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					 Canadian                 L’Institut
  Institute               canadien
         of               des
 Actuaries                actuaires

 2007 General Meeting
Assemblée générale 2007
   Montréal, Québec
                           T100 and UL LCOI
                          Lapse Studies Results
Assemblée générale 2007
 2007 General Meeting




                                            Lloyd Milani
                                          Nikolai Serykh
                                       November 30, 2007
                                          Agenda
                          •   UL LCOI Industry Pricing
                              –   2006 Munich Re Survey
Assemblée générale 2007




                          •   Lapse Studies Highlights
 2007 General Meeting




                          •   Scope and Method
                          •   Results
                          UL LCOI Industry Pricing
                          •   2006 Munich Re Survey
                              –   Sales and Funding
Assemblée générale 2007




                              –   Lapse and Interest
 2007 General Meeting




                              –   Profit
 2007 General Meeting
Assemblée générale 2007
                          UL Level COI Sales
 2007 General Meeting
Assemblée générale 2007
                          UL Level COI Funding Level
 2007 General Meeting
Assemblée générale 2007   UL LCOI Pricing Lapses
 2007 General Meeting
Assemblée générale 2007   UL LCOI Lapse and Interest
 2007 General Meeting
Assemblée générale 2007   UL LCOI - Profitability
                                  T100 and UL LCOI
                                   Lapse Study 2007
                          •   Request for data - Beginning 2005
                          •   Enhanced Fields
Assemblée générale 2007
 2007 General Meeting




                              –   Cash Value
                              –   NAAR Pattern
                              –   UL Deposit
                          •   Results Database
                                  Working Group

                          •   Nikolai Serykh
                          •   Elena Stoyanova
Assemblée générale 2007
 2007 General Meeting
                          Individual Life Subcommittee
                            of the Research Committee
                          •   Lloyd Milani, Chairperson
                          •   Stephen Beal
Assemblée générale 2007
 2007 General Meeting




                          •   Marc-Andre Belzil
                          •   William Brath
                          •   Emile Elefteriadis
                          •   Beth Fitzmaurice
                          •   Marc Tardif
                                          Agenda
                          •   UL LCOI Industry Pricing
                              –   2006 Munich Re Survey
                          •   Lapse Studies Highlights
Assemblée générale 2007
 2007 General Meeting




                          •   Scope and Method
                          •   Results
                               Participating Companies
                          •   AIG            •   Industrial Alliance
                          •   Canada Life    •   Manulife Financial
                              Co-operators       Standard Life
Assemblée générale 2007




                          •                  •
 2007 General Meeting




                              Life           •   Sun Life
                          •   Desjardins     •   Transamerica Life
                          •   Empire Life    •   Wawanesa
                          Top 5 companies contribution to total
                          policy exposure:
                          97% for T100 86% for UL LCOI
                                  Highlights – T100 Study
                          •   1999-2004 Period
                          •   92,587 lapses
                              –   Duration 1-10 - 73,064 lapses
Assemblée générale 2007




                                  Duration 11-20 - 19,594 lapses
 2007 General Meeting




                              –

                              –   Duration 21-25 – 156 lapses
                          •   Over 4.0 million policy exposures
                          •   Over 251 billion face amount exposure
                          •   Compared to 1999 T100 Lapse Study
                              –   204.5% of exposure by policy
                              –   139.0% of exposure by face amount
                          Highlights – UL LCOI Study
                          •   2002-2004 Period
                          •   103,049 lapses
                              –   Duration 1-5 - 74,972 lapses
Assemblée générale 2007




                              –   Duration 6-10 - 24,526 lapses
 2007 General Meeting




                              –   Duration 11-15 - 3,551 lapses
                          •   Over 2.1 million policy exposures
                          •   Over 304 billion face amount exposure
                          •   Compared to 2003 UL LCOI Lapse
                              Study
                              –   167.0% of exposure by policy
                              –   149.0% of exposure by face amount
                                          Method
                          •   Calendar year method
                          •   Exposure period as provided by
Assemblée générale 2007




                              company without modification
 2007 General Meeting




                          •   Following Status codes included
                              –   Active
                              –   Death
                              –   Lapsed and Surrendered
                                                Scope
                          •   Results by Number and by Face Amount
                          •   Durations 1-25 for T100 and 1-15 for UL
                              –   Total
Assemblée générale 2007
 2007 General Meeting




