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Old 09-21-2001, 01:41 PM
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I am curious to know what other companies have done to reduce the DAC "true -up" volatility in earning associated with the stock markets poor performance recently.
I have heard that many companies will do something like assume that a below average year will be followed by a good year.
I am troubled by this as this contradicts the asusmptions that the stock market movements are a Markov process.
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Old 09-26-2001, 11:16 AM
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Many co.'s smooth the projected SA returns over the next n years such that the average SA return over the period (t-n,t+n) = x%. (t is the current period)

I don't know if this is legal or not. It was probably OK in an increasing asset return environment but probably not ok now.
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