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2008 Fall Letter

2008 Fall Letter. Status Going through Due Process Letter is getting shorter Educational notes published or about to be published Maintenance mode on existing standards. 2008 Fall Letter. Insurance Mortality Unchanged Any mortality improvement offset in MfAD

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2008 Fall Letter

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  1. 2008 Fall Letter • Status • Going through Due Process • Letter is getting shorter • Educational notes published or about to be published • Maintenance mode on existing standards

  2. 2008 Fall Letter • Insurance Mortality • Unchanged • Any mortality improvement offset in MfAD • Changes to Standards of Practice related to mortality improvement would be effective in 2009

  3. 2008 Fall Letter • Annuity Mortality • Unchanged • Continues previous recommended alternative to AA scale • Detailed in Appendix A • Changes to Standards of Practice related to mortality improvement would be effective in 2009 • Method for promulgation of rates of mortality improvement expected to change in 2009

  4. 2008 Fall Letter • Scenario Assumptions – Interest Rates • Modified from last year • Refers to Phase I of development of Calibration Criteria expected to be published this year • In the context of stochastic testing, if policy liability is less than that required under worst prescribed scenario CLIFR recommends • that the actuary ensure that model generated rates are tested against draft calibration criteria, and • that rates ideally satisfy draft criteria, • in addition to guidance from previous years.

  5. 2008 Fall Letter • Lapse Studies – Universal Life Level COI and Term to 100 • Modified to reflect • October 2007 study on lapse experience under Universal Life Level COI Policies • October 2007 Term to 100 lapse study • Long Term Equity Returns • Deleted in anticipation of Educational Note

  6. 2008 Fall Letter • Value of Minimum Interest Guarantees and Embedded Options • Guidance unchanged from previous years • Low current economic environment • Not captured by deterministic scenarios

  7. 2008 Fall Letter • Considerations for Amounts on Deposit and Claims Provisions under AcSB Section 3855 Financial Instruments • Guidance unchanged from previous years • Concerns if liability valued without interest adjustment • Guidance on presentation in financial statements

  8. 2008 Fall Letter • Implication of AcSB Section 3855 Financial Instruments on Future Income and Alternative Taxes • Guidance modified from last year • July, 2008 draft proposals released • essentially unchanged from November 2007 • comment period to September 15, 2008 • not substantively enacted at time of writing • If auditor / accountant agree for balance sheet tax provision to treat as if substantively enacted then policy liabilities would be calculated consistent with this position

  9. 2008 Fall Letter • Implication of AcSB Section 3855 Financial Instruments on Future Income and Alternative Taxes • Otherwise • If current liabilities greater than post 3855 liabilities on both current and proposed basis, then appropriate to reflect draft legislation in 2008 year-end liabilities • However, actuary would not reduce liabilities relative to the liabilities in post-3855 environment with current tax rules.

  10. 2008 Fall Letter • Implication of AcSB Section 3855 Financial Instruments on Future Income and Alternative Taxes • Considerations • Amount of time which has passed • Consistency of most recent draft with revisions published in November, 2007 • Difficulty in tracking liabilities on pre 3855 basis • Understanding that many insurers filed 2007 returns on basis of draft legislation

  11. CLIFR Update • Questions?

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