Papers and reports

A report to the Secretary of State for Social Security.

The Working Party was established in 1998 to research the with profits bonds market and report on the products and marketing with a particular focus on PRE. Valuation considerations were not a primary focus for the Working Party unless relevant to other aspects under review. A copy of the terms of reference agreed with the Research Committee is attached in Appendix A1. Late in 1998 a survey was sent to offices writing significant amounts of with profit bond business. There was a high response rate, for which the working party are very thankful.

We have been asked to consider the role of actuaries in the investment field and to recommend ways of strengthening this role. Part of this is the support that the profession can give to actuaries working in investment. The concern arises from a belief that actuaries are becoming less central in the investment area. We have not attempted to explore this belief\; we have concentrated on the current and likely future structure of managing investments in the broadest sense.

Sickness experience 1991-94 for individual PHI policies; Sickness termination experience 1991-94 for group PHI policies; An analysis of the PHI experience of individual companies in the United Kingdom I: claim inception rates; An analysis of the PHI experience of individual companies in the United Kingdom II: claim termination rates; Corrigenda

Claim inception rates under PHI policies, individual 1975-90 and group 1975-86; Recovery and mortality rates of those claiming under PHI policies, individual 1975-90 and group 1975-86; Sickness experience 1983-86 for individual PHI policies; Sickness experience 1979-82 and 1983-86 for group PHI policies

This working party has considered the pensions implications of a prolonged period of low inflation. Experience in the United States of America suggests weaker correlation between equity and bond returns and greater overall volatility of returns. Without a further significant increase in the valuation of equities relative to their underlying economic activity, the cost of pensions will rise, possibly as much as doubling within the next 15 years.

The traditional approach to United Kingdom pension fund valuations is to use an off-market approach to valuing assets and liabilities. This approach has been called into question for a number of reasons, such as changes to the taxation of U.K. share dividends and a growing understanding and appreciation of the key principles of financial economics. This paper looks at the history of the traditional approach and focuses on the drivers for change.

This paper addresses one of the fundamental issues faced by offices in the transacting of with-profits business, namely, the provision of equity-related performance along with maturity guarantees that increase over the lifetime of the policy. The approach commonly followed of using capital to cover the office's investment mismatch risk is considered from an individual policy viewpoint, and, through stochastic modelling, the degree of security represented by different reserve levels identified.