerging Trends and Strategic Issues in South African Insurance (2004) - PWC
Key risks and trends in the Key risks and trends in the insurance sector (Cont)insurance sector (Cont)
Premium growth 7-14% over next 3 years expected
Regulation and governance– King II won’t address concerns raised in Fedsure
investigation– Governance rests on integrity of directors and
management– Only minority LT insurers feel that commission
should be de-regulated– Likely that regulatory pressure will increase in
future
Source: Emerging Trends and Strategic Issues in South African Insurance (2004) - PWC
International Key risks and International Key risks and trends in the insurance sectortrends in the insurance sector
Data based on 2003 reporting data in key IAIS member jurisdictions
Solvency positions and profitability of life insurers healthy
Concerns to supervisors:– Sustained low interest rate environments– Risk of sudden interest rate hikes
Insurers are moving away from equities to debt securities
Source: IAIS
International Key risks and International Key risks and trends (Cont)trends (Cont)
Supervisors use stress test methodologies to monitor sensitivity of sector’s financial strength to changes in market variables.
Stress tests show that life insurance sector can withstand significant shocks in the near term.
Trend to adopt are more realistic and risk-sensitive valuation and capital adequacy regimes.
Source: IAIS
International Key risks and International Key risks and trends (Cont)trends (Cont)
Several supervisors reported initiatives aimed at addressing insurers’ exposure to reputation risk.
EU: financial conglomerate directives – more emphasis by supervisors on group-wide supervision is expected.
Source: IAIS
International Key risks and International Key risks and trends (Cont)trends (Cont)
Reinsurance:– Since Sep 11 a major hardening of market
conditions– Many reinsurers showed a significant
improvement in underwriting performance in 2002/3
– Lloyd’s also benefited from hardening market bouncing back to profits after the WTC-driven losses.
Source: IAIS
What will we show you?What will we show you? Some key risks and trends in the insurance sectorSome key risks and trends in the insurance sector Anticipated changes for the future Information on new Analysis of Surplus in LT2000Information on new Analysis of Surplus in LT2000 Give you brief overview of the LT Insurance Give you brief overview of the LT Insurance
market in 2003.market in 2003. Review some valuation assumptions in the LT2000 Review some valuation assumptions in the LT2000
and compare these with the resulting AOS.and compare these with the resulting AOS.
Anticipated changesAnticipated changes
Some “small” Act changes e.g.– Replace Unit Trust Control Act with CIS
Control Act– Some discrepancies between ST and LT
ActsDefinitions of linked, market related
business etcTypes of assets in Schedule 1
Anticipated changesAnticipated changes
Hybrid capitalCell businessReinsuranceSegregation between policyholders’
and shareholders’ assetsControl levels
What will we show you?What will we show you? Some key risks and trends in the insurance sectorSome key risks and trends in the insurance sector Anticipated changes for the futureAnticipated changes for the future Information on new Analysis of Surplus in LT2000 Give you brief overview of the LT Insurance Give you brief overview of the LT Insurance
market in 2003.market in 2003. Review some valuation assumptions in the LT2000 Review some valuation assumptions in the LT2000
and compare these with the resulting AOS.and compare these with the resulting AOS.
Analysis of Surplus Analysis of Surplus (Statement C7)(Statement C7)
Confidential statement Split between individual life, group business
and shareholders Supplementary statement
– Clarification of “other” (As small as possible please)
– Space for significant items Info in total only – but anticipate a split in
future per business class
Analysis of Surplus Analysis of Surplus (Continued)(Continued)
Free-floating columns for info per business class/product. (But please – complete total column as well)
Some freedom – please state all assumptions in the section at the bottom of the statement
Guidance manual on FSB website– Info on what should be included in the different items
Please do not change the format!– In fact, do not change the format of any of the
statements in the return
What will we show you?What will we show you? Some key risks and trends in the insurance sectorSome key risks and trends in the insurance sector Anticipated changes for the futureAnticipated changes for the future Information on new Analysis of Surplus in LT2000Information on new Analysis of Surplus in LT2000 Give you brief overview of the LT Insurance
market in 2003. Review some valuation assumptions in the LT2000 Review some valuation assumptions in the LT2000
and compare these with the resulting AOS.and compare these with the resulting AOS.