                              –   Calendar Year
                              –   Sex and Joint
                              –   Smoking Status
                              –   Policy Size
                              –   Issue Age
                              –   Premium Frequency
                              –   Cash Value Availability (T100 only)
                          T100 Lapse Study Results
                          •   Total
                          •   Calendar Year
                          •   Sex and Joint
Assemblée générale 2007




                              Smoking Status
 2007 General Meeting




                          •

                          •   Policy Size
                          •   Issue Age
                          •   Premium Frequency
                          •   Cash Value Availability
                          •   Comparison to
                              –   1999 Term-to-100 Lapse Study
                                       Term-to-100 Study
                                               Chart 1a - Composite Lapse Rates
                          8%

                          7%
Assemblée générale 2007
 2007 General Meeting




                          6%

                          5%

                          4%

                          3%                                                           By Number

                          2%                                                           By Amount

                          1%

                          0%
                               1   2   3   4   5   6   7   8   9    10 11 12 13 14 15 16 17 18 19 20
                                                                   Policy Year
                          T100 Study by Calendar Year
                                         Chart 2b - Composite Lapse Rates by Calendar Year
                          8.0%
                                                     (by Amount of Sum Assured)

                          7.0%
Assemblée générale 2007




                          6.0%
 2007 General Meeting




                          5.0%

                          4.0%
                                                                                             1999
                          3.0%                                                               2004
                                                                                             1999-2004

                          2.0%

                          1.0%
                                                                 Policy Year
                          0.0%
                                 1   2   3   4   5   6   7   8    9   10 11 12 13 14 15 16 17 18 19 20
                          T100 Study by Sex and Joint
                                    Status
                                                 Chart 3b - Lapse Rates by Sex
                                                     (by Amount of Sum Assured)
                          8.0%

                          7.0%
Assemblée générale 2007
 2007 General Meeting




                          6.0%

                          5.0%

                          4.0%                                                  Male Single   Female Single

                          3.0%                                                  Joint 1st     Joint 2nd

                          2.0%

                          1.0%

                          0.0%
                                 1   2   3   4   5    6   7   8   9   10 11 12 13 14 15 16 17 18 19 20
                                                                  Policy Year
                          T100 Study by Smoking Status
                                    Chart 4b - Lapse Rates by Smoking Status
                                                  (by Amount of Sum Assured)
                          12%
Assemblée générale 2007




                          10%
 2007 General Meeting




                          8%

                          6%                                             Non-Smoker
                                                                         Smoker
                                                                         Aggregate
                          4%

                          2%

                          0%
                                1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
                                                     Policy Year
                               T100 Study by Policy Size
                                         Chart 5b - Lapse Rates by Policy Size
                          9%                       m
                                               (byA ount of SumAssured)
                          8%
                          7%
Assemblée générale 2007
 2007 General Meeting




                          6%
                          5%
                          4%                                                     <$100K

                          3%                                                     $100K-249K

                          2%                                                     $250K+

                          1%
                          0%
                               1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
                                                        PolicyYear
                                   T100 Study by Issue Age
                                               Chart 6b - Lapse Rates by Issue Age
                          9%                               (by Amount of Sum Assured)
                          8%
Assemblée générale 2007




                          7%
 2007 General Meeting




                          6%

                          5%

                          4%

                          3%                                                               25-34        35-44        45-54

                          2%

                          1%

                          0%
                               1   2   3   4   5   6   7   8   9    10    11     12   13    14     15    16     17    18     19   20
                                                                   Policy Year
                               T100 Study by Premium
                                     Frequency
                                   Chart 7b - Lapse Rates by Premium Frequency
                                                 (by Amount of Sum Assured)
                          8%
                          7%
Assemblée générale 2007
 2007 General Meeting




                          6%
                          5%
                          4%
                                                                              Non-Monthly
                          3%
                                                                              Monthly
                          2%
                          1%
                          0%
                               1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
                                                     Policy Year
                                    Term-to-100 Study
                               by Cash Value Availability (1)
                                       Chart 9b - Lapse Rates by Timing of Cash Value Availability
                                                      (by Amount of Sum Assured)
                          7%


