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The Financial Management of a With-Profit Long-Term Fund—Some Questions of Disclosure

Published online by Cambridge University Press:  03 October 2014

C. S. S. Lyon
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Extract

1.1. There are three starting points for this paper. The first is Marshall Field's challenging Presidential Address to the Institute of Actuaries in 1986 on the subject of “Risk and Expectation”. The second is the example, still fresh in our minds, of a medium-sized mutual life office which overstretched itself and found it necessary to merge with a competitor. The third is the impending requirement, stemming from the Financial Services Act 1986, to give an investment client, including the holder or prospective holder of an insurance savings contract, what is described as “best advice”.

Type
Research Article
Information
Transactions of the Faculty of Actuaries , Volume 41 , 1987 , pp. 14 - 63
Copyright
Copyright © Institute and Faculty of Actuaries 1987

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References

(1) Field, M. H. (1987) Presidential Address: Risk and Expectation, J.I.A. 114, pp 1–14.Google Scholar
(2) Jenkins, T. C. and Wilson, A. J. (1975) “A study (using projection mathematics) of a change in the minimum valuation basis”, TIAANZ 1975 pp 45–190, includes at pp 56–7 the proof of a theorem attributed to J. C. Coss that “the yield(s) on transfers (to and from the estate) determines the rate(s) of expansion which the business will support”.Google Scholar
(3) In his contribution cited in note (9) below, T. C. Jenkins neatly describes as the liability estate “that part of the estate which a cautious basis for valuing liabilities forces into existence”.Google Scholar
(4) Redington, F. M. (1986) “Prescience & Nescience”, in A Ramble through the Actuarial Countryside, pp 518–535. ed. Chamberlin, G. (Staple Inn).Google Scholar
(5) Skerman, R. S. (1968) “The assessment and distribution of profits from life business”, J.I.A. 94, pp 53–100.Google Scholar
(6) Ward, G. C., (1970) “A model office study of a terminal bonus system of full return of surplus to ordinary participating policies”, TIAANZ 1970 pp 21–67 and D1–23.Google Scholar
(7) Jenkins, T. C. and Wilson, A. J.art. cit.Google Scholar
(8) Redington F. M. (1986) “The flock & the sheep & other essays”, in A Ramble through the Actuarial Countryside pp 406–428, pp 411–413. ed. Chamberlin, G., Staple Inn.Google Scholar
(9) Jenkins, T. C. in A Ramble through the Actuarial Countryside pp 452–458.Google Scholar
(10) Forfar, D. O., Milne, R. J. H., Muirhead, J. R., Paul, D. R. L., Robertson, A. J., Robertson, C. M., Scott, H. J. A., and Spence, H. G., of the Faculty of Actuaries Bonus and Valuation Research Group, “Bonus rates, valuation and solvency during the transition between higher and lower investment returns”, T.F.A. 40, pp 512–517.Google Scholar
(11) It looks as though the strain on the intermediate basis in the final year has been overstated by about 34. Taking the figure in the paper (1134) produces a negative rate of return to the estate, which is clearly wrong.Google Scholar
(12) Field, M. H.art. cit. pp 8–9.Google Scholar
(13) Smaller, S. L. (1985) “Bonus declarations after a fall in interest rates”, J.I.A. 112 pp 163–204, p 167.Google Scholar
(14) Forfar, et al. , art. cit. p 19.Google Scholar
(15) Ward, G. C. “Notes on the search for equity in life insurance” (submitted to the Australian Institute, August/September 1986) pp 30–31.Google Scholar