i 3.

05% [2] The investor buys the bond at a pr

Coupon 3.75% Income tax 22% $103.50 per $100 nominal, theref
Redemption 103.50% Capital Gains Tax 27% So under the worst case scenario
possible time ie after 20 years

[1] [1] [2] [1] [1] [1] [4]

Discount Redemption Income Capital
Time Outgo factor Coupon payment tax Gains Tax Total PV
0 100 1 0 0 -100
0.5 0.985098 1.875 0.4125 0 1.443745
1 0.970418 1.875 0.4125 0 1.42223
1.5 0.955957 1.875 0.4125 0 1.401036
2 0.941711 1.875 0.4125 0 1.380157
2.5 0.927677 1.875 0.4125 0 1.35959
3 0.913853 1.875 0.4125 0 1.339329
3.5 0.900235 1.875 0.4125 0 1.31937
4 0.886819 1.875 0.4125 0 1.299709
4.5 0.873604 1.875 0.4125 0 1.280341
5 0.860585 1.875 0.4125 0 1.261261
5.5 0.847761 1.875 0.4125 0 1.242465
6 0.835127 1.875 0.4125 0 1.22395
6.5 0.822682 1.875 0.4125 0 1.20571
7 0.810422 1.875 0.4125 0 1.187743
7.5 0.798345 1.875 0.4125 0 1.170043
8 0.786448 1.875 0.4125 0 1.152607
8.5 0.774728 1.875 0.4125 0 1.135431
9 0.763183 1.875 0.4125 0 1.11851
9.5 0.75181 1.875 0.4125 0 1.101842
10 0.740607 1.875 0.4125 0 1.085422
10.5 0.72957 1.875 0.4125 0 1.069247
11 0.718698 1.875 0.4125 0 1.053313
11.5 0.707988 1.875 0.4125 0 1.037617
12 0.697437 1.875 0.4125 0 1.022154
12.5 0.687044 1.875 0.4125 0 1.006922
13 0.676806 1.875 0.4125 0 0.991916
13.5 0.66672 1.875 0.4125 0 0.977135
14 0.656784 1.875 0.4125 0 0.962573
14.5 0.646997 1.875 0.4125 0 0.948229
15 0.637355 1.875 0.4125 0 0.934098
15.5 0.627857 1.875 0.4125 0 0.920178
16 0.618501 1.875 0.4125 0 0.906466
16.5 0.609284 1.875 0.4125 0 0.892957
17 0.600204 1.875 0.4125 0 0.87965
17.5 0.59126 1.875 0.4125 0 0.866542
18 0.582449 1.875 0.4125 0 0.853628
18.5 0.573769 1.875 0.4125 0 0.840908
19 0.565219 1.875 0.4125 0 0.828376
19.5 0.556796 1.875 0.4125 0 0.816032
20 0.548498 1.875 103.5 0.4125 0.945 57.06157

Total PV 1.666E-06 [1]

e investor buys the bond at a price of $100 per $100 nominal and the bond is to be redeemed at
03.50 per $100 nominal, therefore we know there will be a capital gain at redemption
under the worst case scenario a minimum yield is achieved when bond is redeemed at latest
ssible time ie after 20 years [2]
Coupon 3.75% Income tax 22% The investor buys the bond at a pr
Redemption 103.50% Capital Gains Tax 27% $103.50 per $100 nominal, therefo
So under the worst case scenario a
possible time ie after 20 years

Alternative 1 - IRR

i(12)/12 0.25% [2]

i 3.05% [2]

[1] [2] [1] [2] [2] [2]