                          6%
Assemblée générale 2007
 2007 General Meeting




                          5%


                          4%                                                                     Available CV

                                                                                                 No CV or CV in 5+ years
                          3%


                          2%


                          1%


                          0%
                               1   2    3   4   5   6   7   8   9    10    11     12   13   14   15   16   17   18   19   20
                                                                    Policy Year
                                     Term-to-100 Study
                                by Cash Value Availability (2)
                                        Chart 9b - Lapse Rates by Timing of Cash Value Availability
                                                       (by Amount of Sum Assured)
                          10%

                          9%
Assemblée générale 2007




                          8%
 2007 General Meeting




                          7%

                          6%                                                                       Available CV
                                                                                                   No CV or CV in 5+ years
                          5%
                                                                                                   CV in next 5 Years
                          4%

                          3%

                          2%

                          1%

                          0%
                                1   2     3   4   5   6   7   8   9    10    11     12   13   14   15   16   17   18   19   20
                                                                      Policy Year
                                Term-to-100 Study
                                   1999 vs 2007
                          •   Composite Rates at Durations 1-15
Assemblée générale 2007
 2007 General Meeting




                          •   1999 vs 2007 without Cash Value
                               T100 Study – 1999 vs 2007
                                           Chart 1c - Composite Lapse Rates
                          9%                 (by Amount of Sum Assured)
                          8%
Assemblée générale 2007




                          7%
 2007 General Meeting




                          6%
                          5%

                          4%
                                                                                1999 Study   2007 Study
                          3%

                          2%

                          1%

                          0%
                               1   2   3     4   5   6   7       8     9   10      11   12   13   14      15
                                                             Policy Year
                                   T100 Study 1999 vs 2007
                                     without Cash Value
                                               Composite Lapse Rates
                          9%                (by Amount of Sum Assured)
Assemblée générale 2007
 2007 General Meeting




                          8%
                          7%
                          6%
                          5%

                          4%                                                        1999 Study

                          3%                                                        2007 Study wo CV

                          2%
                          1%
                          0%
                               1    2   3   4   5   6   7       8     9   10   11   12    13     14    15
                                                            Policy Year
                          UL LCOI Lapse Study Results
                           •   Total
                           •   Policy Size
Assemblée générale 2007
 2007 General Meeting




                           •   Comparison to
                               –   2003 UL LCOI Lapse Study
                               –   2007 Term-to-100 Lapse Study
                               –   Munich Re Pricing Survey
                                                UL LCOI Lapse Study
                                                        Chart 1a - Composite Lapse Rates

                                       9%

                                       8%
Assemblée générale 2007




                                       7%
 2007 General Meeting




                                       6%
                          Lapse Rate




                                       5%                                                          By Number
                                       4%                                                          By Amount
                                       3%
                                       2%
                                       1%

                                       0%
                                            1   2   3   4    5   6   7    8    9    10   11   12   13   14     15
                                                                      Policy Year
                                                      UL LCOI Lapse Study
                                                          Policy Size
                                                                  Chart 5b - Lapse Rates by Policy Size
                                                12%                               m
                                                                             (by A ount of SumAssured)
Assemblée générale 2007
 2007 General Meeting



                          Lapse Rate (by Amt)




                                                10%

                                                8%                                                                 <$100K
                                                                                                                   $100K-$249K
                                                6%
                                                                                                                   $250,000+
                                                4%

                                                2%

                                                0%
                                                      1   2   3     4    5     6    7   8     9   10     11   12     13     14   15
                                                                                    Policy Year
                          UL LCOI Study – 2003 vs 2007

                           •   Overall
                           •   Differences
Assemblée générale 2007
 2007 General Meeting
                                                 UL LCOI – 2003 vs 2007
                                                                 Chart 1c - Composite Lapse Rates
                                                6%
                                                                   by Amount of Sum Assured
Assemblée générale 2007
 2007 General Meeting



                          Lapse Rate (by Amt)



                                                5%

                                                4%
                                                                                                             2003 Study
                                                3%                                                           2007 Study

                                                2%

                                                1%

                                                0%
                                                     1   2   3     4   5   6   7    8    9    10   11   12   13   14   15
                                                                                Policy Year
                          UL LCOI Study – 2003 vs 2007
                                 Differences
                           •   Different Study Periods:
                                   1997-2001 vs 2002-2004
Assemblée générale 2007




