fasb long-duration targeted improvements (ldti) 2018 1114 weds - seac fasb... · —dac written off...

FASB Long-Duration Targeted Improvements (LDTI)

Robert Hanes, FSA, MAAAMichael Hayes, FSA, MAAA

2018 SEAC Fall MeetingNovember 14, 2018

2© 2018 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. NDPPS 817897

Agenda• Initiatives & Timeline• Overview

• Traditional & Limited-Payment Contracts• Participating Contracts• Deferred Acquisition Costs (DAC)• Deferred Profit Liability (DPL)• Market Risk Benefits (MRB)• Disclosures

• Impact Example• Transition Examples• Implementation & Perspectives• Sample Implementation Plan

FASB Long-Duration Targeted Improvements (LDTI):

Initiatives & Timeline


2018 SEAC Fall Meeting – FASB Long-Duration Targeted Improvements

FASB Initiative

Targeted Improvements to the Accounting for Long-Duration Contracts (ASU 2018–12)

Focused efforts on targeted improvements to both accounting and disclosures

Change to current U.S. GAAP model for recognition, measurement, presentation and disclosure


Timeline2018 SEAC Fall Meeting – FASB Long-Duration Targeted Improvements

Topics redeliberated by the FASB:— Nonparticipating traditional and limited-payment insurance contracts – August 2, 2017— Participating insurance contracts – October 4, 2017— Measurement of market risk benefits – October 4, 2017— Amortization of deferred acquisition costs – October 4, 2017— Presentation and disclosures – November 1, 2017— Discount rate reset upon initial adoption and effective date – June 6, 2018

Feedback from comment letters discussed in February 2017

Proposed ASU issued in September 2016

Redeliberations in 2017 and 2018

Public roundtable meeting held in April 2017

ASU 2018-12 issued on August 15, 2018



Timeline (continued)Effective date Public business entities All other entities

Annual periods – Fiscal years beginning after December 15, 2020 December 15, 2021

Interim periods – In fiscal years beginning after December 15, 2020 December 15, 2022

Early adoption allowed? Yes


Overview


Overview – Changes to Liability for Future Policy Benefits

Reserving model—Retained the net premium reserving—model—Provision for risk of adverse deviation removed

from determination of the liability—Premium deficiency testing eliminated but net

premium ratio cannot exceed 100%

Disclosures—Disaggregated rollforwards—Information about significant inputs,

judgments, assumptions and methods

Income statement impact—Cash flow assumption changes reflected in P&L

—Discount rate assumption changes reflectedin OCI

Best estimate assumptions—Cash flow assumptions reviewed at least annually,

and when changed, updated on a catch-up—basis—Discount rate assumptions updated each

reporting period on an immediate basisTraditional and

Limited-Payment

Long-Duration Contracts



Traditional and Limited-Payment Contracts – Key ChangesCash flow assumptions

Unlocking of assumptions is meant to provide more relevant estimates of future policy benefit reservesKey changes:—Reviewed at least annually at the same time every year, but more frequently if suggested by experience —If assumptions change, updates made on a catch-up basis through net income—Update for actual experience on an annual basis, unless assumptions are updated—Expense assumptions updated consistently with other cash flow assumptions, but can elect on an entity-wide basis

to not update (lock-in)—Groups used to calculate reserves do not cross issue years, may be annual or quarterly groups

Reflected in the net premium %

Unlocking of the discount rate better reflects the market environment of the liabilitiesKey changes:—Unlocked and updated at each reporting date on an immediate basis in other comprehensive income—Determine discount rate using an upper-medium grade (low-credit risk), fixed income instrument yield

(generally an A rating)

Discount rate

Not reflected in the net premium %



Net Premium Reserving Model

Discount rate unlocked

Reserve(t) PV (Benefits + Expenses) PV (Net Premium % x Gross Premiums)

All cash flow assumptions* unlocked

Discount rate not unlocked

Net premium % PV (Benefits + Expenses) PV (Gross Premiums)

— Expense assumptions should be updated consistently with the standard’s new methodology used for other cash flow assumptions, unless an entity-wide election is made to not update the expense assumption



Traditional and Limited-Payment Contracts – Discount Rate

—Determine discount rate using an upper-medium grade (low-credit risk), fixed income instrument yield (generally an A rating)

—Insurance entities are required to:- Maximize the use of observable inputs and minimize the use of unobservable inputs;- Use reliable information that reflects duration characteristics of the liability for future policy benefits; and- Use the original discount rate as the interest accretion rate

Current practice is that the discount rate can vary depending on the type of insurance contract. Discount rates can be currently based on: expected investment yield, policy crediting rate, or dividend interest rate.

Impact: With the discount rates on investments and reserves are no longer connected, the asset liability management discount rate may not be consistent with the discount rate used in the reserve calculation



Traditional and Limited-Payment Contracts – TransitionTransition

—Apply to contracts in force using existing carrying amounts at the transition date, adjusted to remove related amounts in accumulated OCI (modified retrospective basis)- Transition date defined as the beginning of the earliest period presented- Discount rate assumption used to calculate the liability immediately before transition used to:

—calculate the ratio of net premiums to gross premiums at transition and —interest accretion in future periods

- Remeasure the liability on the balance sheet using the current upper-medium grade (low-credit risk), fixed-income instrument yield to determine the adjustment to opening AOCI at the transition date

—Net premium ratio capped at 100%—Option to apply the guidance retrospectively, with a cumulative adjustment to opening retained earnings

- Required to use same contract issue year level on an entity-wide basis for that issue year and all subsequent issue years- Required to use actual historical experience information

—Cumulative catch-up applied to opening balance of retained earnings if net premiums > gross premiums or if retrospective approach elected

Impact: Availability of historical information may limit the use of retrospective application for all issue years



Participating Contracts

—No change to measurement of the future policy benefit liability for participating contracts —No change to measurement of the future policy benefit liability for participating contracts —Simplified DAC amortization model applies to participating contracts—Accrued terminal dividends accrued are recognized as expense at a constant rate based on the present value

of the base used for the amortization of DAC

Under current U.S. GAAP, the future policy benefits liability for participating insurance contracts is measured using a separate accounting model that is different from the model used for nonparticipating insurance contracts.

