Description: This paper demonstrates some of the basic principles and concepts inherent in the use of natural reserves to adjust earnings and to demonstrate differences in earning patterns obtained by several alternative approaches to a pure natural reserve adjustment of earnings.

Description: This paper discusses three methods for the amortization of deferred acquisition expenses, DAC and the results when actual experience differs significantly from that assumed. The methods include a static approach with prescheduled amortization, a dynamic technique called the expense reserve factor method, and an aggregate or accumulated premium revenue method. A discussion follows the paper. From Transactions of Society of Actuaries 1978, Vol. 30.