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Old 03-27-2020, 02:05 AM
MATEseminars.dc MATEseminars.dc is offline
Join Date: Aug 2018
College: Northern Arizona University
Posts: 61
Default EC help

Originally Posted by fightinphilz View Post
I understand all the steps here in the SOA solution except for how they are calculating expected in-force contribution. Can someone explain how they are going from the formulas presented in the reading, to the formula they are listing there in the sample solution? namely, they say that

EC of IF business = [IBV (t-1) + RC (t-1)] x RDR

From the reading, the formula for line 5 of the AoM Report should be:
EC of IF business = IF EIBV (t) - IBV (t-1) = IBV(t-1) x RDR - IF BP(t) + CoC (t)

how do you get from the 2nd formula back to the first?

Your second formula is set up right but it is not equal to "EC of IF business" as you have stated. It is equal to "the in-force business expected increase in IBV"

So it should be (see page 22 of source formula #18):
the in-force business expected increase in IBV = IF EIBV (t) - IBV (t-1) = IBV(t-1) x RDR - IF BP(t) + CoC (t)

Then to get from there to the EC of IF business ....

EC of IF business = expected increase in IBV plus expected net income (page 22 of the source material)

Using your formula: expected increase in IBV = IBV(t-1) x RDR - IF BP(t) + CoC (t)

expected net income = IF BP(t) + i(t) * RC(t-1)

Then use CoC(t) = [RDR - i(t)] * RC(t-1)

Then put it all together

EC of IF business =
IBV(t-1) x RDR - IF BP(t) + [RDR - i(t)] * RC(t-1)
IF BP(t) + i(t) * RC(t-1)

(the book profits and the i*RC terms fall out and you are left with your answer)

= IBV(t-1) x RDR + RDR * RC(t-1)
- IF BP(t) + IF BP(t)
- i(t) * RC(t-1) + i(t) * RC(t-1)
=[IBV(t-1) + RC(t-1)] * RDR

I hope that helps you.

Dustin Conrad

Last edited by MATEseminars.dc; 03-30-2020 at 12:12 AM..
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