Suppose I had two endowment products one with profit and another without profit endowment. And the valuation is a "net premium valuation". And a discount rate of 2.5% pa for with profit and 4% pa for without profit. Zillmerisation is constant for both contracts. So for the "first year end" the reserves for the with profit endowment should be greater than the without profit? Should it always be greater (for net premium valuation)? Also for the without profit endowment can the first year end reserve be more than 2 times the net premium calculated? From the st2 notes we know that the reserves immediately after payment of the first premium should be equal to the net premium. So is a more than 2 times reserve possible? Also the reserve happens to be more than 2 times the "gross premium" of the contract. This also seems like a huge capital strain on the company. Also zillmerisation adjustments is supposed to increase the net premium because this will help us take some advantage of the initial expenses. So it is not possibe for the zillmer adjustment to reduce the net prenium as it would defeat the whole purpose. Correct? Appreciate any help i can get on this. Unfortunately I don't have access to qualified actuaries. Hence some questions may seem quite silly. Thanks a lot
I wonder whether you've been looking at an old exam question. Zillmerisation used to be part of the ST2 course, but was removed some years ago. Net premium valuations are only very briefly mentioned (in the current course) as being a type of passive valuation, but we used to cover net premiums in much more detail in the past. So I don't think there is anything here that you need to consider in the ST2 exam now. Best wishes Mark