Impact: The simplified DAC amortization model will still be used for participating insurance contracts



Deferred Acquisition Costs (DAC)Under current U.S. GAAP, DAC is amortized in proportion to premiums, gross profits or gross margins

DAC amortization method replaced with a principle in which:—DAC amortized on a constant level basis over the expected term of the contract(s)

- Individual contracts: Amortized on a straight-line basis- Grouped contracts: Amortized on a constant-level basis that approximates straight-line amortization on an individual contract basis

—Amortization should not be a function of revenue or profit emergence—Contracts should be grouped consistent with the grouping used to calculate the reserve—DAC written off for unexpected contract terminations

Concepts eliminated under the proposed standard:

—Accruing interest on the unamortized balance of DAC—Adjusting DAC for the effect of investment performance or changes in expected future liability cash flows (shadow adjustments) —Impairment analysis on DAC

Impact: Simplifies the amortization of DAC

Other considerations—Deferred sales inducements amortized using same methodology and assumptions as DAC—Types of acquisition costs eligible for deferral are not affected—Balances amortized consistent with DAC will need to be assessed to determine whether amortizing these balances consistent with DAC remains

appropriate (e.g., value of business acquired (VOBA), present value of future profits (PVFP) and costs of reinsurance)—VOBA or PVFP still subject to impairment testing



Deferred Acquisition Costs (DAC) (continued)

Transition

—Apply to existing carrying amounts at the transition date, adjusted to remove related amounts in accumulated OCI (prospectivebasis)

—Option to apply the guidance retrospectively, with a cumulative adjustment to opening retained earnings—Required to elect DAC transition method and issue-year level consistent with the liability for future policy benefits

Impact: Availability of historical information may limit the use of retrospective application for all issue years



Deferred Profit Liability (DPL)Under current U.S. GAAP, DPL should be deferred and recognized over the period that services are provided and in constant relationship with insurance inforce or benefit payments

DPL under Long-Duration Targeted Improvements:—Assumptions used in measuring any gross premium deferred shall be consistent with those used in estimating the liability for

future benefits—Assumptions shall be updated contemporaneously with the updating of assumptions for the corresponding liability for future

policy benefits (reviewed for need to update at least annually at the same time every year)—Cash flow assumptions used to calculate the DPL at contract issuance shall be updated in subsequent periods using actual

historical experience and updated future assumptions—Each reporting period the DPL is recalculated as of the contract issue date using the updated historicals with amortization

redetermined in relation to the discounted (actual & re-projected) amount of the insurance in force or actual & reprojected benefit payments (if accounting for annuity products)

- Income recognition remains a constant relationship with insurance inforce or expected future benefit payments- The method of amortization remains unchanged while the DPL is recalculated each period

—The discounting performed using and upper-medium grade (low-credit-risk) fixed-income instrument yield, updated each reporting period

—The revised DPL shall be compared with the carrying amount of the DPL as of the beginning of the current reporting period to determine the change in estimate adjustment to be recognized in net income for the current reporting period



Deferred Profit Liability (DPL)Concepts eliminated under the proposed standard:— Assumptions are no longer locked in and DPL is recalculated as a result of assumption updates

Other considerations

— For assumption updates, the DPL will be recomputed from contract inception and compared to the beginning of period DPL to determine the gain/loss

— Assumption updates will affect the future liabilities which will impact DPL


PolySystems Proprietary and Confidential Information

Market Risk BenefitsJohn Adduci, FSA, MAAA

November 14, 2018


Market Risk Benefits - Overview 19

A new accounting classification for certain benefits offered within deposit contracts with other than nominal market risk, especially guaranteed minimum benefits on annuities

Recognition and measurement is at fair value

Changes in the liability due to the change in an entity’s own credit risk are reflected in other comprehensive income

Transition is retrospective for all market risk benefits


FASB believes that the benefits of targeted improvements for market risk benefits are greater than the costs and complexities 20

One measurement model

Maximize use of observable market inputs

Greater visibility to extent capital market risk is hedged

1Benefits Initial Costs

Reconfigure system and process

Staff education

Initial costs to implement the calculations retrospectively


Market risk benefits are inserted into the accounting classification at the top of the hierarchy 21

Meets the definition of market risk benefitApply ASC 944 for MRB, fair valuePortion of change in liability due to own credit risk goes through OCI

Benefit is not a market risk benefit but is an embedded derivative Apply ASC 815, fair valueChange in liability goes through net income

Benefit is not a market risk benefit and is not an embedded derivativeDetermine if ASC 944 for Death and Other Insurance Benefits is applicable a.k.a. (SOP03-1)Change in liability goes through net income

Market Risk Benefits

Embedded Derivative

Other Accounting Methods

1

2

3


The scope for MRB has been refined and key words in the final standard are protection/shortfall and nominal 22

What is a Market Risk Benefit?A contract or contract feature that both provides protection to the contract holder from other-than-nominal capital market risk and exposes the insurance entity to other-than-nominal capital market risk should be recognized as a market risk benefit.

Sept2016

Evolution of Scope

Nov2017

June

June2018

Limited to contracts with separate accounts

General account deposit contracts scoped in

Refined language for MRB proposed

Final Standard

Aug2018


Interpretation of the definition for market risk benefits could lead to uncertainty among the industry until the dust settles 23


Embedded Derivative

Other Accounting Methods

VA GMWB/L

VA GMDB

ULSGVariable Life

EIUL Indexed Feature

FIA GMWB/L

FIA GMDB

FIA Indexed Feature

VUL GMDB

Minimum Crediting Rates

Annuitization Guarantees

Higher Certainty Less Certainty

Stable Value Features

Variable Annuity

VA GMAB

VA GMIB


Concepts and methods to measure insurance liabilities at fair value exist under current GAAP framework today 24

Familiar Concepts• Income Approach

• Risk Neutral Valuation / Budget Method

• Market Participant Assumptions

• Zero gain/loss at issue

Familiar Methodology

• Attributed Fee methodology

• Host Contract methodology

• Fair Value Option? (old “FAS159”)


Transition will require significant work for all types of contracts impacted 25

The transition requirements for market risk benefits are retrospective, meaning…

For contracts NOT already following a fair value framework…• Perform cashflow projections as of contract inception, allowing “hindsight”, to obtain necessary

retrospective information • At the transition date, adjust retained earnings for the difference in carrying value and transition value

under new guidance (and AOCI, see below)• Consider whether the contract contains other benefits already measured at fair value• Plus… items below

For contracts already following a fair value framework… • Establish method to quantify the cumulative change in instrument specific credit risk for AOCI• Change in presentation format and process for increased reporting and disclosure requirements


Key Market Risk Benefit Considerations 26

Interpretation – What is your company’s interpretation of market risk benefit?

