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2007 General Meeting Assemblée générale 2007 Montréal, Québec

Canadian Institute of Actuaries. L’Institut canadien des actuaires. 2007 General Meeting Assemblée générale 2007 Montréal, Québec. T100 and UL LCOI Lapse Studies Results. Lloyd Milani Nikolai Serykh November 30, 2007. Agenda. UL LCOI Industry Pricing 2006 Munich Re Survey

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2007 General Meeting Assemblée générale 2007 Montréal, Québec

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  1. Canadian Institute of Actuaries L’Institut canadien des actuaires 2007 General Meeting Assemblée générale 2007 Montréal, Québec

  2. T100 and UL LCOI Lapse Studies Results Lloyd Milani Nikolai Serykh November 30, 2007

  3. Agenda • UL LCOI Industry Pricing • 2006 Munich Re Survey • Lapse Studies Highlights • Scope and Method • Results

  4. UL LCOI Industry Pricing • 2006 Munich Re Survey • Sales and Funding • Lapse and Interest • Profit

  5. UL Level COI Sales

  6. UL Level COI Funding Level

  7. UL LCOI Pricing Lapses

  8. UL LCOI Lapse and Interest

  9. UL LCOI - Profitability

  10. T100 and UL LCOI Lapse Study 2007 • Request for data - Beginning 2005 • Enhanced Fields • Cash Value • NAAR Pattern • UL Deposit • Results Database

  11. Working Group • Nikolai Serykh • Elena Stoyanova

  12. Individual Life Subcommittee of the Research Committee • Lloyd Milani, Chairperson • Stephen Beal • Marc-Andre Belzil • William Brath • Emile Elefteriadis • Beth Fitzmaurice • Marc Tardif

  13. Agenda • UL LCOI Industry Pricing • 2006 Munich Re Survey • Lapse Studies Highlights • Scope and Method • Results

  14. Participating Companies • Industrial Alliance • Manulife Financial • Standard Life • Sun Life • Transamerica Life • Wawanesa • AIG • Canada Life • Co-operators Life • Desjardins • Empire Life Top 5 companies contribution to total policy exposure: 97% for T100 86% for UL LCOI

  15. Highlights – T100 Study • 1999-2004 Period • 92,587 lapses • 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 • 204.5% of exposure by policy • 139.0% of exposure by face amount

  16. Highlights – UL LCOI Study • 2002-2004 Period • 103,049 lapses • 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 • 167.0% of exposure by policy • 149.0% of exposure by face amount

  17. Method • Calendar year method • Exposure period as provided by company without modification • Following Status codes included • Active • Death • Lapsed and Surrendered

  18. Scope • Results by Number and by Face Amount • Durations 1-25 for T100 and 1-15 for UL • Total • Calendar Year • Sex and Joint • Smoking Status • Policy Size • Issue Age • Premium Frequency • Cash Value Availability (T100 only)

  19. T100 Lapse Study Results • Total • Calendar Year • Sex and Joint • Smoking Status • Policy Size • Issue Age • Premium Frequency • Cash Value Availability • Comparison to • 1999 Term-to-100 Lapse Study

  20. Term-to-100 Study

  21. T100 Study by Calendar Year

  22. T100 Study by Sex and Joint Status

  23. T100 Study by Smoking Status

  24. T100 Study by Policy Size

  25. T100 Study by Issue Age

  26. T100 Study by Premium Frequency

  27. Term-to-100 Studyby Cash Value Availability (1)

  28. Term-to-100 Studyby Cash Value Availability (2)

  29. Term-to-100 Study1999 vs 2007 • Composite Rates at Durations 1-15 • 1999 vs 2007 without Cash Value

  30. T100 Study – 1999 vs 2007

  31. T100 Study 1999 vs 2007 without Cash Value

  32. UL LCOI Lapse Study Results • Total • Policy Size • Comparison to • 2003 UL LCOI Lapse Study • 2007 Term-to-100 Lapse Study • Munich Re Pricing Survey

  33. UL LCOI Lapse Study

  34. UL LCOI Lapse StudyPolicy Size

  35. UL LCOI Study – 2003 vs 2007 • Overall • Differences

  36. UL LCOI – 2003 vs 2007

  37. UL LCOI Study – 2003 vs 2007Differences • Different Study Periods: • 1997-2001 vs 2002-2004 • Shift in Participants Contribution • Change in Sample Demographic: • Male = -0.8% Female = +5.6% • Joint 1st to Die = -1.2% • Joint 2nd to Die = -3.6%

  38. UL LCOI vs Term-to-100 • Composite Rates at Durations 1-15 • Non-Smoker, Single, 100K+ Band, Monthly Premium Mode

  39. UL LCOI vs Term-to-100

  40. UL LCOI vs Term-to-100NS, Single, 100K+, Monthly Mode

  41. Munich Re Pricing Survey • 2002 Assumptions vs 1997-2001 Experience • 2006 Assumptions vs 2002-2004 Experience

  42. 2003 UL vs MRe Survey 2002Issue Age 25-35

  43. 2007 UL vs MRe Survey 2006Issue Age 25-34 (1)

  44. 2007 UL vs MRe Survey 2006Issue Age 25-34 (2)

  45. Conclusion • 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

  46. Limitations • Not every company was able to contribute each experience year • Basic Policies only • Limited Amount of Exposure • T100 Data • Date of Cash Value on set • Premium Cease Date • UL YRT COI changes to Level COI • Partial Lapses • Increasing Face Amount

  47. Questions

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