For annuity business, how does strenghtening mortality basis result in an increase in PVIF? Would we not be paying out more claims?
It depends which basis you are talking about. Do you mean the valuation basis or the EV projection basis. If we strengthen the valuation basis then the reserves go up. That means that the net assets go down. But the PVIF will go up as the release of reserves in the future will be bigger (assuming that the projection basis is unchanged). If we strengthen the EV projection basis then the reserves are unchanged. The net assets stay the same. But the PVIF comes down as we expect more claims. Best wishes Mark
