Allocation of Surplus in a Mutual Life Office

Synopsis

This paper sets out to demonstrate a set of principles for the allocation of surplus in a mutual life office.

Surplus is defined as a capital item and the principles governing its measurement and allocation are developed without regard to the method by which surplus may be distributed in the form of cash or additional guaranteed benefits. Particular attention is paid to the special problems arising where there is substantial investment in equities or where a substantial portion of surplus comes from the profits of without profits business.