1
SOA 2014 VBT/2017 CSO Impact Study Design
Results
Karen Rudolph
Milliman
June 4, 2015 LATF presentation
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SOA Research Report
The SOA engaged Milliman to develop an analysis using data submitted
by participating companies evaluating the impact of valuation mortality
tables proposed for use in the life insurance industry. The tables under
study include beta versions of the 2014 Valuation Basic Table (2014
VBT), the 2014 Relative Risk Tables and corresponding beta version of
the 2017 Commissioners Standard Ordinary (2017 CSO) table. The
2017 CSO was developed by improving the 2014 VBT to 2017 and
adding margin appropriate for valuation purposes. The version of the
2017 CSO without margins was also made available for this analysis. It
is important to remember these tables are beta versions. Final version
may be different from tables testing in this analysis.
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June 2, 2015
Objectives
Compare/contrast proposed (new) tables with existing tables
by evaluating reserves
– Magnitudes
– Patterns
– Relationships
Evaluate
– Margins (CSO vs. unloaded CSO; PBR margins)
– Risk class splits
– S&U versus Ultimate
– Table aggregation
– Compare and calibrate NPR with Deterministic Reserve
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June 2, 2015
Products
Whole Life
20 Year Level Premium Term Insurance
ULSG
Applies to all products:
– No reinsurance
– Single life, not joint
– If participating, assume 100% cash
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Participation – Tabular Data
June 2, 2015
8 Companies (Term)
– 6: Tabular on 5-class structure
– 4: Tabular on 2-class structure
– 4: Tabular on 1-class structure
4 Companies (WL)
– 2: Tabular on 5-class structure
– 3: Tabular on 2-class structure
– 4: Tabular on 1-class structure
1 Company (ULSG)
– 1: Tabular on 5-class structure
– 1: Tabular on 2-class structure
– 1: Tabular on 1-class structure
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June 2, 2015
Tables Gender Underwriting ANB/ALB = Total
2014 Valuation Basic Tables (VBT) 1 Male
1 Female
2 Total
1 non-tobacco
1 tobacco
1 combined
3 Total
1 ANB
1 ALB
2 Total
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2014 VBT RR Tables 1 Male
1 Female
2 Total
10 non-tobacco
4 tobacco
14 Total
1 ANB
1 ALB
2 Total
56
2017 CSO Tables 1 Male
1 Female
2 Total
1 non-tobacco
1 tobacco
1 combined
3 Total
1 ANB
1 ALB
2 Total
12
2017 CSO Preferred Structure Tables 1 Male
1 Female
2 Total
3 non-tobacco
2 tobacco
5 Total
1 ANB
1 ALB
2 Total
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2017 Unloaded CSO Tables 1 Male
1 Female
2 Total
1 non-tobacco
1 tobacco
1 combined
3 Total
1 ANB
1 ALB
2 Total
12
2017 Unloaded CSO Preferred
Structure Tables
1 Male
1 Female
2 Total
3 non-tobacco
2 tobacco
5 Total
1 ANB
1 ALB
2 Total
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Grand Total 132
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June 2, 2015
Data Requested
TABULAR
Valuation net premiums and Terminal Reserves
25-75 x 10 Male and Female (60/65 for Term)
Methods: Term, ULSG: VM20 NPR; WL, UL: current CRVM
All durations
Over as many tables as possible
Auxiliary Information: NF calculations on a 30 Year LPT to 95 product
AGGREGATE
NPR or current CRVM depending on product
VM-20 Deterministic Reserve
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June 2, 2015
Assembling the Data
Industry Model Office Definition
Based on LIMRA industry insurance amount data
Specific by product type