Redemption Capital Total

Time Outgo Coupon payment Income tax Gains Tax Cashflow
- 100 -100
0.083 0
0.167 0
0.250 0 0
0.333 0 0
0.417 0 0 0
0.500 1.875 0 0 1.875
0.583 0 0 0
0.667 0 0 0
0.750 0.4125 0 -0.4125
0.833 0 0 0
0.917 0 0 0
1.000 1.875 0 0 1.875
1.083 0 0 0
1.167 0 0 0
1.250 0.4125 0 -0.4125
1.333 0 0 0
1.417 0 0 0
1.500 1.875 0 0 1.875
1.583 0 0 0
1.667 0 0 0
1.750 0.4125 0 -0.4125
1.833 0 0 0
1.917 0 0 0
2.000 1.875 0 0 1.875
2.083 0 0 0
2.167 0 0 0
2.250 0.4125 0 -0.4125
2.333 0 0 0
2.417 0 0 0
2.500 1.875 0 0 1.875
2.583 0 0 0
2.667 0 0 0
2.750 0.4125 0 -0.4125
2.833 0 0 0
2.917 0 0 0
3.000 1.875 0 0 1.875
3.083 0 0 0
3.167 0 0 0
3.250 0.4125 0 -0.4125
3.333 0 0 0
3.417 0 0 0
3.500 1.875 0 0 1.875
3.583 0 0 0
3.667 0 0 0
3.750 0.4125 0 -0.4125
3.833 0 0 0
3.917 0 0 0
4.000 1.875 0 0 1.875
4.083 0 0 0
4.167 0 0 0
4.250 0.4125 0 -0.4125
4.333 0 0 0
4.417 0 0 0
4.500 1.875 0 0 1.875
4.583 0 0 0
4.667 0 0 0
4.750 0.4125 0 -0.4125
4.833 0 0 0
4.917 0 0 0
5.000 1.875 0 0 1.875
5.083 0 0 0
5.167 0 0 0
5.250 0.4125 0 -0.4125
5.333 0 0 0
5.417 0 0 0
5.500 1.875 0 0 1.875
5.583 0 0 0
5.667 0 0 0
5.750 0.4125 0 -0.4125
5.833 0 0 0
5.917 0 0 0
6.000 1.875 0 0 1.875
6.083 0 0 0
6.167 0 0 0
6.250 0.4125 0 -0.4125
6.333 0 0 0
6.417 0 0 0
6.500 1.875 0 0 1.875
6.583 0 0 0
 6.667 0 0 0
6.750 0.4125 0 -0.4125
6.833 0 0 0
6.917 0 0 0
7.000 1.875 0 0 1.875
7.083 0 0 0
7.167 0 0 0
7.250 0.4125 0 -0.4125
7.333 0 0 0
7.417 0 0 0
7.500 1.875 0 0 1.875
7.583 0 0 0
7.667 0 0 0
7.750 0.4125 0 -0.4125
7.833 0 0 0
7.917 0 0 0
8.000 1.875 0 0 1.875
8.083 0 0 0
8.167 0 0 0
8.250 0.4125 0 -0.4125
8.333 0 0 0
8.417 0 0 0
8.500 1.875 0 0 1.875
8.583 0 0 0
8.667 0 0 0
8.750 0.4125 0 -0.4125
8.833 0 0 0
8.917 0 0 0
9.000 1.875 0 0 1.875
9.083 0 0 0
9.167 0 0 0
9.250 0.4125 0 -0.4125
9.333 0 0 0
9.417 0 0 0
9.500 1.875 0 0 1.875
9.583 0 0 0
9.667 0 0 0
9.750 0.4125 0 -0.4125
9.833 0 0 0
9.917 0 0 0
10.000 1.875 0 0 1.875
10.083 0 0 0
10.167 0 0 0
10.250 0.4125 0 -0.4125
10.333 0 0 0
10.417 0 0 0
10.500 1.875 0 0 1.875
10.583 0 0 0
10.667 0 0 0
10.750 0.4125 0 -0.4125
10.833 0 0 0
10.917 0 0 0
11.000 1.875 0 0 1.875
11.083 0 0 0
11.167 0 0 0
11.250 0.4125 0 -0.4125
11.333 0 0 0
11.417 0 0 0
11.500 1.875 0 0 1.875
11.583 0 0 0
11.667 0 0 0
11.750 0.4125 0 -0.4125
11.833 0 0 0
11.917 0 0 0
12.000 1.875 0 0 1.875
12.083 0 0 0
12.167 0 0 0
12.250 0.4125 0 -0.4125
12.333 0 0 0
12.417 0 0 0
12.500 1.875 0 0 1.875
12.583 0 0 0
12.667 0 0 0
12.750 0.4125 0 -0.4125
12.833 0 0 0
12.917 0 0 0
13.000 1.875 0 0 1.875
13.083 0 0 0
13.167 0 0 0
13.250 0.4125 0 -0.4125
13.333 0 0 0
13.417 0 0 0
13.500 1.875 0 0 1.875
13.583 0 0 0
13.667 0 0 0
13.750 0.4125 0 -0.4125
13.833 0 0 0
13.917 0 0 0
14.000 1.875 0 0 1.875
14.083 0 0 0
14.167 0 0 0
14.250 0.4125 0 -0.4125
14.333 0 0 0
14.417 0 0 0
14.500 1.875 0 0 1.875
14.583 0 0 0
14.667 0 0 0
14.750 0.4125 0 -0.4125
14.833 0 0 0
14.917 0 0 0
15.000 1.875 0 0 1.875
15.083 0 0 0
15.167 0 0 0
15.250 0.4125 0 -0.4125
15.333 0 0 0
15.417 0 0 0
15.500 1.875 0 0 1.875
15.583 0 0 0
15.667 0 0 0
15.750 0.4125 0 -0.4125
15.833 0 0 0
15.917 0 0 0
16.000 1.875 0 0 1.875
16.083 0 0 0
16.167 0 0 0
16.250 0.4125 0 -0.4125
16.333 0 0 0
16.417 0 0 0
16.500 1.875 0 0 1.875
16.583 0 0 0
16.667 0 0 0
16.750 0.4125 0 -0.4125
16.833 0 0 0
16.917 0 0 0
17.000 1.875 0 0 1.875
17.083 0 0 0
17.167 0 0 0
17.250 0.4125 0 -0.4125
17.333 0 0 0
17.417 0 0 0
17.500 1.875 0 0 1.875
17.583 0 0 0
17.667 0 0 0
17.750 0.4125 0 -0.4125
17.833 0 0 0
17.917 0 0 0
18.000 1.875 0 0 1.875
18.083 0 0 0
18.167 0 0 0
18.250 0.4125 0 -0.4125
18.333 0 0 0
18.417 0 0 0
18.500 1.875 0 0 1.875
18.583 0 0 0
18.667 0 0 0
18.750 0.4125 0 -0.4125
18.833 0 0 0
18.917 0 0 0
19.000 1.875 0 0 1.875
19.083 0 0 0
19.167 0 0 0
19.250 0.4125 0 -0.4125
19.333 0 0 0
19.417 0 0 0
19.500 1.875 0 0 1.875
19.583 0 0 0
19.667 0 0 0
19.750 0.4125 0 -0.4125
19.833 0 0 0
19.917 0 0 0
20.000 1.875 103.50 0 0 105.375
20.083 0 0 0
20.167 0 0 0
20.250 0.4125 0 -0.4125
20.333 0 0 0
20.417 0 0.945 -0.945
The investor buys the bond at a price of $100 per $100 nominal and the bond is to be redeemed at
$103.50 per $100 nominal, therefore we know there will be a capital gain at redemption
So under the worst case scenario a minimum yield is achieved when bond is redeemed at latest
possible time ie after 20 years [2]

Alternative 2 - XIRR

i 3.04% [2]
This method gives a slightly different solution as the XIRR function takes account of actual month lengths

[2] [1] [2] [1] [2] [2] [2]

