Common use of Expected Gross Interest Rate Clause in Contracts

Expected Gross Interest Rate. The expected gross interest rate for a block of business is determined by blending current yields on the investment portfolio of assets underlying the block of business together with expected new money for minimal new and reinvestment cash flow. The blending will be based on cash flow for the period under review and will take into consideration funds due for reinvestment and interest income. Current yields should include the effect of realized statutory capital gains and losses. New money assumptions shall consider these investment guidelines in respect of quality, duration and type of assets. An example is shown in the following Table 1: Table 1 Expected Gross Interest Rate Volume Rate Investment Portfolio 800 8.5% Reinvestment Portfolio 100 8.0% New Money 100 8.0% Average 1,000 8.4%