– Percentage weightings by Issue Age; Risk Class; Gender
– By Risk Class for 5-Class, 2-Class and Unismoke
Gender WL Term ULSG
Male 42.7% 55.8% 46.8%
Female 57.3% 44.2% 53.2%
NonTobacco 90% 95.6% 95.9%
Tobacco 10% 4.4% 4.1%
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Assembling the Data
Tabular data converted into Mean Reserve
Tabular data is aggregated using the model office definition
– Aggregation categories: Risk Class, Gender, Issue Age, Overall
Aggregated results are collected up by product type for any given
table structure (Example: 2017 CSO 5-Class S&U)
Each company’s submission is weighted equally – straight average
Ratios are taken
– 2017 CSO / 2001 CSO
– 2017 CSO S&U / 2017 CSO Ultimate
– 2017 CSO Margin = 2017 CSO – 2017 CSO without margin
June 2, 2015
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Impact Study Report
June 2, 2015
Overall Effect of 2017 CSO
– Whole Life Tables 1A (5-class), 1B (2-class), 1C (1-class)
– Term Tables 1A (5-class), 1B (2-class), 1C (1-class), 1D (5-class S&U)
– ULSG Tables 1A (5-class), 1B (2-class), 1C (1-class)
Aggregation Analysis
– Demonstration of weighting reserves from more granular classes and comparing to less granular class [Table 2 ]
Select Period Analysis
– By policy year, ratios of terminal reserves based on Ultimate to terminal reserves based on S&U, over select period durations [Table 3]
Loading Analysis
– Loading inherent in 2017 CSO versus loading inherent in 2001 CSO [Table 4]
Auxiliary Items
– CV testing on 30 year term plan, if anyone did this
VM20 Analysis
– Company level comparison of progression of Forecast DR and NPR
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Table 1 Series - Overall Impact
Presented here are portions of the larger report
• WL
• ULSG
• Term
June 2, 2015
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2017 CSO Mean Reserve as percent of 2001 CSO Mean Reserve
Overall
t= 5 t = 10 t = 15 t = 20 t = 30 t = 40 t = 50
5-Class Ultimate 92% 93% 94% 95% 97% 98% 99%
2-Class Ultimate 90% 92% 93% 94% 96% 98% 99%
1-Class Ultimate 94% 95% 96% 97% 98% 99% 100%
WHOLE LIFE PRODUCT
Comparison of CRVM Mean Reserves
2017 to 2001 CSO Ultimate
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ULSG PRODUCT
Comparison of NPR Mean Reserves
2017 to 2001 CSO
2017 CSO Mean Reserve as percent of 2001 CSO Mean Reserve
Overall
t= 5 t = 10 t = 15 t = 20 t = 30 t = 40 t = 50
5-Class Ultimate 92% 90% 91% 91% 93% 94% 95%
2-Class Ultimate 89% 86% 87% 88% 90% 92% 92%
1-Class Ultimate 95% 93% 93% 94% 95% 97% 98%
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20-YEAR TERM PRODUCT
Comparison of NPR Mean Reserves
2017 to 2001 CSO
2017 CSO Mean Reserve as percent of 2001 CSO Mean Reserve
Overall
t= 5 t = 10 t = 15 t = 20
5-Class Ultimate 62% 60% 62% 64%
2-Class Ultimate 55% 54% 55% 60%
1-Class Ultimate 71% 65% 68% 70%
5-Class S&U 67% 67% 69% 64%
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Table 1A
Comparison of VM-20 Net Premium Mean Reserves
2017 CSO Ultimate Mean Reserve as percent of 2001 CSO Ultimate Mean Reserve
Preferred Structure Table (5-class)
Average of Results from All Companies (5*)
20 Year Term Product
t= 5 t = 10 t = 15 t = 20
Overall 62% 60% 62% 64%
Gender
Male 61% 60% 61% 64%
Female 62% 62% 62% 64%
Risk Class
Super Preferred NS 64% 61% 63% 68%
Preferred NS 63% 62% 63% 67%
Residual NS 54% 53% 54% 55%
Preferred S 95% 93% 94% 89%
Residual S 82% 80% 80% 73%
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Table 4 Series - Margin Analysis
Presented here are portions of the larger report
• WL – Overall for 5-Class
• WL – By Risk Class
