• Finally, l come to the matter of reserves and nonforfeiture values on deposit term and deposit whole life type contracts.
  • Instances of unusual and inappropriate patterns of reserves and cash values have been noted.
  • Because of this, consideration is being given to new regulation and statutory language in order to produce more acceptable results.
• I would like to repeat here the point l made at the meeting that the existence of strange results suggests that inappropriate actuarial techniques may have been used to produce those results and that actuarial procedures and methods that are applicable to standard straightforward pans are not necessarily applicable to these special plans without an examination of the implications and assumptions of the usual actuarial methods.
  • In particular, I believe that many of the strange results produced arise because of the unusual premium payment pattern. 
• That may produce, at some policy durations, a present value of future benefits less than the present value of that portion of the adjusted premium which was to pay for those benefits.
• In such a case, it is improper actuarial practice to take into account those excess premiums.

(ATTACHMENT C·2)
To: Mr. Ted Becker, Chairman, NAIC (C) Committee Technical Task Force on Valuation and Nonforfeiture Value Regulation
From: Paul E. Sarnoff -The Prudential Insurance Company of America

1980-1, NAIC Proceedings