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Canada (509,376)
MTHEL 131 (111)
David Kohler (106)
Lecture 4

Lecture 4.pdf

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Mathematics Electives
David Kohler

Lecture 4 Capital needs analysis Immediate expense Living expenses Funeral Estimated 60%-80% of original income 15k (suppose spouse earn 40%) Mortgage 200k 20%-40% to maintain lifestyle for 15 Debt years 10k 2500/month*factor= Emergency fund 360k = 665k 40k Education fund 40k Total 305k + Pricing of estimated premium: Factors: 1. mortality (current age, years to death) 2. investment returns 3. expenses of the company premiums -> reserves: money for future claim The Old Equitable: 40 years in the running 4 billions in liability (policies) 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: 1. PRO: premium reduction option -> lower premium 2. Cash 3. Accumulation (on deposit) 4. PUA: paid-up addition (pay for additional premium) Reasons for distributing dividend to policyholders? 1. policyholders own company 2. participating policy (vs non-par policy) Capital st
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