Overview of LT Insurance Overview of LT Insurance market in 2003market in 2003
FSB classification: G – General insurers (27 active in 2003)
e.g. Old Mutual, Liberty, Regent Life
L – Linked insurers (12 active in 2003)e.g. Investment Solutions, MCubed, Citadel
R – Reinsurers (6 active in 2003)e.g. Munich Re, Swiss Re
Overview of LT Insurance Overview of LT Insurance market in 2003market in 2003
FSB classification: A – Assistance insurers (7 active in 2003)
e.g. Safrican, Lion of Africa, HTG, KGA
N – Niche insurers (11 active in 2003)e.g. Bonben, Relyant, Medscheme Life
C – Cell captive insurers (4 active in 2003)e.g. Guardrisk, Nova Life
Overview of LT Insurance Overview of LT Insurance market in 2003market in 2003
Distribution of insurers per year-end month
27%
6%
47%
3% 1% 16%
2 3 6 8 9 12
Overview of LT Insurance Overview of LT Insurance market in 2003market in 2003
Who went where? Ranking according to total assets
2003 2002Old Mutual g 1 1Sanlam g 2 2Momentum g 3 3Liberty g 4 4Investment Solutions l 5 5Metropolitan Life g 6 6Investec Employee Benefits g 7 7Capital Alliance Life g 8 9M Cubed Investment Life l 9 8Investec l 10 10
Ranking according to Total Assets
Insurer Industry
Overview - some key Overview - some key indicatorsindicators
g l r a n cTotal R’b 2003
Total R’b 2002
Number of active insurers 27 12 6 7 11 4 67 64
Net premiums received 68% 29% 1% 0% 0% 1% 165 177
Net benefits paid 69% 30% 1% 0% 0% 0% 157 134
Total expenses incurred 93% 3% 2% 1% 1% 1% 20 19
Investment yield 9.7% -3.1% 11.2% 3.2% 16.1% 5.0
% 8.0% 0.8%
Overview – where are the Overview – where are the assets invested?assets invested?
As % of Rows g l r a n cTota
l (R'b) 2003
Total
(R'b) 2002
Cash and deposits 75% 21% 2% 0% 0% 1% 60 67Fixed interest 90% 6% 3% 0% 1% 0% 179 168Equities and convertible debentures
90% 9% 0% 0% 1% 0% 348 334
Property 99% 1% 0% 0% 0% 0% 36 34Collective investment schemes 66% 34% 0% 0% 0% 0% 96 98
Other 77% 21% 1% 0% 0% 1% 98 42
Total assets 85% 13% 1% 0% 1% 0% 817 783
Overview – where are the Overview – where are the assets invested?assets invested?
As % of Columns g l r a n cCash and deposits 7% 12% 17% 31% 5% 19%
Fixed interest 23% 10% 67% 11% 32% 22%
Equities and convertible debentures
45% 29% 5% 4% 61% 10%
Property 5% 0% 0% 3% 0% 0%
Collective investment schemes
9% 30% 0% 33% 0% 2%
Other 11% 19% 11% 19% 2% 46%
Total assets 695 108 7 0 4 3
Distribution of assets - 2003Distribution of assets - 2003General Insurers
Cash and deposits
Fixed interest
Equities and convertibledebentures
Property
Collective investmentschemes
Other
Linked Reinsurers
Assistance Niche Cell
Overview - the liabilities and Overview - the liabilities and CAR…CAR…
g l r a n cTota
l (R'b) 200
3
Total
(R'b) 200
2
Linked liabilities 57% 42% 0% 0% 0% 1% 253 265
Non-linked liabilities 98% 0% 1% 0% 1% 0% 454 409
Total liabilities 84% 15% 1% 0% 1% 0% 736 706
Excess assets 97% 1% 1% 0% 0% 0% 81 77
CAR before management action 99% 0% 0% 0% 0% 0% 73 82
CAR after management action 98% 0% 1% 0% 0% 0% 32 35
Overview – remarksOverview – remarks
Industry funding factor (excluding CAR) unchanged from 2002 at 1,11.
