Use deterministic profit testing to assess emerging surplus for equity-linked life insurance cash flows, including profit signature, profit vector, net present value, internal rate of return, profit margin, and discounted payback periods, under best estimate or stress test assumptions.
Free SOA Exam ALTAM (Advanced Long-Term Actuarial Mathematics) lesson in Embedded Options in Life Insurance and Annuity Products. 44 min read, ~6,647 words.
Profit vector is per-in-force end-of-year emerging surplus. Profit signature is per-issue. NPV discounts at the risk discount rate (RDR). IRR is the RDR that makes NPV zero. Profit margin equals NPV divided by EPV of premiums. Discounted payback period (DPP) is the first at which cumulative discounted turns non-negative. Best...
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What this lesson covers
- Content
- Example 1
- Example 2
- Example 3
- Example 4
- Example 5
- Common Mistakes
- Key Takeaways
- Exam Shortcuts
Learning objectives
- 7e
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