Redemption Income Capital Total

Date Outgo Coupon payment tax Gains Tax Cashflow
9/1/2023 100 -100
3/31/2024 1.875 0 1.875
6/30/2024 0.4125 -0.4125
9/30/2024 1.875 0 0 1.875
12/31/2024 0.4125 0 -0.4125
3/31/2025 1.875 0 0 1.875
6/30/2025 0.4125 0 -0.4125
9/30/2025 1.875 0 0 1.875
12/31/2025 0.4125 0 -0.4125
3/31/2026 1.875 0 0 1.875
6/30/2026 0.4125 0 -0.4125
9/30/2026 1.875 0 0 1.875
12/31/2026 0.4125 0 -0.4125
3/31/2027 1.875 0 0 1.875
6/30/2027 0.4125 0 -0.4125
9/30/2027 1.875 0 0 1.875
12/31/2027 0.4125 0 -0.4125
3/31/2028 1.875 0 0 1.875
6/30/2028 0.4125 0 -0.4125
9/30/2028 1.875 0 0 1.875
12/31/2028 0.4125 0 -0.4125
3/31/2029 1.875 0 0 1.875
6/30/2029 0.4125 0 -0.4125
9/30/2029 1.875 0 0 1.875
12/31/2029 0.4125 0 -0.4125
3/31/2030 1.875 0 0 1.875
6/30/2030 0.4125 0 -0.4125
9/30/2030 1.875 0 0 1.875
12/31/2030 0.4125 0 -0.4125
3/31/2031 1.875 0 0 1.875
6/30/2031 0.4125 0 -0.4125
9/30/2031 1.875 0 0 1.875
12/31/2031 0.4125 0 -0.4125
3/31/2032 1.875 0 0 1.875
6/30/2032 0.4125 0 -0.4125
9/30/2032 1.875 0 0 1.875
12/31/2032 0.4125 0 -0.4125
3/31/2033 1.875 0 0 1.875
6/30/2033 0.4125 0 -0.4125
9/30/2033 1.875 0 0 1.875
12/31/2033 0.4125 0 -0.4125
3/31/2034 1.875 0 0 1.875
6/30/2034 0.4125 0 -0.4125
9/30/2034 1.875 0 0 1.875
12/31/2034 0.4125 0 -0.4125
3/31/2035 1.875 0 0 1.875
6/30/2035 0.4125 0 -0.4125
9/30/2035 1.875 0 0 1.875
12/31/2035 0.4125 0 -0.4125
3/31/2036 1.875 0 0 1.875
6/30/2036 0.4125 0 -0.4125
9/30/2036 1.875 0 0 1.875
12/31/2036 0.4125 0 -0.4125
3/31/2037 1.875 0 0 1.875
6/30/2037 0.4125 0 -0.4125
9/30/2037 1.875 0 0 1.875
12/31/2037 0.4125 0 -0.4125
3/31/2038 1.875 0 0 1.875
6/30/2038 0.4125 0 -0.4125
9/30/2038 1.875 0 0 1.875
12/31/2038 0.4125 0 -0.4125
3/31/2039 1.875 0 0 1.875
6/30/2039 0.4125 0 -0.4125
9/30/2039 1.875 0 0 1.875
12/31/2039 0.4125 0 -0.4125
3/31/2040 1.875 0 0 1.875
6/30/2040 0.4125 0 -0.4125
9/30/2040 1.875 0 0 1.875
12/31/2040 0.4125 0 -0.4125
3/31/2041 1.875 0 0 1.875
6/30/2041 0.4125 0 -0.4125
9/30/2041 1.875 0 0 1.875
12/31/2041 0.4125 0 -0.4125
3/31/2042 1.875 0 0 1.875
6/30/2042 0.4125 0 -0.4125
9/30/2042 1.875 0 0 1.875
12/31/2042 0.4125 0 -0.4125
3/31/2043 1.875 0 0 1.875
6/30/2043 0.4125 0 -0.4125
8/30/2043 1.875 103.50 0 0 105.375
12/31/2043 0.4125 0 -0.4125
2/29/2044 0.945 -0.945
onth lengths
Minimum yield achieved
3.05%
 t r ft,r
0 1 2.50%
1 1 2.55%
2 1 2.65%
3 1 2.78%
4 1 3.00%
5 1 3.20%
6 1 3.40%
7 1 3.60%
8 1 3.80%
9 1 4.00%
10 1 4.20%
11 1 4.35%
12 1 4.50%
13 1 4.60%
14 1 4.65%
15 1 4.68%
16 1 4.70%
17 1 4.72%
18 1 4.75%
19 1 4.80%
20 1 4.85%
21 1 4.90%
22 1 4.95%
23 1 5.00%
24 1 5.10%
25 1 5.20%
 (i) (iii) Alternative (iii)
[4] [1] [2] Coupon
PV
t r ft,r (1+ft,r) yt (1+yt)-t Par Yield Coupon
0 1 2.50% 1.0250
1 1 2.55% 1.0255 2.50% 0.97561 3.605271
2 1 2.65% 1.0265 2.52% 0.95135 3.515623
3 1 2.78% 1.0278 2.57% 0.92679 3.424864
4 1 3.00% 1.0300 2.62% 0.901722 3.332228
5 1 3.20% 1.0320 2.70% 0.875459 3.235173
6 1 3.40% 1.0340 2.78% 0.848313 3.134858
7 1 3.60% 1.0360 2.87% 0.820418 3.031777
8 1 3.80% 1.0380 2.96% 0.79191 2.926426
9 1 4.00% 1.0400 3.05% 0.762919 2.819293
10 1 4.20% 1.0420 3.15% 0.733576 2.710858
11 1 4.35% 1.0435 3.24% 0.704007 2.601592
12 1 4.50% 1.0450 3.33% 0.67466 2.49314
13 1 4.60% 1.0460 3.42% 0.645607 2.38578
14 1 4.65% 1.0465 3.51% 0.617216 2.28086
15 1 4.68% 1.0468 3.58% 0.58979 2.179513
16 1 4.70% 1.0470 3.65% 0.563422 2.082072
17 1 4.72% 1.0472 3.71% 0.53813 1.988607
18 1 4.75% 1.0475 3.77% 0.513875 1.898976
19 1 4.80% 1.0480 3.82% 0.490573 1.812865
20 1 4.85% 1.0485 3.87% 0.468104 0.036954 1.729833
21 1 4.90% 1.0490 3.91%
22 1 4.95% 1.0495 3.96% 14.39345 Total 100
23 1 5.00% 1.0500 4.00%
24 1 5.10% 1.0510 4.04%
25 1 5.20% 1.0520 4.09%

(ii) 4.50%
The yield curve has a upward sloping shape. It is an increasing yield curve. 4.00%
[1]
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
0 5

Expectation Theory [2]

The market expects interest rates to rise in the future.
The demand for for long term bonds is lower than for short term bonds.
 Liquidity Preference
Changes in interest rates will impact bonds with longer outstanding terms more than bonds with shorter outstanding term
There is therefore a greater risk of loss on longer term bonds.
Risk-averse investors are assumed to require compensation for this greater risk through higher yields

Market Segmentation
Bonds of differing terms tend to be purchased by different types of investor.
e.g. Pension funds have long term liabilities and so are interested in long dated bonds, whilst general insurers tend
ties and so would be more interested in shorter term bonds.
The interplay of demand from these various investors and supply (of bonds from governments and companies) wll
uce the term structure of interest rates.
Alternative (iii) (iv)
3.6954% [1] [2] [1]
PV Yield to
redemption Solver/Goalseek
(1+i)-t Maturity
used to find the
Price
yield to maturity by equating the price to £0.99.

96.36931 3.77% £99.00

92.87043
89.49859
86.24917
83.11773
80.09998
77.19179
74.3892
71.68835
69.08557
66.57728
64.16007
61.83061
59.58573
57.42236
55.33753
53.32839
51.3922
49.52631
46.81039118 47.72816

Goalseek setting J26 to 100

by changing cell K2

yt
4.50%
4.00%
3.50%
3.00%
2.50%
2.00%
1.50%
1.00%
0.50%
0.00%
0 5 10 15 20 25 30 [1]
 [2]
shorter outstanding terms.

[2]

neral insurers tend

nd companies) wll

[Maximum 3]
quating the price to £0.99.
(i) (ii) See separate sheet

1 2.50%
2 2.52%
3 2.57% (iii) 20-year par yield
4 2.62% 3.70%
5 2.70%
6 2.78%
7 2.87% (iv) Yield to maturity
8 2.96% 3.77%
9 3.05%
10 3.15%
11 3.24%
12 3.33%
13 3.42%
14 3.51%
15 3.58%
16 3.65%
17 3.71%
18 3.77%
19 3.82%
20 3.87%
21 3.91%
22 3.96%
23 4.00%
24 4.04%
25 4.09%
You should assume that deaths occur uniformly over each policy year.

Conventional With Profits

Basic sum assured 125,000

Bonuses are added at the end of each policy year. (So the death benefit in any given year does not in
Super Compound Bonuses
0.5% bonus on basic sum assured
3% bonus on bonuses added to the policy in previous policy years.

Terminal Bonus payable on death (as a percentage of basic sum assured plus bonuses added prior to
year
1-10 0%
11-15 5%
16-20 10%
21-25 20%

Terminal Bonus on maturity 20%

Unitised With Profits

Annual Premium 5000 payable annually in advance
Allocation rates - percentage of premium allocated to buy units
Year rate
1 25%
2 50%
3 75%
4+ 101%
Bid offer spread 5%
Annual management charge deducted from the unit fund at the end of each year
Unit Growth rate 2.50% per annum
Terminal Bonus payable on death (as a percentage of the fund value)
year
1-5 0%
6-10 5%
11-15 10%
16-20 20%
21-25 30%

There is an additional minimum monetary payment on death 125,000 (UWP only)

Terminal Bonus on maturity 30%

any given year does not include the bonus relating to the policy year of death).

revious policy years.

us bonuses added prior to death)

