Canadian Segregated Funds Experience Study

Transcription

1 Canadian Segregated Funds Experience Study June 21, 2017 Marianne Purushotham Corporate Vice President, LIMRA Research Shared Services

2 Agenda 1. Canadian Segregated Funds Experience Study Preliminary Results 2. Company Practices Study Assumption Setting for Canadian Segregated Funds Policyholder Behavior Assumptions 2

3 Canadian Segregated Funds Experience Study Preliminary Results 3

4 Background Discussions began in 2013 CIA, SOA and LIMRA agreed on a joint project CIA Segregated Funds Experience Committee agreed to serve as a POG (project oversight group) for the study Experience period = Data received from 6 participating companies between May 2015 and June 2016 Study data represents approximately 90 percent of the segregated funds contract value inforce on nearly 12 million exposure years 4

5 Study Methodology Covers experience for: Mortality Policyholder behavior Surrender/Lapse Partial withdrawal activity Companion company practices survey on assumption setting 5

6 Study Methodology/Data Collected Inforce File (Raw Data by Val Month/Yr from participating co.) Inforce1 (LIMRA created) Total AV, GMMB, GMDB, GMWB across all funds by policy (for each valuation month/yr) Movement File (Raw Data from participating company) Append transaction data Inforce1_Merge (LIMRA created) Exposure Databases Full Surrenders/Mortality Add Exposure and Full Surrender, Death, Withdrawal Indicators 6

7 Product information forms Fund information forms Reconciliation and Editing Consistent approach across participants for study purposes 7

8 Full Surrender/Lapse Experience Preliminary By Count 8

9 Distribution of Study Exposure % 14% % 18% 17% 17% 16% % Issue Yrs Pre % Without GMWB With GMWB 32% 23% %

10 Full Surrenders* Preliminary Results Policy Year * Definition of Lapse/Full Surrender = contract terminates and money leaves the company, 10 not internal transfers or exchanges

11 Full Surrenders Preliminary Results Contracts with GMWB All Contracts Contracts with GMWB No Withdrawals 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Canada US % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Canada US Contracts with GMWB Both Occasional and/or Scheduled WIthdrawals 8.0% 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Canada US % 7.0% 6.0% 5.0% 4.0% 3.0% 2.0% 1.0% 0.0% Contracts with GMWB Systematic/Scheduled Withdrawals/Utilizing Benefits Canada US

12 Full Surrenders by ITM - Preliminary Results Canada US 5% No Partials Partials 5% No Partials Partials 4% 4% 3% 3% 2% 2% 1% 1% 0% Under 100% 100%-125% Over 125% 0% Under 100% 100% to 125% Over 125% 12 Partials = Occasional or Systematic/Scheduled GMWB only ITM = Benefit Base/MV

13 Partial Withdrawal Activity Preliminary By Count 13

14 Withdrawal Activity- Preliminary Results % contracts taking withdrawals by current age includes scheduled and non scheduled GMWB Non GMWB 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% Under % Under All Other Non Reg Reg All Other Non Reg Reg *Includes 4 companies 14

15 Withdrawal Activity- Preliminary Results Of the contracts taking withdrawals % that are on a scheduled basis 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Under GMWB and Non GMWB GMWB non GMWB *Includes 4 companies 15

16 Mortality Experience Preliminary By Count 16

17 Mortality All Contracts - Preliminary Results 160% 140% 120% 100% 80% 60% F M 40% 20% 0% Under *Includes all companies *Expected basis: GMWB: CIP2014, non GMWB: CIA 9407

18 Next Steps Complete any final changes from participants based on reconciliations (June 2017) Release report to CIA, SOA and LIMRA members (July 2017) Provide participants with data visualization tools including industry data and their own results (September 2017) Study updates expected biannually 18

19 Canadian Segregated Funds Assumption Setting Company Practices Study 19

20 Assumption Setting: Company Practices The study survey questions were divided into 3 main topical areas: Structure of the Full Surrender/Lapse Assumption Modeling Approaches for Full Surrender/Lapse Other Important Policyholder Behavior Assumptions This report provides a summary of responses from the 5 companies as well as commentary regarding interpretation of results where applicable. The study focuses on products with GLWB/GMWB product types. 20

21 ITM Definitions The following are definitions that companies employ for determining the ITM-ness of a contract. ITM Ratio = Current Account Value/Current Protected Value 3 companies use this definition for both GLWB and GMWB. ITM Ratio = Current Account Value/Current Guaranteed Amount where Current Guaranteed Amount = Current Annual Guaranteed Payment x Annuity Factor* *For a life annuity over the contractholder(s) lifetime 2 companies use this definition for GLWB and Definition a. above for GMWB. 21

22 Factors Applied in Determining Assumed Lapse Rates Policy Duration 3 companies* Load Type 2 companies ITM 5 companies Withdrawal Pattern (payments being taken or not) Registered vs. Non Registered 1 company 2 companies 22

23 Assumptions for best- estimate base lapse rates Prior to the application of any dynamic assumption and before margin Examples of ways the ultimate lapse rate assumption varies are: Back end load versus front end load By registered versus non-registered By whether or not the GLWB is in the payment phase Ultimate lapse rate levels reported by companies: 3.6% to 8.5%. ***There were no differences indicated in approach between GLWB and GMWB benefits. 23

24 Assumptions for best- estimate base, ultimate, at-the-money lapse rates Use of Lapse Floor All but one participating company uses an assumed lapse floor prior to the account value being exhausted. Best estimate lapse floor assumptions used range from 1% to 5.5%. 24

25 Use of a dynamic lapse formula for surrenders for segregated funds products with GLWB or GMWB All 5 participating companies report using a dynamic lapse formula All 5 companies currently use in-the-moneyness ( ITM ) as the sole dynamic factor. 25

26 Factors Driving Time to First Withdrawal Number of Cos Registration Type 3 Attained Age 3 Issue Age 2 Partial Withdrawal History 1 Duration 2 26

27 Assumptions that Policyholders Withdraw at Levels Other than the Maximum Guaranteed Level Number of Cos Assume some policyholders make withdrawals above the maximum level. - Assume some policyholders make withdrawals below the maximum level. Assume some policyholders will not make withdrawals

28 28 Appendix

29 Distribution of Study Exposure 2% 21% CAS 31% 30% 17% 1% MGA TPA OTH Unknown 2% 9% RRSP 17% RRIF NRSP 47% 51% Female Male Unknown 13% 58% NREG All Other 29

30 Full Surrenders Preliminary Results 14% All Contracts By Product/Registration Type 12% 10% 8% 6% 4% All Other NREG NRSP RRIF RRSP 2% 0%

31 Full Surrenders Preliminary Results Contracts with GMWB By Product/Registration Type 31