Description: An update on the principle-based reserves (PBR) process and possible valuation manual adoption, with recommendations to actuaries on how to prepare.

Description: Article that recaps a SPDA case study in the use of derivatives for ALM that was presented at the Orlando April spring meeting in Session 40, Are We Prepared for Interest Rates to Rise Again.

Description: Noting that the Commissioners Annuity Reserve Method has been adopted by almost all states in the past four years as the basis for valuing individual account annuities in statutory statements, the author reviews this reserve method and how the various provisions commonly included in modern deferred annuity policies should be reserved to be consistent with its methodology. Includes discussion and author’s review of discussion. From Transactions of Society of Actuaries 1982 Volume 34.

Description: In this article, a numerical comparison of two commonly used FIA valuation methodologies is conducted to help insurers decide on the best methodology to use under GAAP LDTI and VM-22. We compared two modeling approaches to project the future index credits with the annual point-to-point crediting formula: Tthe stochastic equity crediting model and the deterministic option budget crediting model. The analysis is then extended to different levels of option budgets and the monthly average crediting formula. The advantages and disadvantages of the two equity return projecting approaches are also highlighted and will be discussed later in the report.

Description: This article discusses the impact of rising interest rates on annuity writers and life insurers and the risk management challenges it presents. Falling interest rates were addressed as well.

Description: Feature article discussing recent innovations within the fixed annuity insurance industry and the changes those innovations may bring.

Description: This article explores the effectiveness of hedging delta and rho of equity options. This provides insight into the frequency and severity of losses due to not hedging volatility risk or other higher order risks. 10yr-equity put option strategies were chosen to represent the risk of hedging guaranteed benefits attached to variable annuities, while 1-yr put and call strategies were modeled to investigate the risk of hedging equity index interest credited to fixed indexed annuities. In both cases, the value of the option was compared to the value of delta/rho hedges in the tail of both actual historical and simulated scenarios for equity returns and volatilities. The historical path of interest rates and equities was generally used to highlight the hedge impact for different implied volatility assumptions in each example.

Description: This essay advocates that the transition from DB to DC plans won't be complete until plan sponsors offer programs of retirement income in their DC plans. The essay discusses the relevant actuarial and behavioral issues.

Description: This article discusses a variety of new developments in the annuity market.

Description: Discussion of how the weak equity environment has led to a growth in the sale of fixed annuities and fixed account allocations within variable annuities. Includes a description of typical product design features and changes in the nonforfeiture laws to accomodate the low interest rate environment.