MTHEL131 Lecture Notes - Lecture 4: Capital Structure, The Great-West Life Assurance Company, Manulife
7 Apr 2014
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Estimated 60%-80% of original income (suppose spouse earn 40%) Factors: mortality (current age, years to death, investment returns, expenses of the company premiums -> reserves: money for future claim. The old equitable: 40 years in the running. A calculation of cash on hand shows 1 million in excess of required (in reserves) Experience dividend: surplus resulting from company"s past year operation. Payment options to get the excess back to shareholders: pro: premium reduction option -> lower premium, cash, accumulation (on deposit, pua: paid-up addition (pay for additional premium) Reasons for distributing dividend to policyholders: policyholders own company, participating policy (vs non-par policy) Mutual: owned by policyholders, cannot be taken over (advantage, hard to raise capital (disadvantage) Stock: owned by stockholders, can be taken over (by acquiring 51% shares) (disadvantage, easy to raise capital (by issuing stocks) (advantage) Conversion from a mutual company to a stock company (demutualizaion for expansion)
