The Amortisation of Bonds and the Valuation of Assets of a Life Insurance Company

Extract

The word “amortisation” is now being used in insurance circles in America to represent the operation of a sinking fund, whereby bonds or other fixed term securities, bought at a premium or at a discount, will be brought down, or up, to the par value at the date when repayment is promised. The scientific basis of the method is so well known to actuaries and is so fully explained in such standard works as King's Theory of Finance and the Institute of Actuaries Text-Book, that there is no need for me to enter upon a discussion of the principles. But of late years the system has assumed great practical importance, and the general method, with the suitability of its application to our business, are subjects worthy of consideration and discussion.