1%

(UWP only)
 [1] [1] [2] [2]
Conventional With Profits
125,000 0.5% 3%

Basic Sum Total Terminal

Year Assured Bonus Super Bonus Total Bonus Benefit Bonus TB added
1 125,000 625 - 625.00 125,625 0% -
2 125,000 625 18.75 1,268.75 126,269 0% -
3 125,000 625 38.06 1,931.81 126,932 0% -
4 125,000 625 57.95 2,614.77 127,615 0% -
5 125,000 625 78.44 3,318.21 128,318 0% -
6 125,000 625 99.55 4,042.76 129,043 0% -
7 125,000 625 121.28 4,789.04 129,789 0% -
8 125,000 625 143.67 5,557.71 130,558 0% -
9 125,000 625 166.73 6,349.44 131,349 0% -
10 125,000 625 190.48 7,164.92 132,165 0% -
11 125,000 625 214.95 8,004.87 133,005 5% 6,608.25
12 125,000 625 240.15 8,870.02 133,870 5% 6,650.24
13 125,000 625 266.10 9,761.12 134,761 5% 6,693.50
14 125,000 625 292.83 10,678.95 135,679 5% 6,738.06
15 125,000 625 320.37 11,624.32 136,624 5% 6,783.95
16 125,000 625 348.73 12,598.05 137,598 10% 13,662.43
17 125,000 625 377.94 13,600.99 138,601 10% 13,759.81
18 125,000 625 408.03 14,634.02 139,634 10% 13,860.10
19 125,000 625 439.02 15,698.04 140,698 10% 13,963.40
20 125,000 625 470.94 16,793.98 141,794 10% 14,069.80
21 125,000 625 503.82 17,922.80 142,923 20% 28,358.80
22 125,000 625 537.68 19,085.49 144,085 20% 28,584.56
23 125,000 625 572.56 20,283.05 145,283 20% 28,817.10
24 125,000 625 608.49 21,516.54 146,517 20% 29,056.61
25 125,000 625 645.50 22,787.04 147,787 20% 29,303.31
 [2] [1] [1] [1] [2]
Unitised With Profits 5000
5%

Benefit on Fund after

death during Maturity Fund at Allocatio Allocated allocated
year Benefit Year start n rate Premium Premium
125,000 1 0 25% 1,187.50 1,187.50
125,625 2 1,205.02 50% 2,375.00 3,580.02
126,269 3 3,632.82 75% 3,562.50 7,195.32
126,932 4 7,301.45 101% 4,797.50 12,098.95
127,615 5 ### 101% 4,797.50 17,074.91
128,318 6 ### 101% 4,797.50 22,124.27
129,043 7 ### 101% 4,797.50 27,248.10
129,789 8 ### 101% 4,797.50 32,447.51
130,558 9 ### 101% 4,797.50 37,723.61
131,349 10 ### 101% 4,797.50 43,077.53
138,773 11 ### 101% 4,797.50 48,510.43
139,655 12 ### 101% 4,797.50 54,023.46
140,564 13 ### 101% 4,797.50 59,617.80
141,499 14 ### 101% 4,797.50 65,294.66
142,463 15 ### 101% 4,797.50 71,055.26
150,287 16 ### 101% 4,797.50 76,900.83
151,358 17 ### 101% 4,797.50 82,832.61
152,461 18 ### 101% 4,797.50 88,851.89
153,597 19 ### 101% 4,797.50 94,959.96
154,768 20 ### 101% 4,797.50 101,158.12
170,153 21 ### 101% 4,797.50 107,447.70
171,507 22 ### 101% 4,797.50 113,830.05
172,903 23 ### 101% 4,797.50 120,306.55
174,340 24 ### 101% 4,797.50 126,878.57
175,820 177,344 25 128750 101% 4,797.50
 [1] [1] [1] [1] [2] [1]

2.50% 1% 125,000

Benefit on Benefit on
Unit fund at Unit fund before Terminal death before death
mid year AMC AMC Fund at end Bonus minimum during year
1,202.25 1,217.19 12.17 1,205.02 0% 1,202.25 125,000
3,624.49 3,669.52 36.70 3,632.82 0% 3,624.49 125,000
7,284.71 7,375.20 73.75 7,301.45 0% 7,284.71 125,000
12,249.26 12,401.43 124.01 12,277.41 0% 12,249.26 125,000
17,287.03 17,501.78 175.02 17,326.77 0% 17,287.03 125,000
22,399.11 22,677.37 226.77 22,450.60 5% 23,519.07 125,000
27,586.60 27,929.30 279.29 27,650.01 5% 28,965.93 125,000
32,850.60 33,258.70 332.59 32,926.11 5% 34,493.13 125,000
38,192.24 38,666.70 386.67 38,280.03 5% 40,101.86 125,000
43,612.68 44,154.47 441.54 43,712.93 5% 45,793.31 125,000
49,113.06 49,723.19 497.23 49,225.96 10% 54,024.37 125,000
54,694.58 55,374.04 553.74 54,820.30 10% 60,164.04 125,000
60,358.42 61,108.25 611.08 60,497.16 10% 66,394.27 125,000
66,105.81 66,927.03 669.27 66,257.76 10% 72,716.39 125,000
71,937.97 72,831.64 728.32 72,103.33 10% 79,131.76 125,000
77,856.15 78,823.35 788.23 78,035.11 20% 93,427.38 125,000
83,861.63 84,903.43 849.03 84,054.39 20% 100,633.95 125,000
89,955.69 91,073.19 910.73 90,162.46 20% 107,946.82 125,000
96,139.63 97,333.96 973.34 96,360.62 20% 115,367.56 125,000
102,414.79 103,687.07 1,036.87 102,650.20 20% 122,897.75 125,000
108,782.51 110,133.89 1,101.34 109,032.55 30% 141,417.26 141,417
115,244.15 116,675.81 1,166.76 115,509.05 30% 149,817.39 149,817
121,801.10 123,314.21 1,233.14 122,081.07 30% 158,341.42 158,341
128,454.76 130,050.53 1,300.51 128,750.03 30% 166,991.19 166,991
135,206.57 136,886.22 1,368.86 135,517.35 30% 175,768.54 175,769
 [1]

Maturity
Benefit

176,173
(i} (ii)
Benefit on death during
year Maturity Benefit
Year Conventional Unitised Conventional Unitised
1 125,000 125,000 177,344 176,173
2 125,625 125,000
3 126,269 125,000
4 126,932 125,000
5 127,615 125,000
6 128,318 125,000
7 129,043 125,000
8 129,789 125,000
9 130,558 125,000
10 131,349 125,000
11 138,773 125,000
12 139,655 125,000
13 140,564 125,000
14 141,499 125,000
15 142,463 125,000
16 150,287 125,000
17 151,358 125,000
18 152,461 125,000
19 153,597 125,000
20 154,768 125,000
21 170,153 141,417
22 171,507 149,817
23 172,903 158,341
24 174,340 166,991
25 175,820 175,769
 Pricing / reserving assumptions

Table A Table B Pricing / Reserving Basis

Age x qx qx
30 0.000674 Term Assurances
31 0.000719 Mortality 100% of table A
32 0.000769 Interest rate 5.75% per annum effective
33 0.000826
34 0.000893
35 0.000969 Temporary Level Annuities
36 0.001055 Mortality 100% of table B
37 0.001154 Interest rate 4.25% per annum effective
38 0.001267
39 0.001396 You should ignore expenses
40 0.001543
41 0.001711
42 0.001901
43 0.002117
44 0.002363
45 0.002642
46 0.002957
47 0.003315
48 0.003718
49 0.004174
50 0.004689
51 0.005269
52 0.005922
53 0.006656
54 0.007481
55 0.008406
56 0.009444
57 0.010606
58 0.011906
59 0.013357
60 0.014978 0.00631
61 0.016783 0.006468
62 0.018793 0.006668
63 0.021027 0.00692
64 0.023509 0.007235
65 0.026261 0.007627
66 0.029308 0.008112
67 0.03268 0.00871
68 0.036402 0.009444
69 0.040507 0.010338
70 0.045028 0.011424
71 0.049998 0.012732
72 0.055454 0.014303
73 0.061433 0.016178
74 0.067974 0.018404
75 0.075116 0.021031
76 0.082902 0.024115
77 0.091373 0.027713
78 0.100569 0.031889
79 0.110532 0.036703
80 0.121303 0.042223
81 0.132919 0.048512
82 0.145417 0.055631
83 0.158831 0.063639
84 0.173187 0.072587
85 0.18851 0.08252
 Claims experience