Systems – Do you have desired scenario generators and system modeling capabilities?

Calculation – What fair value methodology will you use?

Compound Market Risk Benefit – How do you value more than one MRB together?

Unit of account – At what level of granularity is the calculation done?

Assumptions – Do you need to develop new assumption sets for market risk benefits?


GMXB that are fair valued today generally use a prospective reserve method, GMXB under SOP03-1 use a retrospective method 27

At Issue – Original Assumptions

(1)Year

(2)Rider

Charges

(3)Excess Claims

(4)Retrospective

Reserve (SOP03-1)

(5)Prospective Reserve

(MRB FV)

(6)Change in Reserve

(7)Income

1 50 20 20 20 20 10

2 50 30 30 30 10 10

3 50 40 30 30 0 10

4 50 50 20 20 -10 10

5 50 60 0 0 -20 10

250 200 80% 80% 50

Attributed Fee % (locked in at issue) = 80% = PV Excess Claims / PV Rider Charges Reserve(t) = PV of future excess claims – AF% * PV of future rider charges

Benefit Ratio for SOP03-1 (always recalculated as of issue) = PV Excess Claims / PV Rider Charges = 80% Reserve(t) = Benefit Ratio*Cumulative Rider Charges – Cumulative Excess Claims


Updates to future assumptions impact the pattern of reserve for both reserve regimes 28

Updated assumptions in Year 2+, reserves recast as of issue date

(1)Year

(2)Rider

Charges

(3)Excess Claims

(4)Retrospective

Reserve (SOP03-1)

(5)Change in Reserve

(Retrospective SOP03-1)

(6)Prospective Reserve

(MRB FV)

(7)Change in Reserve (Prospective MRB

FV)

1 50 20 27.2 27.2 56 56

2 50 36 38.4 11.2 60 4

3 50 48 37.6 -0.8 52 -8

4 50 60 24.8 -12.8 32 -20

5 50 72 0 -24.8 0 -32

250 236 94% 80%

Year 1 actual experience is equal to expected

Increase to claims projection due to assumption change


For benefits transitioning from a retrospective approach to prospective approach, the reserve story changes 29

Unlocking Analysis

(1)Year

(2)Rider

Charges

(3)Excess Claims

(4) Retrospective

Reserve (SOP03-1)

(5)∆

Retrospective Reserve

(6)Prospective

Reserve (MRB FV)

(7)∆

Prospective Reserve

(8)Income

(Retrospective)

(9)Income

(Prospective)

1 50 20 20 20 20 20 10 10

2 50 36 38.4 18.4 60 40 -4.4 -26

3 50 48 37.6 -0.8 52 -8 2.8 10

4 50 60 24.8 -12.8 32 -20 2.8 10

5 50 72 0 -24.8 0 -32 2.8 10

250 236 14 14

The impact to income of updating assumptions is not spread over the

remainder of the contract with a prospective approach

Total claims are 36 higher than the original projection, total profits are 36

lower

FAQs – Market Risk BenefitsGAAP Targeted Improvements


• Determination and selection of rates for MRBs• Application of the MRB discount rates, e.g. do we take the year-end rate for a

cohort, average of quarterly rates, etc.• Selection of amortization basis for FAS 97 blocks: DAC, SIA, UREV. Account Value?

Premium Inforce? Policy Count? • Impact of MRBs, changes in SOP 03-1 on DAC and other balances at transition, if

any• MRB combination – calculation, presentation or both?• Identification of MRBs in FAS 60 blocks, if any (consider annuitization benefits,

e.g. tying annuitization rates to SPIA rates, delayed ROP)

Market Risk Benefits – FAQs 31


• Slide 6 – classification• Methods for FV calculation for FIA, VA, VIA –

• Attributable fees or something else?• Full stochastic or certainty-equivalent?

• How do the attributable fees get calculated, e.g. for VA/VIA GMDB?• Pivot Date – does every block have to have the same pivot date?• Cohort Definition – was annual cohort reference removed? Can cohorts be

combined across issue years?• MRBs including attributed fee % at cohort or policy level?

Market Risk Benefits – FAQs 32



DisclosuresAdditional disaggregated disclosures for the liability for future policy benefits and DAC include rollforwards of opening and closing balances and information about significant inputs, judgments, assumptions and methods used in the measurement of the liabilities for future policy benefits and DAC. —Provides a principle for determining how to disaggregate the new disclosures to provide meaningful information without including

a large amount of insignificant detail or aggregating items with significantly different characteristics—Provides examples of disaggregation characteristics

(e.g., type of coverage, etc.)—Consider how information about the liability for future policy benefits

or DAC has been disaggregated for other purposes when determining which categories would be the most relevant and useful

—Cannot aggregate amounts from different reportable segments

Impact: The standard significantly expands the disclosure requirements for long-duration contracts in the annual and interim financial statements


Disclosures

New Disclosure Requirements under ASU 2018-12—Entity must provide disaggregated roll-forwards of beginning to ending balances for the following accounts:

- Liability for Future Policy Benefits- Policy Holder Account Balances- Market Risk Benefits- Separate Account Liabilities- Deferred Acquisition Costs

—Qualitative and Quantitative information about transition adjustments related to- Opening balance of retained earnings- Accumulated other comprehensive income- Net premiums exceeding gross premiums- The establishment of a premium deficiency as required in Subtopic 944-60



— In this example, the required disaggregation is shown as term life vs. whole life.

