Hi,
I want to confirm the following-
In analysis of surplus (say surplus = assets- BEL over the year),
Change in economic assumptions (inflation and discount rate/investment return return)- it will affect both assets and BEL
Change in non economic assumptions (at year end only)- it will only affect BEL
Economic variance- it will affect only assets (as actual investment return can be higher or lower than expected)
Non economic variance- it will affect both assets and liabilities , except for expense variance which will affect only assets.
In analysis of EV (shareholder owned net assets + PVIF)
Change in economic assumptions - affects PVIF and net assets (both assets and BEL)
Change in non economic assumptions (year end)- affects net assets (due to change in BEL only) and PVIF
Economic variance- it will affect PVIF and Net assets (assets only)
Non economic variance- it will affect net assets (assets and BEL) and PVIF, expense variance will not affect BEL
Actual impact also depends on which products are in force-
For term product, lapse variance will only affect BEL and PVIF as there is no benefit outgo on lapse hence asset is not affected
For savings product, lapse variance will affect BEL, PVIF and assets as there is a surrender outgo for savings products.
Also, when considering the impact separately on PVIF and shareholder net assets- is there a need to breakdown net assets into free surplus +required capital less cost? Or we simply think of impact on assets and BEL ?
Thank you!
I want to confirm the following-
In analysis of surplus (say surplus = assets- BEL over the year),
Change in economic assumptions (inflation and discount rate/investment return return)- it will affect both assets and BEL
Change in non economic assumptions (at year end only)- it will only affect BEL
Economic variance- it will affect only assets (as actual investment return can be higher or lower than expected)
Non economic variance- it will affect both assets and liabilities , except for expense variance which will affect only assets.
In analysis of EV (shareholder owned net assets + PVIF)
Change in economic assumptions - affects PVIF and net assets (both assets and BEL)
Change in non economic assumptions (year end)- affects net assets (due to change in BEL only) and PVIF
Economic variance- it will affect PVIF and Net assets (assets only)
Non economic variance- it will affect net assets (assets and BEL) and PVIF, expense variance will not affect BEL
Actual impact also depends on which products are in force-
For term product, lapse variance will only affect BEL and PVIF as there is no benefit outgo on lapse hence asset is not affected
For savings product, lapse variance will affect BEL, PVIF and assets as there is a surrender outgo for savings products.
Also, when considering the impact separately on PVIF and shareholder net assets- is there a need to breakdown net assets into free surplus +required capital less cost? Or we simply think of impact on assets and BEL ?
Thank you!