Assurance Annuity
Reduction in
Calendar Policy annual
Year Year Claims paid benefit
2008 1 $ 110,000 $ 10,500
2009 2 $ - $ 23,000
per annum effective 2010 3 $ - $ 12,500
2011 4 $ 200,000 $ -
2012 5 $ - $ 29,500
2013 6 $ 95,000 $ -
2014 7 $ - $ 12,000
per annum effective 2015 8 $ - $ -
2016 9 $ - $ 20,000
2017 10 $ - $ -
2018 11 $ 320,000 $ 23,000
2019 12 $ 120,000 $ 8,000
2020 13 $ - $ 23,000
2021 14 $ 190,000 $ 31,000
2022 15 $ - $ -
 5.75% $ 12,800,000

[1] [1] [1] [1] [3] [2] [2]

Term Assurance Policies
Policy Discount PV of Total annual
Age x qx px n-1px PV of Benefits
Year n Factor Premiums premium
1 32 0.000769 0.999231 1 0.945626 $ 9,571.86 1 $ 17,626.81
2 33 0.000826 0.999174 0.999231 0.894209 $ 9,714.83 0.94489929
3 34 0.000893 0.999107 0.998406 0.845588 $ 9,923.56 0.89278374
4 35 0.000969 0.999031 0.997514 0.799611 $ 10,173.52 0.84348604
5 36 0.001055 0.998945 0.996547 0.756133 $ 10,464.02 0.79684983
6 37 0.001154 0.998846 0.995496 0.715019 $ 10,812.18 0.75272733
7 38 0.001267 0.998733 0.994347 0.676141 $ 11,212.49 0.71097748
8 39 0.001396 0.998604 0.993087 0.639377 $ 11,667.56 0.6714673
9 40 0.001543 0.998457 0.991701 0.604612 $ 12,177.93 0.63407086
10 41 0.001711 0.998289 0.990171 0.571737 $ 12,749.89 0.59866902
11 42 0.001901 0.998099 0.988477 0.54065 $ 13,372.56 0.56514865
12 43 0.002117 0.997883 0.986598 0.511253 $ 14,055.51 0.5334036
13 44 0.002363 0.997637 0.984509 0.483454 $ 14,804.33 0.50333275
14 45 0.002642 0.997358 0.982183 0.457167 $ 15,615.29 0.47484007
15 46 0.002957 0.997043 0.979588 0.432309 $ 16,483.11 0.44783503
 4.25% $ 640,000

[1] [1] [2] [1]

Temporary Annuities
Policy Discount PV of Total
Age x qx px n-1px
Year n Factor Benefits premium
1 67 0.00871 0.99129 1 0.959233 $ 608,562 $ 6,280,627
2 68 0.009444 0.990556 0.99129 0.920127 $ 578,239
3 69 0.010338 0.989662 0.981928 0.882616 $ 548,932
4 70 0.011424 0.988577 0.971777 0.846634 $ 520,538
5 71 0.012732 0.987268 0.960676 0.812119 $ 492,960
6 72 0.014303 0.985697 0.948445 0.779011 $ 466,100
7 73 0.016178 0.983822 0.934879 0.747253 $ 439,865
8 74 0.018404 0.981596 0.919755 0.716789 $ 414,168
9 75 0.021031 0.978969 0.902828 0.687568 $ 388,928
10 76 0.024115 0.975885 0.883841 0.659537 $ 364,076
11 77 0.027713 0.972287 0.862527 0.63265 $ 339,555
12 78 0.031889 0.968111 0.838623 0.606858 $ 315,326
13 79 0.036703 0.963297 0.811881 0.582118 $ 291,369
14 80 0.042223 0.957777 0.782082 0.558387 $ 267,690
15 81 0.048512 0.951488 0.74906 0.535623 $ 244,320
 5.75% $ 12,800,000

[1] [1] [1] [4] [2] [2]

Term Assurance Policies
Policy
Age x qx px p
n-1 x Abarx:<16-n> aduex:<n> Premium
Year n
1 32 0.000769 0.999231 1 0.01428114475 10.370490989 $ 17,626.81
2 33 0.000826 0.999174 0.999231 0.01432252483 9.9169203325
3 34 0.000893 0.999107 0.998406 0.0143084732 9.4374385759
4 35 0.000969 0.999031 0.997514 0.01422559894 8.9305662897
5 36 0.001055 0.998945 0.996547 0.01406072633 8.3947083237
6 37 0.001154 0.998846 0.995496 0.01379886856 7.828162764
7 38 0.001267 0.998733 0.994347 0.01342107761 7.2291245327
8 39 0.001396 0.998604 0.993087 0.0129062246 6.5956558893
9 40 0.001543 0.998457 0.991701 0.01222983129 5.9256783499
10 41 0.001711 0.998289 0.990171 0.01136383974 5.216954616
11 42 0.001901 0.998099 0.988477 0.01027533787 4.4670726678
12 43 0.002117 0.997883 0.986598 0.0089282525 3.6734125033
13 44 0.002363 0.997637 0.984509 0.00728002571 2.8331314616
14 45 0.002642 0.997358 0.982183 0.0052811197 1.9431281324
15 46 0.002957 0.997043 0.979588 0.0028754852 1
 4.25% $ 640,000

[1] [3] [1]

Temporary Annuities
Policy
Age x qx px p
n-1 x ax Premium
Year n
1 67 0.00871 0.99129 1 9.8134799154 $ 6,280,627
2 68 0.009444 0.990556 0.99129 9.3204470013
3 69 0.010338 0.989662 0.981928 8.8092061031
4 70 0.011424 0.988577 0.971777 8.2795272594
5 71 0.012732 0.987268 0.960676 7.7311474306
6 72 0.014303 0.985697 0.948445 7.1636592735
7 73 0.016178 0.983822 0.934879 6.5764781287
8 74 0.018404 0.981596 0.919755 5.9687176668
9 75 0.021031 0.978969 0.902828 5.3390514363
10 76 0.024115 0.975885 0.883841 4.6855335791
11 77 0.027713 0.972287 0.862527 4.0053723083
12 78 0.031889 0.968111 0.838623 3.2946182458
13 79 0.036703 0.963297 0.811881 2.5477745023
14 80 0.042223 0.957777 0.782082 1.7572552867
15 81 0.048512 0.951488 0.74906 0.912698705
 [2] [2] [4]
Premium 0.0013771

