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Part (b) - (i) In this part you will need to submit a written Group report and
you will be assessed on your written communication skills.
Due 8.55am 29 April 2014
Instructions
The font size of the main body of your assignment must be 12pt.
The assignment you submit must be in this order: Cover Page, the report and
the appendices.
Assignments must be submitted via the Turnitin submission box that is
available on the course website. As long as the due date has not been reached,
you can resubmit your work: the previous version of your assignment will be
replaced by the new version.
All parts of your assignment must be uploaded as a unique pdf document.
Please note that it is School policy that late assignments, even by one
minute, will not be marked. Assignments MUST be submitted prior to the
due time and date.
Students are reminded of the risk that technical issues may delay or even
prevent their submission (such as internet connection and/or computer breakdowns). Students should then consider either submitting their assignment
from the university computer rooms or allow enough time (at least 24 hours
is recommended) between their submission and the due time. The Turnitin
module will not let you submit a late report. No paper copy will be either
accepted or graded.
Marks will be given for the written presentation of your results. A clear and
precise presentation is expected in the main body of your assignment. You
should use graphs and tables as appropriate. Full assessment criteria are given
in the Writhen Communication Assessment Rubric.
Programming code or spreadsheets should not appear in the main body. They
must be provided as appendices at the end of your assignment.
The font size requirement does not apply to the appendices.
Assignment details follow over page.
Product Information
You are the actuarial team in a life insurance company. Your team is assessing
the design, pricing and risks of an annual premium deferred annuity contract. The
deferred annuity commences at age 65. Premiums are level annual and paid from
issue date to age 65. Premiums net of expenses are invested in the insurance fund
and this fund earns interest. The accumulated premiums net of expenses is used to
purchase an annuity at age 65. The annuity is payable monthly in arrears. You are
assessing premiums for male lives.
The features of the product are:
There is a guaranteed minimum accumulation amount at age 65 for the premiums net of expenses. This is based on a guaranteed interest rate of 4%
p.a.
On death of the policyholder, there is a benefit payable at the end of the policy
year of death of the return of the gross premiums with no interest.
The policyholder may surrender the policy only up to age 65. The surrender
benefit is the accumulation of the premiums net of expenses at an interest rate
of 2% p.a..
Level annual premiums are payable in advance until age 65 earlier death.
The deferred annuity is guaranteed to be a minimum of the annuity that would
be paid based on the accumulated premiums net of expenses with an interest
rate of 4% p.a.and mortality of 45% of PMA92 from 65 onwards.
Part (a) (25 marks)
Page limit for this Part(a): maximum of 2 A4 pages including figures, graphs and
tables.
You have to prepare a report for the Group Actuary that presents and discusses
the cash flow profile of the product.
Your report will need to present and discuss the cash flows including premiums
(for a range of typical amounts), investment returns, expenses, expected death and
surrender payments, accumulation amounts, annuity payments, and profit and risk
margins.