Industry funding factor (including CAR) unchanged from 2002 at 1,06.
Industry CAR cover slight improvement from 2,18 (2002) to 2,56 (2003).
What will we show you?What will we show you? Some key risks and trends in the insurance sectorSome key risks and trends in the insurance sector Anticipated changes for the futureAnticipated changes for the future Information on new Analysis of Surplus in LT2000Information on new Analysis of Surplus in LT2000 Give you brief overview of the LT Insurance Give you brief overview of the LT Insurance
market in 2003.market in 2003. Review some valuation assumptions in the LT2000
and compare these with the resulting AOS.
Valuation assumptions in the Valuation assumptions in the LT2000LT2000
The results we are about to show represent a mix of greatly different insurers.
The dangers of interpreting industry results should be kept in mind.
We suggest the results to be an orientation exercise and nothing more.
What were the hurdles?What were the hurdles?To consolidate two very different versions of
the LT2000 (38 insurers on version 2.3 and 32 insurers on version 3)
Valution basis (G11 – old; G10 – new) proved to be especially difficult
Next year we’ll have a problem with the AOS (C7)
Therefore – had to make assumptions to derive an industry representative basis
Discount ratesDiscount rates(LT2000 version 2.3)(LT2000 version 2.3)
Observed rates from 5% to 13% (2002: 6% to 18%) between the classes of business.
Observed inflation assumption between 5% and 9% (2002: 2% and 11%).
Weighted average inflation assumption of 7.2% (2002: 9.6%).
Discount rates – 2002Discount rates – 2002 (LT2000 version 2.3) (LT2000 version 2.3)
11.0%
11.5%
12.0%
12.5%
13.0%
13.5%% pa
Annuities
Retirement Fund Business Untaxed
Business
Taxed Business
Discount rates – 2003Discount rates – 2003(LT2000 version 2.3)(LT2000 version 2.3)
9.6%
9.8%
10.0%
10.2%
10.4%
10.6%
10.8%
11.0%
11.2%
11.4%% pa
Annuities
Retirement Fund business
Untaxed Business
Taxed Business
Discount ratesDiscount rates2003 (LT2000 version 3)2003 (LT2000 version 3)
Individual business: Around 38% of insurers entered a representative
assumption Observed rates between 9% and 12.5% between the
classes of business. Average central discount rate (CDR) 10.5% Highest discount rates for linked and market-related
classes. Lowest discount rates for without-profit annuities. Observed inflation assumption between 5.4% and 6.5%
(Average of 6%)
Discount ratesDiscount rates2003 (LT2000 version 3)2003 (LT2000 version 3)
Group business:Not a lot of dataAround 16% of insurers entered a representative
assumptionObserved rates between 7.8% and 10.5% between
the classes of business (lower than individual)Average central discount rate 9.1%Average inflation assumption of 5.8%
Discount ratesDiscount rates2003: LT2000 version 32003: LT2000 version 3
Individual Business - AveragesVariable Class of business
With-profit Bus
Annuities Linked Market Perform
Other TotalWith-profit
Without-profit
CDR 10.5% 12.5% 9.3% 10.3% 10.8% 9.6% 10.5%IPF 10.2% - 9.4% 10.0% 10.2% 9.5% 9.8%UPF 10.4% 10.4% 9.1% 10.7% 10.8% 9.9% 10.2%CPF 9.7% - 9.4% 9.9% 9.8% 9.5% 9.7%Corporate Fund 11.0% - 9.4% 12.2% 11.8% 9.9% 10.9%Expense Inflation
5.7% 5.4% 6.0% 6.2% 6.1% 6.4% 6.0%
CDR – Exp Infl 4.9% 7.1% 3.3% 4.1% 4.7% 3.2% 4.5%
Discount ratesDiscount rates2003: LT2000 version 32003: LT2000 version 3
Group Business - AveragesVariable Class of business
With-profit Bus
Annuities Linked Market Perform
Other Total
With-profit
Without-profit
Central Discount Rate
9.5% 9.1% 8.4% - 9.5% 8.8% 9.1%
IPF - 7.8% - - - 8.8% 8.3%
UPF 10.5% 10.5% - - 10.5% 8.7% 10.0%
CPF - - - - - 8.4% 8.4%
Corporate Fund - - - - - 8.4% 8.4%
Expense Inflation
- 5.8% - - - 5.8% 5.8%
Discount rates – 2003Discount rates – 2003Per business class (Individual)Per business class (Individual)
(LT2000 version 3)(LT2000 version 3)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
14.0%
With-profit business With-profit annuities Without-profit annuities
Class of business
