An Analysis of Profit from Endowment Assurances

Extract

A great deal has been written about Endowment Assurances, which now form so large a proportion of the new business of life assurance offices, but their effect upon the business has been only partially investigated, and much yet remains to be done. It is generally admitted that the mortality in this class is better than that prevailing in other classes, and recently Mr. R. P. Hardy brought before the Congress of Actuaries in New York an interesting paper, in which he stated that “while probably the results would vary in their incidence according to the tables brought into contrast, it appears to me that one effect of a better mortality is to show a gradually reduced surplus. And if this be the case, some care is necessary in relying upon future profits according to their past experience.” He appended a table showing the quinquennial surplus or deficiency arising when the premiums are charged, and the reserves made, according to the American table as adjusted by Mr. Arthur Hunter, while the mortality experienced is that of the O^M table; and the results show that, for endowment assurances of 15, 20 and 25 years, the surplus at each quinquennium, as a rule, diminishes very rapidly. It should be noted that these calculations were made at 3 per cent interest throughout.