Description of Experience - Historical. See the corresponding section on MetLife US Industrial policies. Actuarial Contribution Memorandum Page 24 November 16, 1999 501 5. Description of Experience - Prospective See the corresponding section on MetLife US Industrial policies. Actuarial Contribution Memorandum Page 25 November 16, 1999 502 V. UNIVERSAL LIFE
Description of Experience - Historical. Gross Premiums: From the seriatim data on the Statement Date, an implicit funding level was calculated for each policy as the ratio of its account value relative to its NLP reserve. Major model plans were segmented into three implicit funding levels: low, medium and high. For example, for a specific model plan, "low" would encompass all policies with fund values between 0% and 30% of the NLP reserve, "medium" between 30% and 55%, and "high" 55% or more. Due to their newness, model plans representing 1998 issues were not delineated into distinct funding levels. Instead, an historical average funding ratio was used. Historical assumptions as to gross premiums were set such that, together with the appropriate premium persistency experience, the average funding level for each model plan cell was reproduced.
Description of Experience - Historical. For all of the coverages discussed below, MetLife developed the net investment rates by allocating assets and investment income to each of the products based on an allocation of investment income from their respective LOB. GUL/GVUL PAID-UP The historical data for each model cell was produced using the appropriate pricing basis. Gross single premiums were calculated using the appropriate mortality, interest, and expense loading. Statutory and tax reserves were assumed equal to net single premiums using the same assumptions, excluding the expense loading. Historical cost of insurance was allocated to the model cells. Historical expenses were assumed to be equal to the pricing expense loading, adjusted for actual experience. INDIVIDUAL COLI The historical data for each policy was obtained from policyholder account value statements. These statements include actual historical premiums, expense loads, COI charges, withdrawals, and interest credited. Historical cost of insurance was allocated to each policy using mortality rates based on MetLife's experience mortality for this business. Historical expenses were based on pricing assumptions with actual-to-expected adjustments. For each calendar year, the difference between the allocated net investment rate and the average credited rate for all individual COLI policies was determined. This difference was then added to each policy's credited rate to determine that policy's net investment rate. Tax reserves were set equal to statutory reserves, which were also set equal to account values. The historical data for each model cell was gathered from MetLife systems and was equal to actual experience. Premiums and reserves were set equal to the actual values for the business. Expenses, first year and renewal, were represented as a percentage of premium. The percentages were developed based on actual experience. Historical incurred claims were based on pricing assumptions since the actual claim experience was not deemed credible due to the small amount of actual experience. Actuarial Contribution Memorandum Page 42 November 16, 1999 519 GUL/GVUL POOLED PORTED CERTIFICATES The historical data for each model cell was gathered from MetLife systems and was equal to actual experience. Premiums and reserves were set equal to the actual values for the business. Expenses were represented as a percentage of premium and per policy. These were developed based on actual experience. Historical COI was allocated to the model cells.
Description of Experience - Historical. The Reg. 62 data for MetLife's DI 25 largest groups of policy forms was the foundation of the historical experience data. For each major policy form, this data included historical calendar year collected premiums, paid claims, paid dividends, as well as unearned premium, policy and claim reserves. Historical first year commissions and expenses were developed from actual data when available or from other sources such as pricing assumptions. Renewal commissions and expenses were solved for in order to validate to either annual statement totals for the individual health LOB or, when available, DI only data. Reinsurance costs were estimated from the reinsurance agreements. The investment income allocation, including statutory capital gains (both realized and unrealized) was calculated using the rates developed for this LOB as described in Section II. These were applied to reserves plus one-half the cash flows under the assumption that these cash flows on the average occur mid-year. FIT rates were applied as also described in Section II.
Description of Experience - Historical. Premiums: Annual statement reports and internal data were used to determine earned premium for all calendar years in the model. One half year's premium was used for 1995 to recognize the impact of the co-insurance arrangement.