Perc
enta
ge
Expense inflation Central discount rate Central discount rate - expense inflation
Discount rates – 2003Discount rates – 2003Per business class (Individual)Per business class (Individual)
(LT2000 version 3)(LT2000 version 3)
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
Linked Marketperformance
Other Average
Class of business
Perc
enta
ge
Expense inflation Central discount rate Central discount rate - expense inflation
Spread between discount rate Spread between discount rate and inflation assumption - 2003and inflation assumption - 2003
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 9.0%Difference between discount rate and expense inflation
Perc
enta
ge o
f ins
urer
s
Cumulative spread between Cumulative spread between discountdiscount rate and rate and inflationinflation assumption assumption
(Comparison between 2002 and 2003)(Comparison between 2002 and 2003)
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
0.0% 2.5% 4.5% 6.5% 8.5% 10.5% 12.5%Difference between discount rate and expense
inflation
Per
cent
age
of in
sure
rs
20022003
Moving left suggesting more
valuators using lower differential.
Discount ratesDiscount ratesAOS ResultsAOS Results
Industry in total made investment profits, compared to losses in 2002
Per industry grouping: In aggregate, assistance business and those in run-off made
losses (few made profits) Most profits made by general insurers
Per year-end month: In aggregate, those with March year-ends made losses
(although some did make profits) Most profits made by insurers with December year-ends
Discount rates – AOS resultsDiscount rates – AOS results
Total (R‘m)2002
Total (R‘m)2003
Min of profit/loss -2,235 -338
Max of profit/loss 517 3,799
Total of profit/loss -1,681 5,721
Profit/total insurance profit -10% 71%
Average profit/loss -28 94Weighted average of profit/loss -380 1,088
MortalityMortalityIn the graphed rates, we tried to determine
representative mortality rates for males and females.
Where possible, we used weighted rates, but simplifying assumptions were needed to consolidate the different versions of the LT2000.
For assurance we use SA85/90 ultimate 100% heavy to place weighted rates in perspective.
For annuities we use a(55) to put weighted average rates in perspective.
Mortality – Assurance tablesMortality – Assurance tablesMost popular tables are SA85/90 and SA56/62.Bigger insurers resort to internal tables.Specialized classes revert to special tables like
A24-29 and ELT8…Encouraging to see some insurers implementing
the ASSA2000 model (where products justify it).Still significant number that fail to complete
G10.1 and G10.2 (usually say – refer to attached valuation report…)
Mortality – Assurance table Mortality – Assurance table adjustmentsadjustments
Proportional adjustments with or without constant additions are popular with the level of complexity varying. Examples include:
Proportion vary across age (model accident hump)
Or over time (model temporary initial selection) With risk factors (popular for smoking status, sex
and health?)
Age adjustments used mainly for sex differential.
Mortality – Assurance males Mortality – Assurance males (Linear scale)(Linear scale)
0.0000
0.0200
0.0400
0.0600
0.0800
0.1000
0.1200
20 30 40 50 60 70 80
g l r n c a SA85/90
Mortality – Assurance females Mortality – Assurance females (Linear scale)(Linear scale)
0.0000
0.0200
0.0400
0.0600
0.0800
0.1000
0.1200
20 30 40 50 60 70 80
g l r n c a SA85/90
Mortality – Assurance males Mortality – Assurance males (Log scale)(Log scale)
0.0001
0.0010
0.0100
0.1000
1.0000
20 30 40 50 60 70 80
g l r n c a SA85/90
Mortality – Assurance females Mortality – Assurance females (Log scale)(Log scale)
0.0001
0.0010
0.0100
0.1000
1.0000
20 30 40 50 60 70 80
g l r n c a SA85/90
Mortality – Annuity tables and Mortality – Annuity tables and adjustmentsadjustments
Most commonly used include a(55), internal table, a(90) and PA(90)
Adjustments mostly combination of proportional and age adjustment.
