Transcript Canadian Institute of Actuaries L’Institut canadien des

Canadian
Institute
of
Actuaries
2007 General Meeting
Assemblée générale 2007
Montréal, Québec
L’Institut
canadien
des
actuaires
2007 General Meeting
Assemblée générale 2007
T100 and UL LCOI
Lapse Studies Results
Lloyd Milani
Nikolai Serykh
November 30, 2007
Agenda
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UL LCOI Industry Pricing
2007 General Meeting
Assemblée générale 2007
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2006 Munich Re Survey
Lapse Studies Highlights
Scope and Method
Results
UL LCOI Industry Pricing
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2006 Munich Re Survey
2007 General Meeting
Assemblée générale 2007
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Sales and Funding
Lapse and Interest
Profit
2007 General Meeting
Assemblée générale 2007
UL Level COI Sales
2007 General Meeting
Assemblée générale 2007
UL Level COI Funding Level
2007 General Meeting
Assemblée générale 2007
UL LCOI Pricing Lapses
2007 General Meeting
Assemblée générale 2007
UL LCOI Lapse and Interest
2007 General Meeting
Assemblée générale 2007
UL LCOI - Profitability
T100 and UL LCOI
Lapse Study 2007
2007 General Meeting
Assemblée générale 2007
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Request for data - Beginning 2005
Enhanced Fields
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Cash Value
NAAR Pattern
UL Deposit
Results Database
Working Group
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2007 General Meeting
Assemblée générale 2007
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Nikolai Serykh
Elena Stoyanova
Individual Life Subcommittee
of the Research Committee
2007 General Meeting
Assemblée générale 2007
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Lloyd Milani, Chairperson
Stephen Beal
Marc-Andre Belzil
William Brath
Emile Elefteriadis
Beth Fitzmaurice
Marc Tardif
Agenda
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UL LCOI Industry Pricing
2007 General Meeting
Assemblée générale 2007
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2006 Munich Re Survey
Lapse Studies Highlights
Scope and Method
Results
Participating Companies
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2007 General Meeting
Assemblée générale 2007
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AIG
Canada Life
Co-operators
Life
Desjardins
Empire Life
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Industrial Alliance
Manulife Financial
Standard Life
Sun Life
Transamerica Life
Wawanesa
Top 5 companies contribution to total
policy exposure:
97% for T100 86% for UL LCOI
Highlights – T100 Study
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1999-2004 Period
92,587 lapses
2007 General Meeting
Assemblée générale 2007
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Duration 1-10 - 73,064 lapses
Duration 11-20 - 19,594 lapses
Duration 21-25 – 156 lapses
Over 4.0 million policy exposures
Over 251 billion face amount exposure
Compared to 1999 T100 Lapse Study
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204.5% of exposure by policy
139.0% of exposure by face amount
Highlights – UL LCOI Study
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2002-2004 Period
103,049 lapses
2007 General Meeting
Assemblée générale 2007
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Duration 1-5 - 74,972 lapses
Duration 6-10 - 24,526 lapses
Duration 11-15 - 3,551 lapses
Over 2.1 million policy exposures
Over 304 billion face amount exposure
Compared to 2003 UL LCOI Lapse
Study
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167.0% of exposure by policy
149.0% of exposure by face amount
Method
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2007 General Meeting
Assemblée générale 2007
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Calendar year method
Exposure period as provided by
company without modification
Following Status codes included
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Active
Death
Lapsed and Surrendered
Scope
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2007 General Meeting
Assemblée générale 2007
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Results by Number and by Face Amount
Durations 1-25 for T100 and 1-15 for UL
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Total
Calendar Year
Sex and Joint
Smoking Status
Policy Size
Issue Age
Premium Frequency
Cash Value Availability (T100 only)
T100 Lapse Study Results
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2007 General Meeting
