EOM4 Profit - Original vs Revised Assumptions

[Jemaine Clement]

I'm doing EOM4, and have populated two versions of the profit model, one with the original assumptions from Asherton, and one with revised Lapse Rates, Interest, and Mortality.

Is anyone else finding that the profit using the revised assumptions is only marginally lower than the profit using the original assumptions? I'm finding a little above 5% for the original assumptions, and a little below 5% for the revised.

Based on Asherton's earnings table, I would have expected much lower profits (on the order of 50% lower).

Any suggestions on what I might be missing, or are any of you also getting similar results?

Of note, my revised interest and mortality assumptions are very close to the original (marginally higher interest, marginally lower mortality), while my revised lapse rates are higher than the originals beginning in year 2.

[actuarygal]

In looking at the combined profit model results (aka band 1, 2, and 3 combined) I got just above 5.00% for the original assumptions and my revised assumptions caused the profit results to drop over 50 bps.

I think the extent to which yours changes will be dependent on how drastically you changed the assumptions.

[Jemaine Clement]

Thanks for the reply. I think I saw a drop of about 40 bp, but it's good to hear that others are in the same rough ballpark.