Remaining
benefit/annuity IF at
end of year Term Assurance
End of Term
Date Policy Year Assurance Annuity PV Benefit PV Premium
1-Jan-08 12,800,000 640,000
31-Dec-08 1 12,690,000 629,500 181,752.84 173,301.43
31-Dec-09 2 12,690,000 606,500 181,574.52 164,922.33
31-Dec-10 3 12,690,000 594,000 180,522.85 156,064.57
31-Dec-11 4 12,490,000 594,000 175,618.47 144,388.22
31-Dec-12 5 12,490,000 564,500 172,347.87 134,643.68
31-Dec-13 6 12,395,000 564,500 166,354.26 123,394.54
31-Dec-14 7 12,395,000 552,500 159,972.65 112,581.81
31-Dec-15 8 12,395,000 552,500 151,588.76 101,145.91
31-Dec-16 9 12,395,000 532,500 140,854.79 89,048.64
31-Dec-17 10 12,395,000 532,500 127,362.81 76,248.84
31-Dec-18 11 12,075,000 509,500 107,808.65 61,083.03
31-Dec-19 12 11,955,000 501,500 87,032.71 46,642.31
31-Dec-20 13 11,955,000 478,500 63,135.79 31,990.04
31-Dec-21 14 11,765,000 447,500 33,830.08 16,201.52
31-Dec-22 15 11,765,000 447,500 - -
 [4] [3]
per unit SA

erm Assurance Temporary Annuity

Reserve at end year Reserve at end year

8,451.41 5,867,221.39
16,652.19 5,342,783.50
24,458.28 4,918,039.19
31,230.26 4,592,301.57
37,704.18 4,043,885.66
42,959.72 3,712,421.90
47,390.84 3,297,716.51
50,442.85 2,949,825.92
51,806.15 2,495,046.63
51,113.97 2,132,860.75
46,725.62 1,678,608.00
40,390.40 1,277,708.91
31,145.75 840,846.65
17,628.57 408,432.67
- -
 [2] [2] [1]
Premium

Remaining
benefit/annuity IF at
end of year Term Assurance
End of Term
Date Policy Year Assurance Annuity Abarx:<16-n> PV Benefit
1-Jan-08 12,800,000 640,000
31-Dec-08 1 12,690,000 629,500 0.0143225248 181,752.84
31-Dec-09 2 12,690,000 606,500 0.0143084732 181,574.52
31-Dec-10 3 12,690,000 594,000 0.0142255989 180,522.85
31-Dec-11 4 12,490,000 594,000 0.0140607263 175,618.47
31-Dec-12 5 12,490,000 564,500 0.0137988686 172,347.87
31-Dec-13 6 12,395,000 564,500 0.0134210776 166,354.26
31-Dec-14 7 12,395,000 552,500 0.0129062246 159,972.65
31-Dec-15 8 12,395,000 552,500 0.0122298313 151,588.76
31-Dec-16 9 12,395,000 532,500 0.0113638397 140,854.79
31-Dec-17 10 12,395,000 532,500 0.0102753379 127,362.81
31-Dec-18 11 12,075,000 509,500 0.0089282525 107,808.65
31-Dec-19 12 11,955,000 501,500 0.0072800257 87,032.71
31-Dec-20 13 11,955,000 478,500 0.0052811197 63,135.79
31-Dec-21 14 11,765,000 447,500 0.0028754852 33,830.08
31-Dec-22 15 11,765,000 447,500 -
 [1] [2] [3]
0.0013771 per unit SA

Term Assurance Temporary Annuity

aduex:<n> PV Premium Reserve at end year ax Reserve at end year

9.916920 173,301.43 8,451.41 9.320447 5,867,221.39

9.437439 164,922.33 16,652.19 8.809206 5,342,783.50
8.930566 156,064.57 24,458.28 8.279527 4,918,039.19
8.394708 144,388.22 31,230.26 7.731147 4,592,301.57
7.828163 134,643.68 37,704.18 7.163659 4,043,885.66
7.229125 123,394.54 42,959.72 6.576478 3,712,421.90
6.595656 112,581.81 47,390.84 5.968718 3,297,716.51
5.925678 101,145.91 50,442.85 5.339051 2,949,825.92
5.216955 89,048.64 51,806.15 4.685534 2,495,046.63
4.467073 76,248.84 51,113.97 4.005372 2,132,860.75
3.673413 61,083.03 46,725.62 3.294618 1,678,608.00
2.833131 46,642.31 40,390.40 2.547775 1,277,708.91
1.943128 31,990.04 31,145.75 1.757255 840,846.65
1.000000 16,201.52 17,628.57 0.912699 408,432.67
- - 0 -
 T

Remaining
benefit/annuity IF at
end of year Reworked figures from (i)
End of Term
Date Policy Year Assurance Annuity Actual px Actual qx Actual n-1px
1-Jan-08 12,800,000 640,000
31-Dec-08 1 12,690,000 629,500 0.991406 0.008594 1
31-Dec-09 2 12,690,000 606,500 1 0 0.99140625
31-Dec-10 3 12,690,000 594,000 1 0 0.99140625
31-Dec-11 4 12,490,000 594,000 0.98424 0.01576 0.99140625
31-Dec-12 5 12,490,000 564,500 1 0 0.97578125
31-Dec-13 6 12,395,000 564,500 0.992394 0.007606 0.97578125
31-Dec-14 7 12,395,000 552,500 1 0 0.968359375
31-Dec-15 8 12,395,000 552,500 1 0 0.968359375
31-Dec-16 9 12,395,000 532,500 1 0 0.968359375
31-Dec-17 10 12,395,000 532,500 1 0 0.968359375
31-Dec-18 11 12,075,000 509,500 0.974183 0.025817 0.968359375
31-Dec-19 12 11,955,000 501,500 0.990062 0.009938 0.943359375
31-Dec-20 13 11,955,000 478,500 1 0 0.933984375
31-Dec-21 14 11,765,000 447,500 0.984107 0.015893 0.933984375
31-Dec-22 15 11,765,000 447,500 1 0 0.919140625
 Premium 0.0013771 per unit SA
5.75%
Term Assurance

Reworked figures from (i)

Discount
Factor PV Benefits PV Premiums PV Benefit PV Premium Reserve at end year

0.9456265 106,048.41 16,525.13 572,774.59 156,800.05 415,974.54

0.8942094 - 15,492.31 605,709.13 148,340.73 457,368.41
0.8455881 - 14,649.94 640,537.41 139,394.99 501,142.42
0.7996105 160,472.70 13,635.04 482,545.24 132,295.33 350,249.91
0.7561329 - 12,690.44 510,291.59 122,702.40 387,589.19
0.7150193 67,642.26 11,909.14 446,076.24 113,552.39 332,523.84
0.6761411 - 11,175.94 471,725.62 103,012.57 368,713.05
0.639377 - 10,568.27 498,849.84 91,866.71 406,983.13
0.6046118 - 9,993.63 527,533.71 80,079.96 447,453.75
0.5717369 - 9,450.24 557,866.90 67,615.47 490,251.42
0.5406496 167,835.26 8,705.69 276,506.96 56,329.19 220,177.77
0.5112526 58,924.58 7,940.10 171,939.39 43,537.63 128,401.76
0.4834539 - 7,433.75 181,825.91 29,577.88 152,248.03
0.4571669 82,101.39 6,917.83 - 15,320.58 - 15,320.58
0.4323091 - 6,437.72 - - -
 4.25%
Temporary Annuity

Reworked figures from (i)