Description of Experience - Historical. Mortality: The block is small and decreasing (all automatic increase options have expired). Mortality experience fluctuates significantly by calendar year. Increasing attained age premiums offset the anticipated increase in mortality with age. Conversion activity has been negligible; therefore, the model assumes no conversions.
Description of Experience - Historical. The PE data for the 10 TNE DI in force policy forms was the foundation of the historical experience data. For each policy form, this data included historical calendar year collected premiums, paid claims, paid dividends, as well as unearned premium, policy and claim reserves. Historical commissions and expenses were developed from annual statement data. Reinsurance costs were omitted as noted above. The investment income allocation, including statutory capital gains (both realized and unrealized) was calculated using the rates developed for this LOB as described in Section II. These were applied to reserves plus one-half the cash flows under the assumption that these cash flows occur mid-year on average. FIT rates were applied as also described in Section II.
Description of Experience - Historical. Premium: For 1963 through 1998 earned premiums were taken from the CCBS income statement. Since premiums were level for 1963 through 1965, a value of 4 times the 1963 premium was used as an approximation of premium contributions from 1955 through 1962. The multiple of 4 was selected as a reasonable factor allowing for start-up and initial growth of the block. (In the absence of data, this block was treated as one Claims: For 1963 through 1998, accident and health benefits were taken from the CCBS income statement. Commissions, General Expenses, Taxes and Fees: For 1963 through 1998, these expense items were taken directly from the CCBS statement. Dividends: Dividends were taken directly from the CCBS statement. They were discontinued in 1971.
Description of Experience - Historical. EXPENSES Expenses were determined from the annual statement general insurance expense and tax & fee expense allocated to the Department 24 Group Annuities from 1990 through 1998. Prior to 1990, incurred expenses were trended from the 1990 levels, as detailed expense Actuarial Contribution Memorandum Page 66 November 16, 1999 543 analysis was unavailable. Incurred expenses were calculated and applied as a percentage of expense charges made to contractholders. INVESTMENT INCOME Net investment income was developed independently for each contract, reflecting the interest rates credited to contract experience funds, adjusted for profit charges, any risk charges released and realized capital gains and losses. Realized and unrealized capital gains and losses were developed based on experience of the Department 24 Group Annuities. Prior to 1984, the realized and unrealized capital gains and losses were based on the entire Group Annuity LOB. MORTALITY Mortality gains or losses are reflected implicitly in the experience funds of all Department 24 Group Annuity contracts.
Description of Experience - Historical. EXPENSES Expenses were determined from the annual statement general insurance expense and tax & fee expense allocated to the Department 11 Annuities from 1990 through 1998. Prior to 1990, incurred expenses were trended from the 1990 levels, as detailed expense analysis was unavailable. Incurred expenses were expressed as a percentage of mean reserves. INVESTMENT INCOME Long term and short term liabilities in Department 11 were combined to manage duration and convexity risk, and as a result, earned rates associated with specific products were not identifiable. For GICs, net investment income was calculated based on the contract's pricing earned rate. For other Department 11 products, pricing rates were not always available. The 30 year A-rated corporate bond rate achievable by MetLife's investment department was available historically on a monthly basis. This rate, adjusted for asset calls when interest rates declined, was used to develop historical net investment income for Structured Settlements, Terminal Funding and Closeout contracts when pricing rates were not available. For Treasuries Plus and Participating Mortgage contracts, historical net investment income was calculated based on the earned rates in MetLife's short term portfolio, which is invested in assets consistent with the crediting strategy on the Treasury Plus contracts. Actuarial Contribution Memorandum Page 70 November 16, 1999 547 MORTALITY For Structured Settlements, Terminal Funding and Closeout contracts, mortality gains or losses are reflected directly in the AC calculation, due to the relationship between reserve decreases and benefit payments. No mortality gains or losses exist on the GIC, Treasuries Plus or Participating Mortgage products.