Assemblée générale 2007
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Total
Calendar Year
Sex and Joint
Smoking Status
Policy Size
Issue Age
Premium Frequency
Cash Value Availability
Comparison to
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1999 Term-to-100 Lapse Study
Term-to-100 Study
Chart 1a - Composite Lapse Rates
8%
2007 General Meeting
Assemblée générale 2007
7%
6%
5%
4%
3%
By Number
2%
By Amount
1%
0%
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20
Policy Year
T100 Study by Calendar Year
Chart 2b - Composite Lapse Rates by Calendar Year
(by Amount of Sum Assured)
8.0%
2007 General Meeting
Assemblée générale 2007
7.0%
6.0%
5.0%
4.0%
1999
2004
1999-2004
3.0%
2.0%
1.0%
Policy Year
0.0%
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20
T100 Study by Sex and Joint
Status
Chart 3b - Lapse Rates by Sex
(by Amount of Sum Assured)
2007 General Meeting
Assemblée générale 2007
8.0%
7.0%
6.0%
5.0%
4.0%
Male Single
Female Single
3.0%
Joint 1st
Joint 2nd
2.0%
1.0%
0.0%
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20
Policy Year
T100 Study by Smoking Status
Chart 4b - Lapse Rates by Smoking Status
(by Amount of Sum Assured)
2007 General Meeting
Assemblée générale 2007
12%
10%
8%
Non-Smoker
Smoker
Aggregate
6%
4%
2%
0%
1 2 3 4 5 6
7 8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
T100 Study by Policy Size
2007 General Meeting
Assemblée générale 2007
Chart 5b - Lapse Rates by Policy Size
(by Amount of Sum Assured)
9%
8%
7%
6%
5%
4%
3%
2%
1%
0%
<$100K
$100K-249K
$250K+
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2
3
4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
T100 Study by Issue Age
Chart 6b - Lapse Rates by Issue Age
(by Amount of Sum Assured)
9%
2007 General Meeting
Assemblée générale 2007
8%
7%
6%
5%
4%
25-34
3%
35-44
45-54
2%
1%
0%
1
2
3
4
5
6
7
8
9
10
11
Policy Year
12
13
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15
16
17
18
19
20
T100 Study by Premium
Frequency
Chart 7b - Lapse Rates by Premium Frequency
(by Amount of Sum Assured)
2007 General Meeting
Assemblée générale 2007
8%
7%
6%
5%
4%
Non-Monthly
3%
Monthly
2%
1%
0%
1
2 3 4
5 6 7
8 9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
Term-to-100 Study
by Cash Value Availability (1)
Chart 9b - Lapse Rates by Timing of Cash Value Availability
(by Amount of Sum Assured)
2007 General Meeting
Assemblée générale 2007
7%
6%
5%
Available CV
4%
No CV or CV in 5+ years
3%
2%
1%
0%
1
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6
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9
10
11
Policy Year
12
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15
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18
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20
Term-to-100 Study
by Cash Value Availability (2)
Chart 9b - Lapse Rates by Timing of Cash Value Availability
(by Amount of Sum Assured)
10%
2007 General Meeting
Assemblée générale 2007
9%
8%
7%
Available CV
No CV or CV in 5+ years
CV in next 5 Years
6%
5%
4%
3%
2%
1%
0%
1
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5
6
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8
9
10
11
Policy Year
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Term-to-100 Study
1999 vs 2007
2007 General Meeting
Assemblée générale 2007
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Composite Rates at Durations 1-15
1999 vs 2007 without Cash Value
T100 Study – 1999 vs 2007
Chart 1c - Composite Lapse Rates
(by Amount of Sum Assured)
9%
2007 General Meeting
Assemblée générale 2007
8%
7%
6%
5%
4%
1999 Study
2007 Study
3%
2%
1%
0%
1
2
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4
5
6
7
8
9
Policy Year
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11
12
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2007 General Meeting
Assemblée générale 2007
T100 Study 1999 vs 2007
without Cash Value
Composite Lapse Rates
(by Amount of Sum Assured)
9%
8%
7%
6%
5%
4%
1999 Study
3%
2007 Study wo CV
2%
1%
0%
1
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7
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9
Policy Year
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UL LCOI Lapse Study Results
2007 General Meeting
Assemblée générale 2007
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Total
Policy Size
Comparison to
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2003 UL LCOI Lapse Study
2007 Term-to-100 Lapse Study
Munich Re Pricing Survey
UL LCOI Lapse Study
Chart 1a - Composite Lapse Rates
9%
7%
Lapse Rate
2007 General Meeting
Assemblée générale 2007
8%
6%
5%
By Number