— The disaggregated roll-forward, when aggregated, must be reconciled to the statement of financial position

Example Disclosure for Liability for Future Policy Benefits2018 SEAC Fall Meeting – FASB Long-Duration Targeted Improvements

Term Life Whole Life Term Life Whole LifeBalance, beginning of year $ VVV $ VVV $ XXX $ XXXBeginning balance at original discount rate WWW WWW XXX XXX

Effect of changes in cash flow assumptions XXX XXX XXX XXXEffect of actual variances from expected experience XXX XXX XXX XXX

Adjusted beginning of year balance XXX XXX XXX XXXPV of Expected Issuances XXX XXX XXX XXXNet Premiums Interest Accrual XXX XXX XXX XXX

Net Premiums Collected (XXX) (XXX) (XXX) (XXX)Derecognition (lapses) (XXX) (XXX) (XXX) (XXX)

Ending balance at original discount rate YYY YYY WWW WWWEffect of changes in discount rate assumptions XXX XXX XXX XXX

Balance, end of year $ ZZZ $ ZZZ $ VVV $ VVV

Term Life Whole Life Term Life Whole LifeBalance, beginning of year $ VVV $ VVV $ XXX $ XXXBeginning balance at original discount rate WWW WWW XXX XXX

Effect of changes in cash flow assumptions XXX XXX XXX XXXEffect of actual variances from expected experience XXX XXX XXX XXX

Adjusted beginning of year balance XXX XXX XXX XXXPV of Expected Issuances XXX XXX XXX XXXFuture Policy Interest Accrual XXX XXX XXX XXX

Benefits Benefit payments (XXX) (XXX) (XXX) (XXX)Derecognition (lapses) (XXX) (XXX) (XXX) (XXX)

Ending balance at original discount rate YYY YYY WWW WWWEffect of changes in discount rate assumptions XXX XXX XXX XXX

Balance, end of year $ ZZZ $ ZZZ $ VVV $ VVV

Net liability for future policy benefits $ CCC $ DDD $ AAA $ BBBLess: Reinsurance recoverable XXX XXX XXX XXX

Net liability for future policy benefits, after reinsurance recoverable $ XXX $ XXX $ XXX $ XXX

December 31,20X2 20X1

December 31,20X2 20X1

Sheet1

December 31,

20X220X1

Term LifeWhole LifeTerm LifeWhole Life

Balance, beginning of year$ VVV$ VVV$ XXX$ XXX

Beginning balance at original discount rateWWWWWWXXXXXX

Effect of changes in cash flow assumptionsXXXXXXXXXXXX

Effect of actual variances from expected experienceXXXXXXXXXXXX

Adjusted beginning of year balanceXXXXXXXXXXXX

PV of ExpectedIssuancesXXXXXXXXXXXX

Net PremiumsInterest AccrualXXXXXXXXXXXX

Net Premiums Collected(XXX)(XXX)(XXX)(XXX)

Derecognition (lapses)(XXX)(XXX)(XXX)(XXX)

Ending balance at original discount rateYYYYYYWWWWWW

Effect of changes in discount rate assumptionsXXXXXXXXXXXX

Balance, end of year$ ZZZ$ ZZZ$ VVV$ VVV

December 31,

20X220X1








Future PolicyInterest AccrualXXXXXXXXXXXX

BenefitsBenefit payments(XXX)(XXX)(XXX)(XXX)





Net liability for future policy benefits$ CCC$ DDD$ AAA$ BBB

Less: Reinsurance recoverableXXXXXXXXXXXX

Net liability for future policy benefits, after reinsurance recoverable$ XXX$ XXX$ XXX$ XXX



Example Disclosure for DAC

— In this example, the required disaggregation is shown as whole life vs. universal life vs. variable universal life

— The disaggregated roll-forward, when aggregated, must be reconciled to the statement of financial position

Whole LifeUniveral

Life

Variable Universal

Life TotalBalance, beginning of year $ YYY $ YYY $ YYY $ YYY

Capitalizations XXX XXX XXX XXXAmortization expense (XXX) (XXX) (XXX) (XXX)Experience adjustment (XXX) (XXX) (XXX) (XXX)

Balance, end of year $ ZZZ $ ZZZ $ ZZZ $ ZZZ

Whole LifeUniveral

Life

Variable Universal

Life TotalBalance, beginning of year $ WWW $ WWW $ WWW $ WWW

Capitalizations XXX XXX XXX XXXAmortization expense (XXX) (XXX) (XXX) (XXX)Experience adjustment (XXX) (XXX) (XXX) (XXX)

Balance, end of year $ YYY $ YYY $ YYY $ YYY

As of December 31, 20X2


Sheet1

December 31,

20X220X1








Net PremiumsInterest AccrualXXXXXXXXXXXX

Net Premiums Collected(XXX)(XXX)(XXX)(XXX)





December 31,

20X220X1








Future PolicyInterest AccrualXXXXXXXXXXXX

BenefitsBenefit payments(XXX)(XXX)(XXX)(XXX)





Net liability for future policy benefits$ CCC$ DDD$ AAA$ BBB

Less: Reinsurance recoverableXXXXXXXXXXXX

Net liability for future policy benefits, after reinsurance recoverable$ XXX$ XXX$ XXX$ XXX

Sheet3


Whole LifeUniveral LifeVariable Universal LifeTotal

Balance, beginning of year$ YYY$ YYY$ YYY$ YYY

CapitalizationsXXXXXXXXXXXX

Amortization expense(XXX)(XXX)(XXX)(XXX)

Experience adjustment(XXX)(XXX)(XXX)(XXX)

Balance, end of year$ ZZZ$ ZZZ$ ZZZ$ ZZZ


Whole LifeUniveral LifeVariable Universal LifeTotal

Balance, beginning of year$ WWW$ WWW$ WWW$ WWW

CapitalizationsXXXXXXXXXXXX

Amortization expense(XXX)(XXX)(XXX)(XXX)

Experience adjustment(XXX)(XXX)(XXX)(XXX)

Balance, end of year$ YYY$ YYY$ YYY$ YYY


Impact Example


Product SpecificationsInsurance: Targeted improvements to the accounting for long-duration contracts

20-Year Level Term Product

— Male, age 45, non-smoker— Face amount of $1,000,000— No cash value— Base case:

- Investment earnings rate = upper-medium grade fixed yield = 5.0%; investment income allocated based on net GAAP liability (GAAP reserve – DAC)

- Flat lapse rate of 5% during the level term period, with full termination at the end of the level term period- Current GAAP PADs of 3% on mortality and 20 basis points deducted from investment earnings rate

— Net Income Sensitivity Cases:- Mortality doubled at years 5 and 15- Lapses increased to 20% at years 5 and 15- Future mortality assumption increased by 10% at years 5 and 15- Future lapse assumption increased to 10% at years 5 and 15- Upper-medium grade fixed yield at 3.0% while investment earnings rate at 5.0%


Base Case: LiabilitiesInsurance: Targeted improvements to the accounting for long-duration contracts

