The Address is a journey in three parts. The first part describes the world scene in the last century when the Institute was founded and traces the development of actuarial work to the present day. The current U.K. pension scene is then broadly reviewed and the journey ends with vistas of the future. The concentration of actuarial work towards life assurance and pensions is attributed to meeting the needs of the past and encouragement is given to the urgent extension of the work of the profession into wider fields.

The U.K. pension scene is described as being complex, confused and filled with uncertainty. The profession is urged to assist government actively and positively, to examine the expected future growth of pension funds, and to compare the financing of retirement benefits in the U.K. with other methods adopted in Europe.

Work in wider fields is envisaged as embracing general insurance, the health and care of the aged, banking and finance, and the appraisal of capital projects.

The paper deals with the development of unitised with-profits business in the United Kingdom. The authors trace the recent history of these products and comment on the main reasons for their development They also deal with corporate issues, including implications for policyholders and shareholders of different fund structures and different types of life office. Pricing and product development issues are also covered. Reserving issues including the range of valuation methods, statutory requirements and policyholders' reasonable expectations are explored. Finally the paper considers the actuary's contribution to the management of unitised with-profits policyholders' expectations.

The paper analyses the relationship between equities and gilt-edged. It shows that the yield ratio (the yield on gilts divided by that on equities) should no longer hold its almost mystical significance of the last decade, being but one component of the expected return on equities, in which the most significant element is the rate of dividend growth relative to the yield on gilt-edged. How equities perform in economic recession is highlighted. The paper reviews the performance of equities over the last 70 years in both nominal and real terms and analyses the historic sources of the equity risk premium, i.e. the excess return of equities over gilt-edged. If the equity risk premium remains at below-average levels in the 1990s, as is possible, constraints may be placed on actuaries' choice of pension fund valuation bases.

A well-known result concerning the equated time of a series of cash payments is extended to more general cash flows, including continuous payment streams.

The historic barriers between the different companies which comprise the financial services industry are breaking down. In order that organisations may prosper in the new environment the relationships between products, distribution and clients need to be understood. A theory is developed to explain the historic position and the dynamics of the current environment and indicate future trends. The conclusion is that successful organisations will be those which fully understand and specialise in a limited number of sectors, and those who start with a clientbase and a distribution system which will not inhibit the introduction of other distribution methods so that they can become multi-product and multi-distribution organisations. Finally, the paper explores the relationships between pricing policy and distribution by means of distribution chains to determine the point and degree of price sensitivity.

This paper seeks to define and explain financial reinsurance, a type of reinsurance growing rapidly in the general insurance market. It provides criteria for underwriters and actuaries to understand the degree of risk transfer involved and the limitations on that risk transfer. It seeks to set out criteria, applicable to both insurer and reinsurer, for estimating reserves where financial reinsurance covers are involved and for compliance with supervisory requirements. Several examples are given of typical financial reinsurance contracts currently in use.

This paper looks at the existing controls on minimum funding standards and the solvency of defined benefit pension schemes in the United Kingdom. It considers the definition and disclosure of solvency margins and then goes on to look at the operation of a ‘Pensioners’ Protection Fund which would underwrite the solvency of schemes in a winding-up. With submissions due to the Goode Committee before the end of 1992, this paper will provide a well-timed opportunity to discuss some of the issues to be addressed by that Committee.

In this paper an asset/liability model is used to compare the quality of information available from a set of stochastic simulations with a traditional deterministic sensitivity test approach.

The traditional approach applied to a range of variants of the basic model office fails to distinguish adequately very risky strategies from relatively secure strategies. The stochastic simulation method succeeds in ranking the various strategies considered into an intuitively satisfactory order of insolvency risk, as well as giving quantitative information on the relative probabilities of insolvency of different strategies and on the timing of potential solvency problems.

This paper extends the theory of graduation by parametric formulae to include dynamic estimation methods. This is an application of the Kalman filter and allows the parameters of the curve fitted to vary with age. The amount of variation is determined by the amount of smoothing required, and the method can be regarded as a combination of curve fitting and sequential smoothing, each of which has been used separately for performing graduations. In practice, a dynamic straight line can always be used for the graduation and the method has a sensible logical interpretation.

This paper considers the application of loglinear models to claims run-off triangles which contain negative incremental claims. Maximum likelihood estimation is applied using the three parameter lognormal distribution. The method can be used in conjunction with any model which can be expressed in lognormal form. In particular the chain ladder technique is considered. An example is given and the results compared with the basic actuarial method.