soa 2014 vbt/2017 cso impact study soa 2014 vbt/2017 cso impact study design results karen rudolph...

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SOA 2014 VBT/2017 CSO Impact Study Design

Results

Karen Rudolph

Milliman

June 4, 2015 LATF presentation

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SOA Research Report

The SOA engaged Milliman to develop an analysis using data submitted

by participating companies evaluating the impact of valuation mortality

tables proposed for use in the life insurance industry. The tables under

study include beta versions of the 2014 Valuation Basic Table (2014

VBT), the 2014 Relative Risk Tables and corresponding beta version of

the 2017 Commissioners Standard Ordinary (2017 CSO) table. The

2017 CSO was developed by improving the 2014 VBT to 2017 and

adding margin appropriate for valuation purposes. The version of the

2017 CSO without margins was also made available for this analysis. It

is important to remember these tables are beta versions. Final version

may be different from tables testing in this analysis.

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June 2, 2015

Objectives

Compare/contrast proposed (new) tables with existing tables

by evaluating reserves

– Magnitudes

– Patterns

– Relationships

Evaluate

– Margins (CSO vs. unloaded CSO; PBR margins)

– Risk class splits

– S&U versus Ultimate

– Table aggregation

– Compare and calibrate NPR with Deterministic Reserve

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June 2, 2015

Products

Whole Life

20 Year Level Premium Term Insurance

ULSG

Applies to all products:

– No reinsurance

– Single life, not joint

– If participating, assume 100% cash

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Participation – Tabular Data

June 2, 2015

8 Companies (Term)

– 6: Tabular on 5-class structure



4 Companies (WL)




1 Company (ULSG)




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June 2, 2015

Tables Gender Underwriting ANB/ALB = Total

2014 Valuation Basic Tables (VBT) 1 Male

1 Female

2 Total

1 non-tobacco

1 tobacco

1 combined

3 Total

1 ANB

1 ALB

2 Total

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2014 VBT RR Tables 1 Male

1 Female

2 Total

10 non-tobacco

4 tobacco

14 Total

1 ANB

1 ALB

2 Total

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2017 CSO Tables 1 Male

1 Female

2 Total

1 non-tobacco

1 tobacco

1 combined

3 Total

1 ANB

1 ALB

2 Total

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2017 CSO Preferred Structure Tables 1 Male

1 Female

2 Total

3 non-tobacco

2 tobacco

5 Total

1 ANB

1 ALB

2 Total

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2017 Unloaded CSO Tables 1 Male

1 Female

2 Total

1 non-tobacco

1 tobacco

1 combined

3 Total

1 ANB

1 ALB

2 Total

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2017 Unloaded CSO Preferred

Structure Tables

1 Male

1 Female

2 Total

3 non-tobacco

2 tobacco

5 Total

1 ANB

1 ALB

2 Total

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Grand Total 132

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June 2, 2015

Data Requested

TABULAR

Valuation net premiums and Terminal Reserves

25-75 x 10 Male and Female (60/65 for Term)

Methods: Term, ULSG: VM20 NPR; WL, UL: current CRVM

All durations

Over as many tables as possible

Auxiliary Information: NF calculations on a 30 Year LPT to 95 product

AGGREGATE

NPR or current CRVM depending on product

VM-20 Deterministic Reserve

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June 2, 2015

Assembling the Data

Industry Model Office Definition

Based on LIMRA industry insurance amount data

Specific by product type

– Percentage weightings by Issue Age; Risk Class; Gender

– By Risk Class for 5-Class, 2-Class and Unismoke

Gender WL Term ULSG

Male 42.7% 55.8% 46.8%

Female 57.3% 44.2% 53.2%

NonTobacco 90% 95.6% 95.9%

Tobacco 10% 4.4% 4.1%

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Assembling the Data

Tabular data converted into Mean Reserve

Tabular data is aggregated using the model office definition

– Aggregation categories: Risk Class, Gender, Issue Age, Overall

Aggregated results are collected up by product type for any given

table structure (Example: 2017 CSO 5-Class S&U)

Each company’s submission is weighted equally – straight average

Ratios are taken

– 2017 CSO / 2001 CSO

– 2017 CSO S&U / 2017 CSO Ultimate

– 2017 CSO Margin = 2017 CSO – 2017 CSO without margin

June 2, 2015

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Impact Study Report

June 2, 2015

Overall Effect of 2017 CSO

– Whole Life Tables 1A (5-class), 1B (2-class), 1C (1-class)

– Term Tables 1A (5-class), 1B (2-class), 1C (1-class), 1D (5-class S&U)

– ULSG Tables 1A (5-class), 1B (2-class), 1C (1-class)

Aggregation Analysis

– Demonstration of weighting reserves from more granular classes and comparing to less granular class [Table 2 ]

Select Period Analysis

– By policy year, ratios of terminal reserves based on Ultimate to terminal reserves based on S&U, over select period durations [Table 3]

Loading Analysis

– Loading inherent in 2017 CSO versus loading inherent in 2001 CSO [Table 4]

Auxiliary Items

– CV testing on 30 year term plan, if anyone did this

VM20 Analysis

– Company level comparison of progression of Forecast DR and NPR

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Table 1 Series - Overall Impact

Presented here are portions of the larger report

• WL

• ULSG

• Term

June 2, 2015

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2017 CSO Mean Reserve as percent of 2001 CSO Mean Reserve