Impact: Insurance liabilities are lower throughout the projection period due to the inclusion of PAD in current GAAP

0100020003000400050006000700080009000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Liab

ility

bala

nce

Duration

Insurance liabilities

Targeted changes Current GAAP


Base Case: DACInsurance: Targeted improvements to the accounting for long-duration contracts

Impact: DAC is lower throughout the projection period because amortization has been tied to policy count and no interest is accrued

0

500

1000

1500

2000

2500

3000

0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

DAC

bal

ance

Duration

DAC



Base Case: Net IncomeInsurance: Targeted improvements to the accounting for long-duration contracts

Impact: 1. Targeted changes accelerate net income due to lack of PAD, which pushes income into later years under current GAAP2. Since DAC does not accrue interest, earnings do not emerge as a level % of premium if investment income is calculated based on the net GAAP liability

0100200300400500600700800900

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Net

inco

me

Duration

Net income



Net Income Sensitivity Case: Mortality Experience Doubled @ Year 5

Insurance: Targeted improvements to the accounting for long-duration contracts

Impact: For historical experience variances, the catch-up method for unlocking net premium may serve to absorb some of the current period impact by spreading it over future years

(400)

(200)

0

200

400

600

800

1000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Net

inco

me

Duration

Net income



Net Income Sensitivity Case: Lapse Experience Increased to 20% @ Year 5


Impact: A similar variance-absorbing effect can be seen for lapse variances, which increase profitability for this term product due to relatively low assumed acquisition expenses

0200400600800

10001200140016001800

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Net

inco

me

Duration

Net income



Net Income Sensitivity Case: Mortality Assumption Increased 10% @ Year 5


Impact: Assumption changes result in an immediate impact to current period earnings under targeted changes due to an increase in the net premium ratio

(200)(100)

0100200300400500600700800900

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Net

inco

me

Duration

Net income



Net Income Sensitivity Case: Lapse assumption increased 10% @ Year 5


Impact: Similar to mortality, lapse assumption changes result in an immediate impact to current period earnings under targeted changes due to a decrease in the net premium ratio

0

500

1000

1500

2000

2500

3000

3500

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Net

inco

me

Duration

Net income



Net Income Sensitivity Case: Upper-Medium Grade Fixed Yield @ 3.0%


Impact: A mismatch between the investment earnings rate and the rate used to discount the GAAP liabilities impacts the pattern of net income – here the steeper reserve increases in early years are offset by higher investment income and releases in mid-years, followed by current GAAP overtaking due to release of PAD

0

100

200

300

400

500

600

700

800

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Net

inco

me

Duration

Net income



Transition Examples


Modified Retrospective vs. Retrospective Reserve Results

• Retrospective Example • i = 4.0%• Benefits and Premiums paid EOY• NP % = NPV(B&E)/NPV(GP) at 4.0%

Year B&E GP NP Reserve1 8,300 81,340 59,937 51,637 2 8,600 76,710 56,526 101,628 3 10,220 72,380 53,335 148,808 4 11,530 68,330 50,351 193,581 5 13,500 64,530 47,550 235,375 6 14,240 60,950 44,912 275,462 7 17,020 57,570 42,422 311,882 8 19,620 54,370 40,064 344,801 9 22,070 51,320 37,816 374,340

10 425,000 48,430 35,687 - Total (1-10) 550,100 635,930 468,599 PV 387,114 525,348 387,114 NP% 73.69%

PV (B&E) 394,299 PV (B&E) 407,310 PV (NP) 342,662 PV (NP) 258,501 Reserve 51,637 Reserve 148,808

Original

End of Yr 3End of Yr 1

Reserve Calculations – At & Post Transition


Transition Example 1: Update cash flow and discount rate assumptions EOY 3Claims increase = 10% and discount rate drops to 2.0%

Key: Updated NP % < 100%

Year B&E GP NP Reserve (@ 4.0%) Year B&E GP NP Reserve (@ 4.0%)1 8,300 81,340 65,544 57,244 1 8,300 81,340 44,912 51,637 2 8,600 76,710 61,813 112,746 2 8,600 76,710 42,422 101,628 3 10,220 72,380 58,324 165,360 3 10,220 72,380 40,064 148,808 4 12,683 68,330 55,060 214,351 4 12,683 68,330 58,284 200,362 5 14,850 64,530 51,998 260,073 5 14,850 64,530 55,043 248,569 6 15,664 60,950 49,113 303,926 6 15,664 60,950 51,989 294,836 7 18,722 57,570 46,390 343,750 7 18,722 57,570 49,106 337,014 8 21,582 54,370 43,811 379,730 8 21,582 54,370 46,376 375,289 9 24,277 51,320 41,354 411,995 9 24,277 51,320 43,775 409,798

10 467,500 48,430 39,025 - 10 467,500 48,430 41,310 - Total (1-10) 602,398 635,930 512,431 Total (4-10) 575,278 405,500 345,883 PV 423,324 525,348 423,324 PV 448,041 350,809 299,232 NP% 80.58% NP% 85.30%

End of Yr 3 (@ 4%) (@ 2%) Chg End of Yr 3 (@ 4%) (@ 2%) ChgPV (B&E) 448,041 506,856 58,815 PV (B&E) 448,041 506,856 58,815 PV (NP) 282,681 303,473 20,791 PV (NP) 299,232 321,241 22,009 Reserve 165,360 203,384 38,024 Reflected in OCI Reserve 148,808 185,615 36,807 Reflected in OCI

Orig 148,808 Orig 148,808 Updated 165,360 Updated 148,808 Cumulative 16,551 Reflected in income Cumulative - Reflected in income

End of Yr 3 (Retrospective): Update assumptions - unlocked NP% - No Pivot End of Yr 3 (Prospective): Update assumptions - unlocked NP% - Pivot

Liability Adj End of Yr 3 Liability Adj End of Yr 3



Observations:● Retrospective scenario increases because the NP % is reset from issue to reflect higher lifetime claims.● Modified Retrospective scenario reserve is not increased because the NP % is calculated to produce no reserve

impact at implementation; i.e., pivot occurs. Reserve changes will be higher going forward.Note: Presented results before the discount rate adjustment; i.e., @ 4%. Amounts rounded to nearest 100.