Many include improvement in mortality over time to cater for improving longevity:
0.5%, 1% and 1.5% improvement per annum seen.
Also a ‘CMI Improvement’
Mortality – Annuities males Mortality – Annuities males (Linear scale)(Linear scale)
0.0000
0.0200
0.0400
0.0600
0.0800
0.1000
0.1200
20 30 40 50 60 70 80
g l r n a(55)
Mortality – Annuities females Mortality – Annuities females (Linear scale)(Linear scale)
0.0000
0.0100
0.0200
0.0300
0.0400
0.0500
0.0600
0.0700
0.0800
0.0900
20 30 40 50 60 70 80
g l r n a(55)
Mortality – Annuities males Mortality – Annuities males (Log scale)(Log scale)
0.0001
0.0010
0.0100
0.1000
1.0000
20 30 40 50 60 70 80
g l r n a(55)
Mortality – Annuities females Mortality – Annuities females (Log scale)(Log scale)
0.0001
0.0010
0.0100
0.1000
1.0000
20 30 40 50 60 70 80
g l r n a(55)
Mortality – AOS resultsMortality – AOS results
g l r a n cTotal (R‘m) 2003
Total (R‘m) 2002
Min of profit/loss -4 0 0 -7 -14 0 -14 -36Max of profit/loss 266 0 24 2 18 17 266 200Total of profit/loss
1,473 0 68 -6 33 19 1,58
8 1,125
Profit/total insurance profit 20% 0% 31% 73
% 27% 20% 7%
Average profit/loss 64 0 11 -1 5 6 35 24
Weighted average of profit/loss
159 0 10 -3 17 6 156 133
AIDSAIDSEncouraging to see more widespread use of ASSA2000
model.Representative idea of tables used:
Pattern I: 90%+ proportions of R6B with 50%+ multiplier.
Pattern II: 20% proportions of HA1 with 90% multiplier.
Refer members to PGN102 and PGN105.For LT2000 version 3, please answer the AIDS question
in statement G10 and attach the electronic copy requested!
MortalityMortality - AIDS adjustments - AIDS adjustments (Assurance products)(Assurance products)
Type of AIDS Adjustment
Proportion for
individual life
Proportion for
group life
No information 74% 97%No adjustment disclosed 5% 0%Adjust for gender 6% 3%Adjust for gender and smoker 15% 0%
Total 100% 100%
Mortality – Mortality – Weighted AIDS Weighted AIDS Adjustments (Assurance)Adjustments (Assurance)
0
0.0002
0.0004
0.0006
0.0008
0.001
0.0012
0.0014
20 25 30 35 40 45 50 55 60
Male Female
Morbidity – Income disabilityMorbidity – Income disabilityMany use GLTD (some make no adjustments to
GLTD).
The bigger players resort to internal tables.
CMIR12, CDT and SA85-90 used by minority.
A proportional adjustment to all ages in the table is often used.
The minority apply an age adjustment or set the reserve as a % of office premium.
Observed rates identical for both sexes.
Morbidity – Income disability Morbidity – Income disability both sexes (Linear scale)both sexes (Linear scale)
0.000000.050000.100000.150000.200000.250000.300000.350000.400000.450000.50000
20 30 40 50 60 70 80
g r n
Morbidity – Income disability Morbidity – Income disability both sexes (Log scale)both sexes (Log scale)
0.00010
0.00100
0.01000
0.10000
1.00000
20 30 40 50 60 70 80
g r n
Morbidity – Lump sum Morbidity – Lump sum disabilitydisability
Most use internal tables or SA85-90.Some use CSI table or move to set the
reserve as a % of office premium.Most apply a proportional adjustment
that varies by age: x% at age 20 increasing by y% every age until termination.
