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  #1  
Old 01-18-2005, 09:47 AM
fsa fsa is offline
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Default 2006 Life Valuation Rate Watch

Quote:
Originally Posted by urysohn
Once again, we're looking at a likely stat reserve decrease effective the 1st of next year. Should coincide nicely with the 2001 CSO work some companies are doing, while others will find themselves scrambling to refile a bit off the schedule they had been planning.
To underscore what Urysohn said in the old “Stat Reserve Rate” thread, we are half way through the Moody’s average calc and for the last 6 months of 2004, the average is 5.97%, with the December rate being 5.84%. The trigger point for a 4% Life valuation rate for 2006 is 6.21%. Last year we barely exceeded this (i.e., the avg was 6.26%).

To give you another comparison point, at the same point last year, the avg for the last 6 months of 2003 was 6.33%, with the Dec ’03 rate at 6.20%.
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  #2  
Old 02-09-2005, 03:36 PM
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Default Thru Jan

The 7 month Moody's average thru Jan 2005 is 5.93%, with the January rate being 5.72%. The trigger point for a 4% Life valuation rate for 2006 is 6.21%. So, we are still on our way to 4%.
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  #3  
Old 02-09-2005, 04:17 PM
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The change from 4.5% is a 100%, both-feet-in, given. It will happen.

I think the more interesting speculation is whether or not the rate drops to 3.75!
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  #4  
Old 02-09-2005, 05:56 PM
Actuary321 Actuary321 is offline
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I was wondering about that 3.75 thing so I looked in the SVL and see that it is possible that it could move 0.75.

I also read about the guarantee period and have a question.

If a company issues whole life insurance for ages 0-99 and uses 80 CSO as the valuation basis. Would the company need to use the 10 year or less rate (currently 5%) for issue ages over 90, the 10 to 20 year rate (currently 4.75%) for issue ages between 80 and 90 and the 20 + rate (currently 4.5% for issue ages under 80? Or would you simply use the 20+ rate for everything?
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Old 02-09-2005, 10:17 PM
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Quote:
Originally Posted by Actuary321
I was wondering about that 3.75 thing so I looked in the SVL and see that it is possible that it could move 0.75.

I also read about the guarantee period and have a question.

If a company issues whole life insurance for ages 0-99 and uses 80 CSO as the valuation basis. Would the company need to use the 10 year or less rate (currently 5%) for issue ages over 90, the 10 to 20 year rate (currently 4.75%) for issue ages between 80 and 90 and the 20 + rate (currently 4.5% for issue ages under 80? Or would you simply use the 20+ rate for everything?
Those are maximum valuation int rates, you can always use a lower one. I bet most cos. would use a single rate to avoid confusion. I know I would.
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  #6  
Old 02-15-2005, 01:57 PM
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Quote:
Originally Posted by anon3
The change from 4.5% is a 100%, both-feet-in, given. It will happen.

I think the more interesting speculation is whether or not the rate drops to 3.75!
I can't remember and I'm too lazy to go look up how it works...

If the trigger point for the life 4% is a 6.21% average, does that mean the trigger point for 3.75% is 5.96%? If so, and we're at 5.93% now, 3.75% is not only possible, but highly possible too?

And we'll know at the end of June 05?

Chuck
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  #7  
Old 02-15-2005, 02:03 PM
urysohn
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I show that it will need to average 4.90% or lower over the next 5 months to trigger a 3.75% rate. Doesn't seem too likely.
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  #8  
Old 02-15-2005, 02:12 PM
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Chuck - a 25bps decline in the average Moody's rate does not translate directly to a 25bps drop in the valuation rate.
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  #9  
Old 02-15-2005, 03:08 PM
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Quote:
Originally Posted by urysohn
Chuck - a 25bps decline in the average Moody's rate does not translate directly to a 25bps drop in the valuation rate.
Thanks. I bit the bullet, looked it up and see now.

I vaguely recall that there was a one year "grace period" at one time that gave companies an extra calendar year to re-file existing life products.

Was that my imagination or is that still in effect? Or am I just confusing that with the timing difference between annuities and life?

I couldn't find reference to it. I'm trying to determine whether there will necessarily be a big influx in state filings for the remainder of 2005.

Chuck
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  #10  
Old 02-15-2005, 03:26 PM
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The one-year grace is for nonforfeiture requirements. Companies will still need to hold the higher reserves immediately and the filing burden will be driven by pricing implications, I'd think.
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