Discount Reserve at end
Actual px Actual qx Actual n-1px Factor PV Benefits year

0.98359375 0.0164062 1 0.959233 593,930.23 4,891,622.83

0.963463065925338 0.0365369 0.98359375 0.920127 528,846.35 4,686,403.25
0.979389942291838 0.0206101 0.94765625 0.882616 486,591.73 4,394,386.32
1 0 0.928125 0.846634 466,754.66 3,987,147.74
0.9503367003367 0.0496633 0.928125 0.812119 404,359.45 3,809,319.85
1 0 0.88203125 0.779011 387,874.77 3,406,715.94
0.978742249778565 0.0212578 0.88203125 0.747253 356,411.86 3,076,138.05
1 0 0.86328125 0.716789 341,881.88 2,654,373.92
0.963800904977376 0.0361991 0.86328125 0.687568 304,631.41 2,338,616.63
1 0 0.83203125 0.659537 292,212.38 1,905,507.84
0.956807511737089 0.0431925 0.83203125 0.63265 256,608.89 1,566,666.73
0.984298331697743 0.0157017 0.79609375 0.606858 238,478.45 1,157,803.90
0.954137587238285 0.0458624 0.78359375 0.582118 208,254.83 786,527.80
0.93521421107628 0.0647858 0.74765625 0.558387 174,719.43 429,256.59
1 0 0.69921875 0.535623 167,596.58 -
 Adjusted reserve used? Y Y or N

5.75%
[1] [3]

Remaining benefit/annuity Reserve at Death Strain

IF at end of year year end at Risk
End of Policy Term
Date Year Assurance Annuity 15 year Term Assu
1-Jan-08 12,800,000 640,000
31-Dec-08 1 12,690,000 629,500 $ 8,525 $ 13,154,332
31-Dec-09 2 12,690,000 606,500 $ 16,652 $ 13,033,086
31-Dec-10 3 12,690,000 594,000 $ 24,458 $ 13,025,280
31-Dec-11 4 12,490,000 594,000 $ 31,730 $ 13,018,008
31-Dec-12 5 12,490,000 564,500 $ 37,704 $ 12,806,365
31-Dec-13 6 12,395,000 564,500 $ 43,289 $ 12,800,780
31-Dec-14 7 12,395,000 552,500 $ 47,391 $ 12,698,985
31-Dec-15 8 12,395,000 552,500 $ 50,443 $ 12,695,933
31-Dec-16 9 12,395,000 532,500 $ 51,806 $ 12,694,570
31-Dec-17 10 12,395,000 532,500 $ 51,114 $ 12,695,262
31-Dec-18 11 12,075,000 509,500 $ 47,964 $ 12,698,412
31-Dec-19 12 11,955,000 501,500 $ 40,796 $ 12,376,509
31-Dec-20 13 11,955,000 478,500 $ 31,146 $ 12,262,757
31-Dec-21 14 11,765,000 447,500 $ 17,913 $ 12,275,989
31-Dec-22 15 11,765,000 447,500 $ - $ 12,098,516
When toggle = Y, the answer is theoretically correct. When N, the reserve is used directly from (ii).

5.75%
[1] [1] [1] [1] [1] [2]

Expected
Death Actual Death Mortality Cumulative Reserve at Death Strain
Strain Strain Profit EOY total to EOY year end at Risk

15 year Term Assurance 15 year Temporary Life

$ 10,116 $ 113,045 $ -102,929 $ -102,929 $ 5,965,086 $ -6,605,086

$ 10,765 $ - $ 10,765 $ -98,082 $ 5,545,395 $ -6,174,895
$ 11,632 $ - $ 11,632 $ -92,091 $ 5,021,533 $ -5,628,033
$ 12,614 $ 205,170 $ -192,555 $ -289,941 $ 4,592,302 $ -5,186,302
$ 13,511 $ - $ 13,511 $ -293,102 $ 4,255,214 $ -4,849,214
$ 14,772 $ 97,364 $ -82,592 $ -392,547 $ 3,712,422 $ -4,276,922
$ 16,090 $ - $ 16,090 $ -399,029 $ 3,369,341 $ -3,933,841
$ 17,724 $ - $ 17,724 $ -404,249 $ 2,949,826 $ -3,502,326
$ 19,588 $ - $ 19,588 $ -407,906 $ 2,588,757 $ -3,141,257
$ 21,722 $ - $ 21,722 $ -409,639 $ 2,132,861 $ -2,665,361
$ 24,140 $ 327,833 $ -303,693 $ -736,887 $ 1,754,384 $ -2,286,884
$ 26,201 $ 122,996 $ -96,795 $ -876,053 $ 1,298,091 $ -1,807,591
$ 28,977 $ - $ 28,977 $ -897,449 $ 881,264 $ -1,382,764
$ 32,433 $ 195,101 $ -162,668 $ -1,111,721 $ 436,726 $ -915,226
$ 35,775 $ - $ 35,775 $ -1,139,869 $ - $ -447,500

$ 296,058 $ 1,061,509 $ -765,451

 4.25%

[1] [1] [1] [1]

Expected Actual Death Mortality Cumulative

Death Strain Strain Profit EOY total to EOY

15 year Temporary Life Annuity

$ -57,532 $ -108,365 $ 50,832 $ 50,832

$ -58,317 $ -225,612 $ 167,295 $ 220,288
$ -58,181 $ -115,994 $ 57,813 $ 287,462
$ -59,246 $ - $ -59,246 $ 240,434
$ -61,739 $ -240,828 $ 179,089 $ 429,741
$ -61,171 $ - $ -61,171 $ 386,834
$ -63,641 $ -83,625 $ 19,983 $ 423,258
$ -64,456 $ - $ -64,456 $ 376,790
$ -66,064 $ -113,711 $ 47,647 $ 440,450
$ -64,275 $ - $ -64,275 $ 394,895
$ -63,377 $ -98,776 $ 35,399 $ 447,077
$ -57,642 $ -28,382 $ -29,260 $ 436,818
$ -50,752 $ -63,417 $ 12,665 $ 468,047
$ -38,644 $ -59,294 $ 20,650 $ 508,589
$ -21,709 $ - $ -21,709 $ 508,495

$ -846,747 $ -1,138,003 $ 291,256 $ -631,374 Mortality Loss

[1]
 [1] [1] [1]

Reserve
Remaining benefit/annuity held at Premiums Interest
IF at end of year start received earned
End of Policy Term
Date Year Assurance Annuity 15 year Term A
1-Jan-08 12,800,000 640,000
31-Dec-08 1 12,690,000 629,500 $ - $ 17,627 $ 1,014
31-Dec-09 2 12,690,000 606,500 $ 8,451 $ 17,475 $ 1,491
31-Dec-10 3 12,690,000 594,000 $ 16,652 $ 17,475 $ 1,962
31-Dec-11 4 12,490,000 594,000 $ 24,458 $ 17,475 $ 2,411
31-Dec-12 5 12,490,000 564,500 $ 31,230 $ 17,200 $ 2,785
31-Dec-13 6 12,395,000 564,500 $ 37,704 $ 17,200 $ 3,157
31-Dec-14 7 12,395,000 552,500 $ 42,960 $ 17,069 $ 3,452
31-Dec-15 8 12,395,000 552,500 $ 47,391 $ 17,069 $ 3,706
31-Dec-16 9 12,395,000 532,500 $ 50,443 $ 17,069 $ 3,882
31-Dec-17 10 12,395,000 532,500 $ 51,806 $ 17,069 $ 3,960
31-Dec-18 11 12,075,000 509,500 $ 51,114 $ 17,069 $ 3,921
31-Dec-19 12 11,955,000 501,500 $ 46,726 $ 16,628 $ 3,643
31-Dec-20 13 11,955,000 478,500 $ 40,390 $ 16,463 $ 3,269
31-Dec-21 14 11,765,000 447,500 $ 31,146 $ 16,463 $ 2,738
31-Dec-22 15 11,765,000 447,500 $ 17,629 $ 16,202 $ 1,945
 5.75%

