Slides from a session at the Society of Actuaries 2010 Life & Annuity Symposium held in May 2010 in Tampa, FL Discussion of several modeling and financial reporting issues pertaining to income tax, including: survey of use of tax reserves as opposed to statutory reserves in modeling, computational, regulatory, and disclosure issues with respect to deferred tax assets or liabilities,

This study note focuses on actuarial applications and loss distributions for insurance products.

The report examines various benchmarks for analyzing option adjusted spreads of the major fixed income asset classes of life insurance companies.

The report examines various benchmarks for analyzing option adjusted spreads of the major fixed income asset classes of life insurance companies.

Slides from a session at the Investment Symposium held on March 22–23, 2010 in New York, NY. A discussion of hedging tools and strategies

In this paper, the authors aim to obtain more reliable and accurate mortality projections, based on the idea of obtaining an acceptable accuracy of the estimate by means of variance reducing techniques. In this way the forecasting procedure becomes more efficient.

This paper extends a 'GHV' target-based model of income drawdown developed in Gerrard et al. for the distribution phase of a defined contribution pension scheme. The optimal investment strategy of the pension fund and the optimal drawdown are found using linear-quadratic optimization, which minimizes the deviation of the fund and the drawdown from prescribed targets. The GHV model is modified by nondimensionalizing the loss function, so that there is a relative choice between outcomes. Using this model, three classes of target are studied. Endogenous deterministic targets are suggested from the form of the optimal controls, while exogenous deterministic targets can be stated without knowledge of the optimization problem. The third class of stochastic targets is similar to recent annuity products, which incorporate investment risk. Each scheme represents a trade-off between investment risk and return, and this is illustrated by numerical simulation with reference to a canonical example. A particularly attractive form of income drawdown is given by an implied rate of return target. This yields a reasonable investment strategy and a robust consumption profile with age. In addition, it can be easily explained to pension scheme members.

At, or about, the age of retirement, most individuals must decide what additional fraction of their marketable wealth, if any, should be annuitized. Annuitization means purchasing a nonrefundable life annuity from an insurance company, which then guarantees a lifelong consumption stream that cannot be outlived. The decision of whether or not to annuitize additional liquid assets is a difficult one, since it is clearly irreversible and can prove costly in hindsight. The purpose of this paper is to focus on the question of when and if to annuitize. From NAAJ, January 2001, Volume 5, Number 1.

In this paper we introduce the class of mixture Gaussian time series processes for modeling long-term stock market returns. It offers an alternative class of models to actuaries who may be experimenting with the regime-switching lognormal RSLN process. We use monthly data from the Toronto Stock Exchange 300 and the Standard and Poor's 500 indices to illustrate the mixture time series modeling procedures, and we compare the fits of the mixture models to the lognormal and RSLN models. Finally, we give a numerical example comparing risk measures for a simple segragated fund contract under different stochastic return models.

This paper applies the elementary theory of market mediation to equity markets. Based on stylized institutional and behavioral facts and exploiting the methods of nonlinear dynamics, it explains salient properties of stock market dynamics.