Key: Updated NP % > 100%


10 595,000 48,430 49,039 - 10 595,000 48,430 58,179 - Total (1-10) 759,292 635,930 643,926 Total (4-10) 732,172 405,500 487,126 PV 531,953 525,348 531,953 PV 570,234 350,809 421,425 NP% (unlocked) 101.26% NP% (unlocked) 120.13%


Orig 148,808 Orig 148,808 Updated 215,014 Updated 148,808 Cumulative 66,206 Reflected in income Cumulative - Reflected in income


End of Yr 3 (Retrospective): Update assumptions - unlocked NP% - No Pivot End of Yr 3 (Prospective): Update assumptions - unlocked NP% - Pivot



Observations:● Retrospective scenario increases because the NP % is reset from issue to reflect higher lifetime claims.● Modified Retro scenario does not increase because the NP % is calculated to produce no reserve impact at

implementation; i.e., pivot occurs. Reserve changes will be higher going forward.Note: Presented results before the discount rate adjustment; i.e., @ 4%. Amounts rounded to nearest 100.

Original 7. NP > 100% (Retro - unlocked) 8. NP > 100% (Prosp - unlocked)Changes Implemented - 66,200 -Original 148,800 148,800 148,800

148,800 148,800 148,800

-

66,200

-

-

50,000

100,000

150,000

200,000

250,000

Res

erve

Bal

ance

s

NP % > 100%: Changes at Transition - Duration 3

Original Changes Implemented




Key: Updated NP % Capped @ 100%


10 595,000 48,430 48,430 - 10 595,000 48,430 48,430 - Total 759,292 635,930 635,930 Total 732,172 405,500 405,500 PV 531,953 525,348 525,348 PV 570,234 350,809 350,809 NP% (Capped) 100.00% NP% (Capped) 100.00%


Orig 148,808 Orig 148,808 Updated 219,425 Updated 219,425 Cumulative 70,616 Reflected in income Cumulative 70,616 Reflected in income


End of Yr 3 (Retrospective): Update assumptions - unlocked NP% - No Pivot End of Yr 3 (Prospective): Update assumptions - unlocked NP% - No Pivot

NO

Piv

ot a

t Tr

ansi

tion



Observations:

● Retrospective scenario increases because the NP % is reset from issue to reflect higher lifetime claims and is capped @ 100%..

● Modified Retro scenario does increase because the NP % is capped @ 100%; therefore, no pivot occurs. Results are the same as for the Retrospective scenario.Note: Presented results before the discount rate adjustment; i.e., @ 4%. Amounts rounded to nearest 100.

Original 11. NP 100% Cap (Retro - unlocked) 12. NP 100% Cap (Prosp - unlocked)Changes Implemented - 70,600 70,600Original 148,800 148,800 148,800

148,800 148,800 148,800

-

70,600 70,600

-

50,000

100,000

150,000

200,000

250,000

Res

erve

Bal

ance

s

NP % Capped @ 100%: Changes at Transition - Duration 3

Original Changes Implemented



Observations:● For each scenario, the total benefits paid are the same; the patterns differ because of the different NP %s.

● Higher Y/Y increases for the “< 100%” prospective scenarios durations 4-10; i.e., no free lunch.

1 2 3 4 5 6 7 8 9 103. NP < 100% (Retro - unlocked) 5,600 5,500 5,500 4,200 3,900 3,700 3,500 3,000 2,800 (37,700)4. NP < 100% (Prosp - unlocked) - - - 6,800 6,400 6,100 5,800 5,400 5,000 (35,500)7. NP > 100% (Retro - unlocked) 22,500 22,000 21,700 16,900 15,700 15,000 13,700 12,200 11,000 (150,700)8. NP > 100% (Prosp - unlocked) - - - 27,100 25,700 24,700 23,000 21,500 19,900 (141,900)11. NP 100% Cap (Retro - unlocked) 28,300 21,300 21,000 16,200 15,000 14,400 13,100 11,600 10,300 (151,200)12. NP 100% Cap (Prosp - unlocked) - - 70,600 16,200 15,000 14,400 13,100 11,600 10,300 (151,200)

(200,000)

(150,000)

(100,000)

(50,000)

-

50,000

100,000

Bala

nce

Cha

nges

Policy Duration

Reserve Balance Changes vs. Original after Transition

3. NP < 100% (Retro - unlocked) 4. NP < 100% (Prosp - unlocked) 7. NP > 100% (Retro - unlocked)

8. NP > 100% (Prosp - unlocked) 11. NP 100% Cap (Retro - unlocked) 12. NP 100% Cap (Prosp - unlocked)

$16,600



Day 2 Example 1: Update cash flow and discount rate assumptions EOY 5Claims increase = 5% and discount rate increases to 3.0%

Keys: Updated NP % < 100% AND Retrospective Method


10 490,875 48,430 40,754 - 10 490,875 48,430 44,223 - Total (1-10) 629,785 635,930 535,143 Total (4-10) 602,665 405,500 370,279 PV (@ 4%) 442,087 525,348 442,087 PV (@ 4%) 469,146 350,809 320,338 NP% (unlocked) 84.15% NP% (unlocked) 91.31%



End of Yr 5 (Pro/Retro - Day 2): Update assumptions - Capped NP% - No Pivot

Liability Adj End of Yr 5

End of Yr 5 (Retro/Retro - Day 2): Update assumptions - Capped NP%

Liability Adj End of Yr 5

NO Pivot Day 2!

Pivo

t at

Tran

sitio

nN

o Pi

vot

Day

2



Observations:● Differences based on calculated results at transition.● The reserve increases at EOY 5 for both scenarios because the cash flow assumptions are updated since the

transition date, not the date of the 2nd update; i.e., no pivoting occurs.● Higher Y/Y reserve changes for the Modified Retro transition because the NP is higher (91.31% vs. 84.15%)Note: Presented results before the discount rate adjustment; i.e., @ 4%. Amounts rounded to nearest 100.

