Asset Shares and Surrender Values for LTAM
Calculate asset shares and determine surrender values for life insurance policies on Exam LTAM.
Asset Share Calculation
The asset share represents the accumulated fund per surviving policyholder using actual (or expected realistic) experience. The recursion is: AS_t = (AS_{t-1} + G_t minus e_t) * (1 + i) minus q_x^d * b minus q_x^w * CV_t, all divided by (1 minus q_x^d minus q_x^w). Here G is gross premium, e is expenses, b is death benefit, CV is cash surrender value, and the decrements are death and withdrawal. Asset shares start at negative values due to high first-year expenses and grow over time.
Surrender Values
The cash surrender value (CSV) is the amount paid upon voluntary policy termination. It typically equals the reserve minus a surrender charge that decreases over time. Surrender charges recover unamortized acquisition costs. The nonforfeiture law requires minimum cash values based on adjusted premium reserves. Exam LTAM tests asset share calculations with multiple decrements, the relationship between asset shares and reserves, and the determination of surrender values that balance policyholder equity with insurer expense recovery.