1. 2. 3. 4. 5. 6. 7. 8. 7.
Benefits, including but not limited to death and cash surrender benefits; Expenses, including but not limited to, commissions, general expenses, and premium taxes; Gross premium payments; Other applicable revenue such as fees and revenue on assets invested in sub-accounts, and any Revenue Sharing income; Net payments to/from the General Account from/to the Separate Account; Net Investment Earnings (including realized gains); Net cash flows from Derivative Liability Programs, and Federal income taxes.
The Stochastic Amount The Stochastic Amount is determined as the sum of applying steps a. and b. below to each segment or set of segments for which a Scenario Amount has been calculated. a. b.
Rank the Scenario Amounts from lowest to highest; and Take the average of the highest 10% of the Scenario Amounts.
If necessary, add an amount to item (b) above to capture any material risk included in the scope of these requirements but not already reflected in item (b) above. The actuary may elect to base the projections on asset and policy inforce data that have an “as of� date prior to the valuation date, but in no event earlier than six months before the Valuation Date, provided that such data can be adjusted so that the calculated amount that is based on such data is, in the actuary’s judgment, appropriate. The actuary should disclose and discuss in the supporting memorandum any use of prior period data and the reasoning leading to the conclusion that the calculated amount based on such data is appropriate. Disclosure of the results of such adjustment and the methodology used to determine the adjustment is required. Any such adjustment would generally consider: 1. 2. 3. 4. 5. 6. 7. 8.
Changes in economic conditions between the prior period date and the valuation date; The recognition of estimated cash flows from new business during that period; Material transactions such as reinsurance (either ceded or assumed) of a block of business; Material changes in asset profile; Material changes in liability profile; Material change in matching position of assets and liabilities; Change in the effectiveness of Derivative Programs; changes to existing or addition of new Derivative Programs; and Changes to existing or addition of new reinsurance arrangements.
[Note: If Proprietary Predetermined Scenarios Sets are used, the derivation of the Stochastic Amount will be defined by a separate process, rather than the process defined above.]
H. The Alternative Amount 1.
Purpose. The purpose of the Alternative Amount is to produce a C3 amount that is adequate to cover the C3 risks related to the product benefits and expenses, reflecting future revenue, for those policies for which the stochastic modeling exclusion has been made. Page 25 of 48