1 2 3 4 5 6 7 8 9 1013. Retro Transition 2,900 2,900 2,700 2,800 2,800 2,000 1,700 1,600 1,400 (20,800)14. Prospective Transition - - - 4,100 4,000 3,300 3,000 2,700 2,600 (19,700)

(25,000)

(20,000)

(15,000)

(10,000)

(5,000)

-

5,000

10,000

Bala

nce

Cha

nges

Policy Duration

Reserve Balance Changes after Transition for NP < 100%

13. Retro Transition 14. Prospective Transition

$8,100

$14,100




10 773,500 48,430 48,430 - 10 773,500 48,430 48,430 - Total (1-10) 968,431 635,930 635,930 Total (4-10) 941,311 405,500 405,500 PV (@ 4%) 675,234 525,348 525,348 PV (@ 4%) 731,405 350,809 350,809 NP% (unlocked) 100.00% NP% (unlocked) 100.00%



End of Yr 5 (Retro/Retro - Day 2): Update assumptions - unlocked NP% End of Yr 5 (Pro/Retro - Day 2): Update assumptions - unlocked NP% - No Pivot


Day 2 Example 2: Update cash flow and discount rate assumptions EOY 5

Claims increase = 30% and discount rate increases to 3.0%Keys: Updated NP % Capped @ 100% AND Retrospective Method

NO

Piv

ot a

t Tr

ansi

tion



Observations:● Differences based on calculated results at transition.● The reserve increases at EOY 5 for both scenarios because the cash flow assumptions are updated since the

transition date, not the date of the 2nd update; i.e., no pivoting occurs for the Prospective method.● Y/Y reserve changes the same for each method because the NPs are the same (100%).Note: Presented results before the discount rate adjustment; i.e., @ 4%. Amounts rounded to nearest 100.

1 2 3 4 5 6 7 8 9 1015. Retro Transition 149,000 6,000 6,200 6,400 6,800 1,000 (300) (1,200) (2,200) (171,700)16. Prospective Transition - - - 167,600 6,800 1,000 (300) (1,200) (2,200) (171,700)

(200,000)

(150,000)

(100,000)

(50,000)

-

50,000

100,000

150,000

200,000

Bala

nce

Cha

nges

Policy Duration

Reserve Balance Changes after Transition for NP Capped @ 100%

15. Retro Transition 16. Prospective Transition

$174,40

$174,400



LTC Example – Reserve Comparisons

Reserve projection for a single policy:• 25% Morbidity Change at 19th policy duration.

Note: All policy durations from issue impacted• Scenarios (Net Prem % as of unlocking date)

1. Unchanged (53.4%)2. Modified Retrospective - Net prem % locked (53.4%)3. Modified Retrospective - Net prem % unlocked (975.3%)4. Modified Retrospective - Net prem % unlocked/capped @100% (100.0%)5. Retrospective - Net prem % locked (53.4%)6. Retrospective - Net prem % unlocked (120.0%)7. Retrospective - Net prem % unlocked/capped @100% (100%)



1. Unchanged (53.4%)2. Modified Retrospective - Net prem % locked (53.4%) 3. Modified Retrospective - Net prem % unlocked (975.3%)4. Modified Retrospective - Net prem % unlocked/capped @100% (100.0%)5. Retrospective - Net prem % locked (53.4%)6. Retrospective - Net prem % unlocked (120.0%)7. Retrospective - Net prem % unlocked/capped @100% (100%)



Key Takeaway: Each method will have the same incurred claims; the I/S impact timing will differ based on the NP%.



Implementation & Perspectives


In this section we will focus on practical implications around data, assumptions, modeling and reporting for traditional products and outline immediate next steps companies can take to better prepare for the upcoming changes. Processes for UL type products will not change as dramatically.

Summary of how changes will impact companiesInsurance: Targeted improvements to the accounting for long-duration contracts

With the issuance of these targeted improvements, a number of processes for traditional (FAS 60) products will need to be updated and possibly redesignedThe changes extend beyond actuarial:— Where they do not already exist, best-estimate cash flow projection models will need to be developed for all FAS 60

products, including LTC and DI— The need to incorporate historical information could be more easily accomplished through a grouped reserve calculation,

rather than individual policy reserve calculations (e.g., GAAP factors)— Revamping the DAC process will require decisions related to data, amortization approach, and possibly contract grouping— Historical data, at the appropriate level of granularity, will need to be retained as it will be incorporated in determination of

net premium— Premium deficiency testing, loss recognition testing, and shadow DAC processes will no longer be required as part of the

reporting process— New approach to DAC calculation (constant-level basis) will need to be developed— New qualitative and quantitative disclosure requirements will involve updating the interim and annual financial statements


Data ImplicationsInsurance: Targeted improvements to the accounting for long-duration contracts

— Inventory data sources for policy information, expense and supplementary data

— Conduct current state assessment around data availability, accuracy and completeness. Consider whether current data solution provides a store which is historic, granular or flexible enough

— Identify desired future state around data elements, and data flow processes- New elements would include historical actuals and cohort indicators- New data process will also require a new control framework- Consider integration to/from the end to end process of data extraction

from source systems, actuarial calculations and postings in the ledgers— Conduct gap analysis around data requirements for targeted changes and

identify critical gaps— Identify business owners of systems and data, and define the requirements

around system and data governance

Activities Involved Parties

Scope & Plan — Valuation and financial reporting— Data and IT— Administration systems teams— Claims teams— Experience analysis team— Modeling team— Internal audit— Senior management

As the company goes through regulatory changes there is a big opportunity for IT and Finance functions to simplify and automate financial consolidation processes to derive greater process, headcount and IT maintenance efficiencies


Data Implications (continued)Insurance: Targeted improvements to the accounting for long-duration contracts


— Design a plan and roadmap to implement data changes— It is beneficial to design a data flow prototype to demonstrate desired future

state data processes on a smaller subset of data— Implement changes to data structures and processes— Conduct testing on data elements, user acceptance testing and parallel

testing on the new processes

Implement — Valuation and financial reporting— Data and IT— Administration systems teams— Claims teams— Experience analysis team— Modeling team— Internal audit— Senior management

— Embed newly designed data processes into production process— Ensure relevant transformations take place and data can be seamlessly fed

into actuarial models— Design and implement a control framework around new data flows— Document changes in data processes

Embed


Assumption ImplicationsInsurance: Targeted improvements to the accounting for long-duration contracts


— Identify all assumption types and formats required for U.S. GAAP calculations for each of your company’s products

— For each of the assumptions above, identify reasonable frequency for assumption updates— Consider designing a structured assumption repository that would automate and streamline

assumption update processes as these would need to be updated yearly on a catch-up basis— Develop an approach to updating market observable discount rate assumptions for your

specific products each reporting period

Scope & Plan — Valuation and financial reporting

— Data and IT

— Investment/asset team

— Experience Analysis team

— Assumption management

— Modeling team

— Internal audit

— Senior management— Design/leverage existing tools to perform experience study calculations