                               –
 2007 General Meeting




                           •   Shift in Participants Contribution
                           •   Change in Sample Demographic:
                               –   Male = -0.8%          Female = +5.6%
                               –   Joint 1st to Die = -1.2%
                               –   Joint 2nd to Die = -3.6%
                          UL LCOI vs Term-to-100
                          •   Composite Rates at Durations 1-15
                          •   Non-Smoker, Single, 100K+ Band,
Assemblée générale 2007
 2007 General Meeting




                              Monthly Premium Mode
                               UL LCOI vs Term-to-100
                                           Chart 1e - Composite Lapse Rates
                                             by Amount of Sum Assured
                          6%
Assemblée générale 2007




                          5%
 2007 General Meeting




                          4%

                          3%                                               T100         UL LCOI


                          2%

                          1%

                          0%
                               1   2   3   4   5   6   7    8    9    10     11   12   13   14    15
                                                        Policy Year
                                                UL LCOI vs Term-to-100
                                 NS, Single, 100K+, Monthly Mode

                                                5.0%
Assemblée générale 2007
 2007 General Meeting



                          Lapse Rate (by Amt)




                                                4.0%


                                                3.0%                                                        T100

                                                                                                            UL LCOI
                                                2.0%


                                                1.0%


                                                0.0%
                                                       1   2   3   4   5   6   7   8    9    10   11   12   13   14   15
                                                                               Policy Year
                          Munich Re Pricing Survey
                          •   2002 Assumptions vs 1997-2001
                              Experience
Assemblée générale 2007
 2007 General Meeting




                          •   2006 Assumptions vs 2002-2004
                              Experience
 2007 General Meeting
Assemblée générale 2007
                                Issue Age 25-35
                          2003 UL vs MRe Survey 2002
                          2007 UL vs MRe Survey 2006
                               Issue Age 25-34 (1)
                                                     Pricing vs Valuation vs Experience
Assemblée générale 2007




                                                9%
 2007 General Meeting




                                                8%
                                                7%                                                   UL Study - IA 25-34
                          Lapse Rate (by Amt)




                                                                                                     Valuation - IA 30
                                                6%                                                   Pricing - IA 30
                                                5%
                                                4%
                                                3%
                                                2%
                                                1%
                                                0%
                                                     1   2   3   4   5   6   7   8   9 10 11 12 13 14 15 16 17 18 19 20
                                                                                     Policy Year
                          2007 UL vs MRe Survey 2006
                               Issue Age 25-34 (2)
                                                     Pricing vs Valuation vs Experience -
                                                         NS, Single, 100K+, Monthly Premium Mode
                                                9%
Assemblée générale 2007
 2007 General Meeting




                                                8%
                                                7%
                          Lapse Rate (by Amt)




                                                6%
                                                5%                                                        UL Study - IA 25-34
                                                                                                          Valuation - IA 30
                                                4%                                                        Pricing - IA 30
                                                3%
                                                2%
                                                1%
                                                0%
                                                     1   2   3   4   5   6   7   8   9     10 11 12 13 14 15 16 17 18 19 20
                                                                                         Policy Year
                                          Conclusion
                          •   Careful with experience where exposure is
                              limited
                          •   Lapse Rates pattern are similar in both studies
                          •   T100 lapse rates are lower than UL LCOI
Assemblée générale 2007




                              after duration 8
 2007 General Meeting




                          •   UL LCOI composite experience is in line
                              with average pricing and valuation
                              assumptions
                          •   Average pricing and valuation assumptions
                              are generally higher than actual experience
                              for UL Non-Smoker, Single, Band 100K+,
                              Monthly Premium Mode
                                        Limitations
                          •   Not every company was able to
                              contribute each experience year
                          •   Basic Policies only
                              Limited Amount of Exposure
Assemblée générale 2007




                          •
 2007 General Meeting




                          •   T100 Data
                              –   Date of Cash Value on set
                              –   Premium Cease Date
                          •   UL YRT COI changes to Level COI
                          •   Partial Lapses
                          •   Increasing Face Amount
 2007 General Meeting
Assemblée générale 2007   Questions

				
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