Description: Like it or not, variable annuity (VA) liabilities are inextricably linked with the equity markets. Generally, up markets reduce the excess benefit liability and increase fee income, while down markets increase the excess benefit liability and reduce fee income. Given the volatility, most VA writers will hedge to meet their needs. In this session, the presenters will discuss the need for hedging, regulatory requirements and how companies ultimately determine their hedging strategies.

Description: This paper describes a method for valuing a contingent or reversionary interest involving 2, 3, and 4 lives subject to federal tax. Tools are provided so that a person with little technical knowledge can make the determination. From Transactions of Society of Actuaries 1951, Vol. 3, No. 6.

Description: This report deals with the findings of the 1954 iinter-company study of the mortality under individual immediate annuities.

Description: This paper builds a model that quantifies the natural hedging benefits of a portfolio of both variable annuities and equity indexed annuities. The model is based on risk-neutral option pricing theory and risk-adjusted performance measure, RAPM. Through a double-tier simulation framework, an optimum product mixture of those two contracts is achieved that provides the best RAPM and therefore deploys capital the most efficiently. From 2006 Enterprise Risk Management Symposium, M-AS06-1.

Description: Chairperson’s column describing activities the Product Development section has undertaken to date.

Description: Throughout this session, the presenters will focus on tax rules pertaining to life and annuities, highlighting the recent changes to interest rates under Internal Revenue Code Section 7702 which determines whether a contract qualifies as a life insurance contract. In addition, recent annuity changes will be discussed such as required minimum distributions. Background and examples will be provided on the cash value accumulation test, the guideline premium requirements and the cash value corridor rules under 7702.

Description: This 1973 report is a sex-distinct summary of the relevant mortality experience for the general population, for insured lives, and for life annuitants.

Description: We devise an approach, using tobit models for modeling annuity lapse rates. The approach is based on data provided by the Society of Actuaries’ Risk Management Task Force. Kim [2005a] models annuity lapse rates using a logit model and the same US data (he also used Korean data separately). We find that the tobit model is a more than suitable approach for all levels of the explanatory variables including interest rates, unemployment rates, and GDP growth rates. Specifically, policyholder behavior in the tail of the distribution of lapse rates is explained as well as it is in the normal range of lapse rates.

Description: The speaker will share his insights into the hedging challenges faced by FIA and VA business in the current market environment.

Description: This report presents mortality under individual immediate annuities, life income settlements, and matured deferred annuities between the 1971 and 1976 anniversaries.