• Term – Overall for 5-Class S&U
• Term – By Risk Class
June 2, 2015
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Table 4
Comparison of CRVM Mean Reserves With and Without Margin
Average of Results from All Companies (2)*
Whole Life Product
5-Class Ultimate
t= 5 t = 10 t = 15 t=20 t=30 t=40 t=50
Reserve based on 2017 CSO / Reserve based on 2017 CSO Without Margin
Overall 105% 105% 104% 104% 103% 102% 102%
Reserve based on 2001 CSO / Reserve based on 2001 VBT
Overall 104% 103% 103% 103% 102% 101% 101%
Difference (2017 - 2001)
Overall 2% 2% 1% 1% 1% 1% 1%
Difference in Dollar Amount
Overall 0.72 1.80 2.78 3.61 4.89 5.45 5.24
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Table 4A
Comparison of CRVM Mean Reserves With and Without Margin
Average of Results from All Companies
Whole Life Product
5-Class Ultimate by Risk Class
t= 5 t = 10 t = 15 t=20 t=30 t=40 t=50
Reserve based on 2017 CSO / Reserve based on 2017 CSO Without Margin
Super Preferred NS 105% 105% 104% 104% 103% 102% 102%
Preferred NS 105% 105% 104% 104% 103% 102% 102%
Residual NS 105% 105% 104% 104% 103% 102% 102%
Preferred S 106% 105% 105% 104% 103% 102% 102%
Residual S 106% 106% 105% 104% 103% 102% 102%
Reserve based on 2001 CSO / Reserve based on 2001 VBT
Super Preferred NS 104% 103% 103% 103% 102% 101% 101%
Preferred NS 104% 103% 103% 103% 102% 101% 101%
Residual NS 106% 105% 104% 103% 102% 101% 101%
Preferred S 103% 103% 103% 102% 102% 101% 101%
Residual S 103% 103% 103% 102% 102% 101% 101%
Difference (2017 - 2001)
Super Preferred NS 1% 1% 1% 1% 1% 1% 1%
Preferred NS 1% 1% 1% 1% 1% 1% 1%
Residual NS 0% 0% 0% 1% 1% 1% 1%
Preferred S 3% 2% 2% 2% 1% 1% 1%
Residual S 3% 3% 2% 2% 2% 1% 1%
Difference in Dollar Amount
Super Preferred NS 0.44 1.26 2.07 2.79 4.04 4.81 4.95
Preferred NS 0.58 1.53 2.43 3.21 4.48 5.14 5.10
Residual NS 0.70 1.77 2.75 3.60 4.93 5.51 5.29
Preferred S 1.75 3.65 5.21 6.33 7.51 7.25 6.05
Residual S 1.91 3.94 5.57 6.72 7.87 7.47 6.09
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Table 4
Comparison of VM-20 Net Premium Mean Reserves on With and Without Margin
Average of Results from All Companies
20 Year Term Product
5-Class Select & Ultimate (5)
t= 5 t = 10 t = 15 t=20
Reserve based on 2017 CSO / Reserve based on 2017 CSO Without Margin
Overall 123% 121% 121% 120%
Reserve based on 2001 CSO / Reserve based on 2001 VBT
Overall 111% 112% 113% 118%
Difference (2017 - 2001)
Overall 12% 9% 8% 2%
Difference in Dollar Amount
Overall 0.12 0.11 0.10 (0.18)
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Table 4A
Comparison of VM-20 Net Premium Mean Reserves With and Without Margin
Average of Results from All Companies
20 Year Term Product
5-Class Select & Ultimate by Risk Class
t= 5 t = 10 t = 15 t=20
Reserve based on 2017 CSO / Reserve based on 2017 CSO Without Margin
Super Preferred NS 123% 122% 121% 120%
Preferred NS 124% 122% 121% 120%
Residual NS 124% 121% 121% 120%
Preferred S 121% 119% 119% 122%
Residual S 121% 119% 119% 122%
Reserve based on 2001 CSO / Reserve based on 2001 VBT
Super Preferred NS 119% 119% 118% 126%
Preferred NS 113% 114% 114% 120%
Residual NS 128% 120% 117% 129%
Preferred S 107% 108% 109% 113%
Residual S 105% 106% 107% 110%
Difference (2017 - 2001)
Super Preferred NS 4% 3% 3% (6%)
Preferred NS 11% 8% 7% 0%
Residual NS (4%) 2% 4% (9%)
Preferred S 13% 11% 10% 9%
Residual S 16% 13% 12% 12%
Difference in Dollar Amount
Super Preferred NS (0.02) (0.16) (0.14) (0.20)
Preferred NS 0.09 0.09 0.07 (0.18)
Residual NS 0.17 0.21 0.14 (0.23)
Preferred S 1.14 2.14 2.28 0.28
Residual S 1.39 2.51 2.62 0.28