On the Valuation of Endowment Assurances by Select Tables

Extract

The question whether it is necessary to use select mortality rates in the calculation of office reserves was pronounced by Mr. R. P. Hardy during the discussion on the papers submitted by Messrs. King, Diver and Ackland to be a highly debatable one.

The discussion disclosed two lines of thought on the subject, one admitting that a select valuation was theoretically correct, the other questioning the advisability of making a select valuation at all, the arguments in favour of the use of an aggregate table being crystallized in Mr. Warner's statement that the logical complement of a select table valuation would be the employment of a rate of interest representing to the nearest penny what had been actually realized during the quinquennium. Considered as a warning against undue striving after exactitude this is unanswerable, but when the calculation of the office reserves is viewed as a preliminary to the declaration of bonus, the conclusion might be drawn that an aggregate table valuation so entirely meets the case as to permit the full distribution of the resulting surplus.