Overall

t= 5 t = 10 t = 15 t = 20 t = 30 t = 40 t = 50

5-Class Ultimate 92% 93% 94% 95% 97% 98% 99%

2-Class Ultimate 90% 92% 93% 94% 96% 98% 99%

1-Class Ultimate 94% 95% 96% 97% 98% 99% 100%

WHOLE LIFE PRODUCT

Comparison of CRVM Mean Reserves

2017 to 2001 CSO Ultimate

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ULSG PRODUCT

Comparison of NPR Mean Reserves

2017 to 2001 CSO


Overall

t= 5 t = 10 t = 15 t = 20 t = 30 t = 40 t = 50

5-Class Ultimate 92% 90% 91% 91% 93% 94% 95%

2-Class Ultimate 89% 86% 87% 88% 90% 92% 92%

1-Class Ultimate 95% 93% 93% 94% 95% 97% 98%

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20-YEAR TERM PRODUCT

Comparison of NPR Mean Reserves

2017 to 2001 CSO


Overall

t= 5 t = 10 t = 15 t = 20

5-Class Ultimate 62% 60% 62% 64%



5-Class S&U 67% 67% 69% 64%

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Table 1A

Comparison of VM-20 Net Premium Mean Reserves

2017 CSO Ultimate Mean Reserve as percent of 2001 CSO Ultimate Mean Reserve

Preferred Structure Table (5-class)

Average of Results from All Companies (5*)

20 Year Term Product

t= 5 t = 10 t = 15 t = 20

Overall 62% 60% 62% 64%

Gender

Male 61% 60% 61% 64%

Female 62% 62% 62% 64%

Risk Class

Super Preferred NS 64% 61% 63% 68%

Preferred NS 63% 62% 63% 67%

Residual NS 54% 53% 54% 55%

Preferred S 95% 93% 94% 89%

Residual S 82% 80% 80% 73%

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Table 4 Series - Margin Analysis

Presented here are portions of the larger report

• WL – Overall for 5-Class

• WL – By Risk Class

• Term – Overall for 5-Class S&U

• Term – By Risk Class

June 2, 2015

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Table 4

Comparison of CRVM Mean Reserves With and Without Margin

Average of Results from All Companies (2)*

Whole Life Product

5-Class Ultimate

t= 5 t = 10 t = 15 t=20 t=30 t=40 t=50

Reserve based on 2017 CSO / Reserve based on 2017 CSO Without Margin

Overall 105% 105% 104% 104% 103% 102% 102%

Reserve based on 2001 CSO / Reserve based on 2001 VBT

Overall 104% 103% 103% 103% 102% 101% 101%

Difference (2017 - 2001)

Overall 2% 2% 1% 1% 1% 1% 1%

Difference in Dollar Amount

Overall 0.72 1.80 2.78 3.61 4.89 5.45 5.24

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Table 4A

Comparison of CRVM Mean Reserves With and Without Margin

Average of Results from All Companies

Whole Life Product

5-Class Ultimate by Risk Class

t= 5 t = 10 t = 15 t=20 t=30 t=40 t=50


Super Preferred NS 105% 105% 104% 104% 103% 102% 102%

Preferred NS 105% 105% 104% 104% 103% 102% 102%

Residual NS 105% 105% 104% 104% 103% 102% 102%

Preferred S 106% 105% 105% 104% 103% 102% 102%

Residual S 106% 106% 105% 104% 103% 102% 102%



Preferred NS 104% 103% 103% 103% 102% 101% 101%

Residual NS 106% 105% 104% 103% 102% 101% 101%

Preferred S 103% 103% 103% 102% 102% 101% 101%

Residual S 103% 103% 103% 102% 102% 101% 101%



Preferred NS 1% 1% 1% 1% 1% 1% 1%

Residual NS 0% 0% 0% 1% 1% 1% 1%

Preferred S 3% 2% 2% 2% 1% 1% 1%

Residual S 3% 3% 2% 2% 2% 1% 1%


Super Preferred NS 0.44 1.26 2.07 2.79 4.04 4.81 4.95

Preferred NS 0.58 1.53 2.43 3.21 4.48 5.14 5.10

Residual NS 0.70 1.77 2.75 3.60 4.93 5.51 5.29

Preferred S 1.75 3.65 5.21 6.33 7.51 7.25 6.05

Residual S 1.91 3.94 5.57 6.72 7.87 7.47 6.09

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Table 4

Comparison of VM-20 Net Premium Mean Reserves on With and Without Margin



5-Class Select & Ultimate (5)

t= 5 t = 10 t = 15 t=20


Overall 123% 121% 121% 120%


Overall 111% 112% 113% 118%


Overall 12% 9% 8% 2%


Overall 0.12 0.11 0.10 (0.18)

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Table 4A

Comparison of VM-20 Net Premium Mean Reserves With and Without Margin



5-Class Select & Ultimate by Risk Class

t= 5 t = 10 t = 15 t=20



Preferred NS 124% 122% 121% 120%

Residual NS 124% 121% 121% 120%

Preferred S 121% 119% 119% 122%

Residual S 121% 119% 119% 122%



Preferred NS 113% 114% 114% 120%

Residual NS 128% 120% 117% 129%

Preferred S 107% 108% 109% 113%

Residual S 105% 106% 107% 110%


Super Preferred NS 4% 3% 3% (6%)

Preferred NS 11% 8% 7% 0%

Residual NS (4%) 2% 4% (9%)

Preferred S 13% 11% 10% 9%

Residual S 16% 13% 12% 12%


Super Preferred NS (0.02) (0.16) (0.14) (0.20)

Preferred NS 0.09 0.09 0.07 (0.18)

Residual NS 0.17 0.21 0.14 (0.23)

Preferred S 1.14 2.14 2.28 0.28

Residual S 1.39 2.51 2.62 0.28

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