[2] [1] [1] [1] [1] [1]

Reserve Interest
Benefits required at Mortality Cumulative Reserve held earned on
paid end Profit EOY total to EOY at start reserve

15 year Term Assurance 15 year Temporary Life

$ 113,118 $ 8,451 $ -102,929 $ -102,929 $ 6,280,627 $ 266,927

$ - $ 16,652 $ 10,765 $ -98,082 $ 5,867,221 $ 249,357
$ - $ 24,458 $ 11,632 $ -92,091 $ 5,342,784 $ 227,068
$ 205,670 $ 31,230 $ -192,555 $ -289,941 $ 4,918,039 $ 209,017
$ - $ 37,704 $ 13,511 $ -293,102 $ 4,592,302 $ 195,173
$ 97,693 $ 42,960 $ -82,592 $ -392,547 $ 4,043,886 $ 171,865
$ - $ 47,391 $ 16,090 $ -399,029 $ 3,712,422 $ 157,778
$ - $ 50,443 $ 17,724 $ -404,249 $ 3,297,717 $ 140,153
$ - $ 51,806 $ 19,588 $ -407,906 $ 2,949,826 $ 125,368
$ - $ 51,114 $ 21,722 $ -409,639 $ 2,495,047 $ 106,039
$ 329,071 $ 46,726 $ -303,693 $ -736,887 $ 2,132,861 $ 90,647
$ 123,402 $ 40,390 $ -96,795 $ -876,053 $ 1,678,608 $ 71,341
$ - $ 31,146 $ 28,977 $ -897,449 $ 1,277,709 $ 54,303
$ 195,386 $ 17,629 $ -162,668 $ -1,111,721 $ 840,847 $ 35,736
$ - $ - $ 35,775 $ -1,139,869 $ 408,433 $ 17,358

$ -765,451
 4.25% Alternative

[2] [1] [1] [1] [2] [2]

Reserve
required at Mortality Cumulative total Premium Benefits
Benefits paid end Profit EOY to EOY received paid

15 year Temporary Life Annuity 15 year Term Assurance

$ 629,500 $ 5,867,221 $ 50,832 $ 50,832 $ 17,627 $ 113,118

$ 606,500 $ 5,342,784 $ 167,295 $ 220,288 $ 17,475 $ -
$ 594,000 $ 4,918,039 $ 57,813 $ 287,462 $ 17,475 $ -
$ 594,000 $ 4,592,302 $ -59,246 $ 240,434 $ 17,475 $ 205,670
$ 564,500 $ 4,043,886 $ 179,089 $ 429,741 $ 17,200 $ -
$ 564,500 $ 3,712,422 $ -61,171 $ 386,834 $ 17,200 $ 97,693
$ 552,500 $ 3,297,717 $ 19,983 $ 423,258 $ 17,069 $ -
$ 552,500 $ 2,949,826 $ -64,456 $ 376,790 $ 17,069 $ -
$ 532,500 $ 2,495,047 $ 47,647 $ 440,450 $ 17,069 $ -
$ 532,500 $ 2,132,861 $ -64,275 $ 394,895 $ 17,069 $ -
$ 509,500 $ 1,678,608 $ 35,399 $ 447,077 $ 17,069 $ 329,071
$ 501,500 $ 1,277,709 $ -29,260 $ 436,818 $ 16,628 $ 123,402
$ 478,500 $ 840,847 $ 12,665 $ 468,047 $ 16,463 $ -
$ 447,500 $ 408,433 $ 20,650 $ 508,589 $ 16,463 $ 195,386
$ 447,500 $ - $ -21,709 $ 508,495 $ 16,202 $ -

$ 8,107,500 $ 43,557,699 $ 291,256 $ -631,374 Mortality Loss

[1]
 Alternative solution

[4] [1] [2] [4]

Fund held Fund held

Accumulated to Premium Accumulated
EOY received Benefits paid to EOY

year Term Assurance 15 year Temporary Life Annuity

$ -94,478 $ 6,280,627 $ 629,500 $ 5,918,054

$ -81,430 $ 606,500 $ 5,563,071
$ -67,632 $ 594,000 $ 5,205,502
$ -258,711 $ 594,000 $ 4,832,735
$ -255,398 $ 564,500 $ 4,473,627
$ -349,587 $ 564,500 $ 4,099,256
$ -351,638 $ 552,500 $ 3,720,974
$ -353,807 $ 552,500 $ 3,326,616
$ -356,100 $ 532,500 $ 2,935,497
$ -358,525 $ 532,500 $ 2,527,755
$ -690,161 $ 509,500 $ 2,125,685
$ -835,663 $ 501,500 $ 1,714,527
$ -866,303 $ 478,500 $ 1,308,894
$ -1,094,092 $ 447,500 $ 917,022
$ -1,139,869 $ 447,500 $ 508,495

$ -631,374
Assurance policies make a mortality profit when the mortality is lower than expected.
Annuities make a profit when the mortality is higher than expected.

In this case we had a loss on the assurance policies and gain on the annuities.
So for both policy types mortality was higher than expected over the term.

In light of this the insurance company may wish to review its mortality assumptions.

The timing of deaths will affect the mortality profit. Even if the total number of deaths is as expected,
deaths occurring much earlier or later than expected would impact the mortality profit.

It is also possible is that the policyholders who have died were policyholders with larger than
average sums assured.
This would give their deaths greater weighting when calculating the mortality loss/profit.
The company should also investigate the numbers of claimants compared with expected
when reviewing its mortality assumptions.

[Maximum 6]
 [1]
[1]

[1]
[1]

[1]

[1]

[1]
[1]

[1]

[Maximum 6]
(i) Assurance $ 17,627
Annuity $ 6,280,627

(ii) Reserve at end year

Year n Assurance Annuity
1 $ 8,451 $ 5,867,221
2 $ 16,652 $ 5,342,784
3 $ 24,458 $ 4,918,039
4 $ 31,230 $ 4,592,302
5 $ 37,704 $ 4,043,886
6 $ 42,960 $ 3,712,422
7 $ 47,391 $ 3,297,717
8 $ 50,443 $ 2,949,826
9 $ 51,806 $ 2,495,047
10 $ 51,114 $ 2,132,861
11 $ 46,726 $ 1,678,608
12 $ 40,390 $ 1,277,709
13 $ 31,146 $ 840,847
14 $ 17,629 $ 408,433
15 $ - $ -

(iii) Total Mortality Profit

Assurance Annuity Total
$ -1,139,869 $ 508,495 $ -631,374

(iv)
Assurance policies make a mortality profit when the mortality is lower than expected.
Annuities make a profit when the mortality is higher than expected.

In this case we had a loss on the assurance policies and gain on the annuities.
So for both policy types mortality was higher than expected over the term.

In light of this the insurance company may wish to review its mortality assumptions.

It is also possible is that the policyholders who have died were policyholders with larger than
average sums assured.
This would give their deaths greater weighting when calculating the mortality loss/profit.
The company should also investigate the numbers of claimants compared with expected
when reviewing its mortality assumptions.