The minority apply an age adjustment.
Morbidity – Lump sum Morbidity – Lump sum disability males (Linear scale)disability males (Linear scale)
0.00000
0.02000
0.04000
0.06000
0.08000
0.10000
0.12000
0.14000
20 30 40 50 60 70 80
g r n c
Morbidity – Lump sum disability Morbidity – Lump sum disability females (Linear scale)females (Linear scale)
0.000000.010000.020000.030000.040000.050000.060000.070000.080000.09000
20 30 40 50 60 70 80
g r n c
Morbidity – Lump sum Morbidity – Lump sum disability males (Log scale)disability males (Log scale)
0.00010
0.00100
0.01000
0.10000
1.00000
20 30 40 50 60 70 80
g r n c
Morbidity – Lump sum Morbidity – Lump sum disability females (Log scale)disability females (Log scale)
0.00010
0.00100
0.01000
0.10000
1.00000
20 30 40 50 60 70 80
g r n c
Morbidity – AOS resultsMorbidity – AOS resultsg r n c Othe
rTotal (R‘m) 2003
Total (R‘m) 2002
Min of profit/loss -10 -10 -7 0 0 -10 -22Max of profit/loss 289 62 2 4 0 289 214Total of profit/loss 615 52 -5 4 0 667 642Profit/total insurance profit 8% 24
% 6% 0% 8% 4%Average profit/loss 44 13 -3 4 0 30 31Weighted average of profit/loss
117 52 -5 4 0 117 58
Expenses – Fixed costs Expenses – Fixed costs (2002)(2002)
0
50
100
150
200
250
300
350
400
450
Single premium
Disability income in payment
Annuities in payment
Paid-up policies
Regular premium
Expenses – Fixed costs Expenses – Fixed costs (Version 2.3 - 2003)(Version 2.3 - 2003)
0
100
200
300
400
500
600
700
800
900
Single premium
Annuities in payment Paid-up
policiesRegular premium
Disability income in payment
Expenses – Fixed costs Expenses – Fixed costs (Version 3 - 2003)(Version 3 - 2003)
Very poorly completed. Understandable though - insurers differ
significantly and charge differently. Where multiple product ranges exist with different
expense assumptions per class, please disclose a representative expense assumption.
Completed statements suggests a representative fixed cost per policy of R170 per annum with significant variation.
Expenses – Variable costs Expenses – Variable costs and inflationand inflation
For regular premium policies observed insurers charging between 3% and 5% of regular premium (ignoring one reinsurer’s information…).
For regular/single premium policies observed insurers charging between 0.4% and 1.5% of fund value.
Observed expense inflation rates between 5% and 9% with a representative average of approximately 6%.
Expenses – AOS resultsExpenses – AOS results
Total (R‘m) 2003
Total (R‘m) 2002
Min of profit/loss -106 -137Max of profit/loss 123 264Total of profit/loss -68 71Profit/total insurance profit -3.4% 0.4%Average profit/loss -1 1Weighted average of profit/loss -16 48
Lapse rates – Recurring Lapse rates – Recurring premium (2002)premium (2002)
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
g l r n a
First year Second year Third year Fourth year and later
Lapse rates – Recurring Lapse rates – Recurring premium (2003)premium (2003)
0%
5%
10%
15%
20%
25%
30%
35%
40%
g l r n a
First year Second year Third year
Lapse and surrender rates – Lapse and surrender rates – commentscomments
No AOS item in “old” C7 to analyse profits from surrenders. “New” C7 should provide some insights next year…
Many EV sensitivity testing indicate significant sensitivity to withdrawals.
Many insurers have withdrawal assumptions that vary by months in force and between products - hard to consolidate.
Data of poor quality, hope to give better summary next year.
Questions?Questions?
Thank you for your timeThank you for your time
Contact details:Contact details:
Hantie van HeerdenHantie van Heerden(012) 422 2801(012) 422 2801
[email protected]@fsb.co.za
André Jansen van VuurenAndré Jansen van Vuuren(012) 428 8103(012) 428 8103
[email protected]@fsb.co.za