- These would need to be more robust and automated due to the increased demand on company-own experience and increased frequency of assumption updates

— Implement updates to the assumption methodology as required by the new guidance- Best-estimate assumptions without PADs

— Implement approach for updating market observable discount rate assumptions— Integrate increased assumption update activity into production calendar

Implement

— Automate assumption development and storage procedures to the extent possible— Ensure assumptions are developed and used in the models in a consistent and reasonable

manner— Design and implement a control framework around new assumptions related processes— Assumption inputs need to be clear to users and can be clearly traced back to the basis

documents— Document changes in the assumption processes

Embed

Close collaboration of actuarialteams with the Data Management and Experience Analysis teams will be required as company-own experience will need to be used for experience studies and frequent assumption updates


Modeling ImplicationsInsurance: Targeted improvements to the accounting for long-duration contracts


— Inventory all actuarial valuation models and DAC calculators— Understand current state of model processes and methodologies— Identify desired future state of model processes and methodologies

- New approach to assumption mapping- Cohort level calculations may be desired- Select driver to achieve constant level DAC amortization basis- Changes in modeling approach will be applied retrospectively

— Assess pros/cons and data needs of various transition options


— Data and IT


— Modeling team

— Internal audit

— Senior management

— Design a plan and roadmap to implement model changes- If current modeling system cannot handle targeted improvements requirements may need

to consider system conversion— Ensure that modelling decisions or assumptions are not buried in data processes— Update existing/build new models implementing required functionality — Conduct model testing, user acceptance testing and parallel testing on the new models and

processes

Implement

— Embed new/updated models into production processes— Automate modeling processes and update model-adjacent technology to integrate with the

modeling process— Design and implement a control framework around the new/updated models— Conduct dry-runs— Document model updates and testing of updates

Embed

Since some of the changes in modeling are to be applied retroactively from 2021, some insurers plan to implement the required changes in their models prior to the deadline to allow them carry out parallel runs and generating U.S. GAAP balances using the new rules


Reporting and Disclosure ImplicationsInsurance: Targeted improvements to the accounting for long-duration contracts


— Identify existing sources and/or identify the needs to develop additional sources for the enhanced disclosure elements- Future policy benefit reserves and DAC- Rollforwards of opening and closing balances- Information about significant inputs and judgement- Assumption information

— Carry out analysis of the new results so as to get a proper understanding of the drivers behind and behavior of the new reports

— Consider any impact on internal management reporting or KPIs, which has wider implications on remuneration etc.

— Any move to cohort level calculations from seriatim will drive change to processes in order to analyze at this level

— Design new analysis reports around the disclosure requirements, notably:- analysis of change;- reconciliation across metrics;- forecasting


— Data and IT

— Investment/asset team


— Modeling team

— Senior management

Business Intelligence (BI) platforms (e.g., QlikView, Tableau,Microsoft Power BI) have been identified as viable tools to create dynamic reporting and disclosure dashboards including the calculations of straight-line amortized DAC, assumption summaries and other disclosures— Develop a reporting package consolidating all the newly required disclosures and analysis

reports— Calibrate existing sources to output the required information— Develop a roadmap and action plan to develop sources for missing information— Execute action plan to develop sources for missing information— Consider consolidating disclosure requirements into a single data repository with historic

disclosures filed accordingly

Implement


Reporting and Disclosure Implications (continued)Insurance: Targeted improvements to the accounting for long-duration contracts


— Integrate the reporting and disclosure output structure into the production process

— Results defined in new ways will require additional analysis time for actuarial teams to gain comfort – more expertise will be required to solve the complex issues, and more reconciliation will be needed between different metrics

— Design and implement a control framework around updated reporting processes

— Automate model output and disclosure component generation— Document the reporting and disclosure processes

Embed — Valuation and financial reporting— Data and IT— Investment/asset team— Assumption management— Modeling team— Senior management

Sample Implementation PlanGAAP Targeted Improvements Implementation


Agenda 72

1

2

3

4

OBJECTIVES

SAMPLE TARGETED IMPROVEMENTS SOLUTION AND TIMELINE

PROJECT DISCUSSION

QUESTIONS

OBJECTIVES1


Meeting Objectives

When you have your initial meeting, here are the types of issues you should consider for the agenda:

• Understand the client’s GAAP TI objectives and planning to date• Discuss model vendor solution• Review release schedule for your software vendor• Determine potential next steps and road map• Sample deliverables

74

SAMPLE TARGETED IMPROVEMENTS SOLUTION AND TIMELINE2


Targeted Improvements (TI) will have a significant impact on actuarial reserving and reporting processes across long-duration products 76

Liability Model for Future Policy Benefits

Cashflow Assumptions: Updated to current estimate: unlocking with catch-up adjustments Discount Rate: Upper Medium Grade, two discount rates (locked in, current)Net Premium Ratio: Capped at 100%Products: FAS60 products, e.g, traditional life, health, life-contingent payout annuities


New Classification: Market Risk Benefits (MRBs), includes all types of GMXB benefits Methodology: All MRBs measured at fair valueOwn Credit Risk: Change in reserve due to change inown credit risk reported through other comprehensive incomeProducts: Variable annuities, fixed indexed annuities, fixed annuities

Deferred Acquisition Costs

Simplified Model: Amortization on a constant basis over the anticipated life of the contractOne-way write down: Adjust DAC balance actual terminations for the period in excess of expectedProducts: All long-duration products

Disclosure Requirements

Enhanced Reporting: Reserve and DAC rollforwards, details about assumption and changes to assumptionsProducts: All long-duration products


Updates to calculation engine and reporting software development to support the TI requirements include 77

Liability model for future policy benefits


Deferred Acquisition Costs

A new layer of software

Pairs cohort level history files and projection files to create a retrospective calculation at the cohort level

Stores net-to-gross ratios calculated at the cohort level and policy level present values to create policy level reserve for detailed analysis

Computes reserve balances at a locked-in discount rate as well as at a current discount rate in a single run

Multiple enhanced and detailed reports thatinclu

fasb long-duration targeted improvements (ldti) 2018 1114 weds - seac fasb... · —dac written off...

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