Profit testing assumptions - Sub 302 Sept 2004

[rktc]

Part (ii) of Question 2, Subject 302 September 2004

I am slightly confused as to why both AcTed and the Examiners Report includes 'how to conduct experience investigations' in the solution.

My interpretation of the question was 'how the results from experience investigation can be used to determine the assumptions for profit testing?' (ie. having done all the experience investigations, we need to adapt it to be suitable for profitability testing purposes which includes adjusting experience for known changes, trends and also margins for adverse deviation if not included in the risk discount rate) rather than how to perform the experience investigation itself.

Have I missed out a keyword in the question, or is the question open to interpretation?

Thanks for your advice!

 

[Mike Lewry]

Part (ii) of Question 2, Subject 302 September 2004

I am slightly confused as to why both ActEd and the Examiners' Report include 'how to conduct experience investigations' in the solution.

I expect rktc has now sat ST2 and is therefore less likely to be interested in an answer to this post, but in case anyone else is interested...

To explain how the results from experience investigations can be used, you need to cover briefly what the results are. The solutions state the results briefly then explain how to go on from these to derive assumptions for the model.

Remember that ASET sometimes gives fuller explanations than required for a good pass, to aid with understanding. The most recent ASET papers make it clearer what should be in a good answer and what is extra background information.

I agree it's hard to know where getting the results stops and using the results begins and so hard to judge what the examiners will give marks for. A good approach is to start with what you feel is most relevant, making brief references to other points that could be made. Then go back and expand on these if you have sufficient time later on.