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#31
07-04-2015, 08:50 PM
 777888 Member Join Date: Oct 2008 Posts: 630

Thank you, Gandalf! This is very helpful!
#32
02-22-2019, 10:33 AM
 Flying Squirrel Member SOA AAA Join Date: Nov 2001 Posts: 859

Bumping to ask this question.

We recently acquired another insurer that had a single premium Whole Life policy they issued as a conversion option for term life products that expired because they reached the max age. We didn't have a conversion option, but after unsuccessfully trying to convince the DOI that we didn't have to offer a conversion policy, we're reviving this one (albeit on a new insurer).

I am still pretty new when it comes to GAAP accounting for Life Insurance. When I caluclate the DPL, it turns negative after about 5 years or so. Profit still emerges as a constant % of inforce, but having to have a negative DPL to get there seems wrong.

So, given a simple single premium whole life policy, can the DPL be negative?
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#33
02-25-2019, 11:38 AM
 jraven Member Join Date: Aug 2007 Location: New Hampshire Studying for nothing! College: Penn State Posts: 1,309

What does your pattern of (pre-DPL) profits looks like?

I'm a bit rusty on this, but for a single-pay product I'd expect all the profits (without the DPL) to be front-loaded into the first year, and your DPL at the end of year t would just be something like
DPL_t = k x PVF_t(Exposure)
where k is chosen so that
Profit at issue = k x PVF_0(Exposure)

So either your profits aren't all confined to the first year, or your exposure (which seems to be amount in-force) is going negative.
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