Hi, really sorry to ask a follow-up question on this. I don't think I still fully understand this concept. Is there any chance you could provide a simple numerical example please (for example in mortality profit)?
My guess would be, if finding the analysis of surplus, we can evaluate (say) 2019 to 2020.
- At end of 2019, the BEL was calculated to expect 4 deaths which is a BEL of 200 for the year of 2020.
- Then we need to do a restatement of this for end of 2020.
- Roll this 200 forward allowing for the risk free discount rate, matching/volatility adjustment.
- This then becomes X = 205 => this is the 2019 BEL reinstated for 2020.
- Then looking at actual experience, we see that at end of 2020 there was only 1 death, so the actual liability was (say) Y = 50.
- The surplus arising from BEL in 2020 for mortality is X - Y = 205 - 50 = 155.
Am I on the right lines or am I completely lost?
Last edited: Mar 14, 2022