4%
By Amount
3%
2%
1%
0%
1
2
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4
5
6
7
8
9
Policy Year
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11
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14
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UL LCOI Lapse Study
Policy Size
(by Amount of Sum Assured)
12%
Lapse Rate (by Amt)
2007 General Meeting
Assemblée générale 2007
Chart 5b - Lapse Rates by Policy Size
10%
8%
<$100K
$100K-$249K
6%
$250,000+
4%
2%
0%
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9
Policy Year
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UL LCOI Study – 2003 vs 2007
2007 General Meeting
Assemblée générale 2007
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Overall
Differences
UL LCOI – 2003 vs 2007
Chart 1c - Composite Lapse Rates
by Amount of Sum Assured
Lapse Rate (by Amt)
2007 General Meeting
Assemblée générale 2007
6%
5%
4%
2003 Study
3%
2007 Study
2%
1%
0%
1
2
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4
5
6
7
8
9
Policy Year
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UL LCOI Study – 2003 vs 2007
Differences
2007 General Meeting
Assemblée générale 2007
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Different Study Periods:
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1997-2001 vs 2002-2004
Shift in Participants Contribution
Change in Sample Demographic:
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Male = -0.8%
Female = +5.6%
Joint 1st to Die = -1.2%
Joint 2nd to Die = -3.6%
UL LCOI vs Term-to-100
2007 General Meeting
Assemblée générale 2007
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Composite Rates at Durations 1-15
Non-Smoker, Single, 100K+ Band,
Monthly Premium Mode
UL LCOI vs Term-to-100
Chart 1e - Composite Lapse Rates
by Amount of Sum Assured
2007 General Meeting
Assemblée générale 2007
6%
5%
4%
T100
3%
UL LCOI
2%
1%
0%
1
2
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4
5
6
7
8
9
Policy Year
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11
12
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UL LCOI vs Term-to-100
5.0%
Lapse Rate (by Amt)
2007 General Meeting
Assemblée générale 2007
NS, Single, 100K+, Monthly Mode
4.0%
3.0%
T100
UL LCOI
2.0%
1.0%
0.0%
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2
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4
5
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9
Policy Year
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11
12
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Munich Re Pricing Survey
2007 General Meeting
Assemblée générale 2007
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2002 Assumptions vs 1997-2001
Experience
2006 Assumptions vs 2002-2004
Experience
2007 General Meeting
Assemblée générale 2007
2003 UL vs MRe Survey 2002
Issue Age 25-35
2007 UL vs MRe Survey 2006
Issue Age 25-34 (1)
9%
8%
Lapse Rate (by Amt)
2007 General Meeting
Assemblée générale 2007
Pricing vs Valuation vs Experience
UL Study - IA 25-34
Valuation - IA 30
Pricing - IA 30
7%
6%
5%
4%
3%
2%
1%
0%
1
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4
5
6
7
8
9 10 11 12 13 14 15 16 17 18 19 20
Policy Year
2007 UL vs MRe Survey 2006
Issue Age 25-34 (2)
NS, Single, 100K+, Monthly Premium Mode
9%
8%
Lapse Rate (by Amt)
2007 General Meeting
Assemblée générale 2007
Pricing vs Valuation vs Experience -
7%
6%
UL Study - IA 25-34
Valuation - IA 30
Pricing - IA 30
5%
4%
3%
2%
1%
0%
1
2
3
4
5
6
7
8
9
10 11 12 13 14 15 16 17 18 19 20
Policy Year
Conclusion
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2007 General Meeting
Assemblée générale 2007
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Careful with experience where exposure is
limited
Lapse Rates pattern are similar in both studies
T100 lapse rates are lower than UL LCOI
after duration 8
UL LCOI composite experience is in line with
average pricing and valuation assumptions
Average pricing and valuation assumptions
are generally higher than actual experience
for UL Non-Smoker, Single, Band 100K+,
Monthly Premium Mode
Limitations
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2007 General Meeting
Assemblée générale 2007
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Not every company was able to
contribute each experience year
Basic Policies only
Limited Amount of Exposure
T100 Data
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Date of Cash Value on set
Premium Cease Date
UL YRT COI changes to Level COI
Partial Lapses
Increasing Face Amount
2007 General Meeting
Assemblée générale 2007
Questions