Simple Appraisal Value YRT

Parameters

Entry 56 next
Sex Male
Smoker Non smoker
Policy term 10 years
Premium term 10 years
Sum insured 250,000 increases with CPI annually
Premium payable annually

Risk free rate 3%

Tax rate 30%
Inflation 2%
Expenses
Fixed initial $350.00 point of sale
Fixed renewal $75.00 indexed and starts from beginning year 2
Commission
Variable initial 70% of annual premium
Variable renewal 5% of annual premium, indexed and starts from beginning year 2
Mortality 100%
Mortality table IA90-92
Lapse rate 15%
Reserves as % IF 20% policy liabilities and capital requirements
Imputation Crs as % FTL 70%

Net worth (assets) at start 1,500.00

Risk discount rate 8%

Term premium rates Decrement Rates

Male non-smoker

Rate per
$1,000 sum
Age next insured Age next qx
56 0.00553 56 0.00426
57 0.00622 57 0.00474
58 0.00703 58 0.00529
59 0.00797 59 0.00591
60 0.00900 60 0.00662
61 0.01027 61 0.00743
62 0.01168 62 0.00836
63 0.01324 63 0.00940
64 0.01507 64 0.01058
65 0.01704 65 0.01192

Decrement table Calculations

Year Age lx dx wx lx+1 Year

1 55 1.000 0.004 0.149 0.846 1

2 56 0.846 0.004 0.126 0.716 2
3 57 0.716 0.004 0.107 0.605 3
4 58 0.605 0.004 0.090 0.512 4
5 59 0.512 0.003 0.076 0.432 5
6 60 0.432 0.003 0.064 0.364 6
7 61 0.364 0.003 0.054 0.307 7
8 62 0.307 0.003 0.046 0.259 8
9 63 0.259 0.003 0.038 0.218 9
10 64 0.218 0.003 0.032 0.183 10

NPV (earned
rate)

Embedded/Appraisal value

Year

1
2
3
4
5
6
7
8
9
10

Reserves and excess asse

Year

1
2
3
4
 5
6
7
8
9
10

Item

Adjusted Net Worth

Value of Inforce Business
Value of New Business
Value of Imputation Credits
Appraisal Value
beginning year 2
 Investment Death Mat Surr Reserves Increase in
Premium Income outgo outgo outgo Expense Commission eoy Reserves

1,383 2 1,065 0 0 350 968 277 277

1,342 45 1,023 0 0 65 68 268 -8
1,309 44 985 0 0 56 68 262 -7
1,280 43 949 0 0 48 68 256 -6
1,246 42 916 0 0 42 67 249 -7
1,224 41 886 0 0 36 68 245 -4
1,198 40 858 0 0 31 67 240 -5
1,168 39 829 0 0 26 67 234 -6
1,142 39 802 0 0 23 67 228 -5
1,107 38 775 0 0 19 66 0 -228

$10,958 $7,818 $0 $0 $658 $1,493

mbedded/Appraisal value

Increase
Investment Death Mat Surr in Distributable
Premium Income outgo outgo outgo Expense Commission Reserves Profit (gross)

1,383 2 1,065 0 0 350 968 277 -1,275

1,342 45 1,023 0 0 65 68 -8 239
1,309 44 985 0 0 56 68 -7 250
1,280 43 949 0 0 48 68 -6 263
1,246 42 916 0 0 42 67 -7 269
1,224 41 886 0 0 36 68 -4 281
1,198 40 858 0 0 31 67 -5 288
1,168 39 829 0 0 26 67 -6 291
1,142 39 802 0 0 23 67 -5 294
1,107 38 775 0 0 19 66 -228 513

Sum
NPV at RDR

eserves and excess assets Policy Liability

Profit Margin 9%

Interest
Excess on Cash flow Increase
Assets Reserves assets excess Tax on from Tax on policy in assets
(boy) (boy) (boy) assets interest policy profits in year Assets (eoy)

1,500 0 1,500 45 14 - 998 39 - 1,005 495

495 277 218 7 2 231 50 185 680
680 268 411 12 4 244 48 204 884
884 262 622 19 6 258 47 224 1,108
 1,108 256 852 26 8 262 45 235 1,343
1,343 249 1,094 33 10 276 43 256 1,599
1,599 245 1,354 41 12 283 41 270 1,869
1,869 240 1,629 49 15 285 39 280 2,148
2,148 234 1,915 57 17 289 37 292 2,441
2,441 228 2,212 66 20 285 34 297 2,737
354 106 checks out

Value
$
djusted Net Worth 1,500
alue of Inforce Business - As assumed only new business
alue of New Business 197
alue of Imputation Credits 202
ppraisal Value 1,900
PV cash flows $988.50
Profit margin % 9.021%
 Value of
future
Cash flow profit Policy Change in Interest on
Distributable Cash flow w/o Interest on margins liability policy policy
Profit (gross) before tax interest cash flow BEL eoy eoy eoy liability liability
-988 988 0
-1,275 -998 -1,000 2 -2016 890 -1127 -1127 0
239 231 186 36 -1854 792 -1063 64 0
250 244 200 36 -1674 694 -981 82 0
263 258 215 35 -1475 596 -879 101 0
269 262 221 34 -1265 498 -767 112 0
281 276 235 34 -1034 399 -635 132 0
288 283 242 33 -789 300 -490 145 0
291 285 245 32 -536 200 -336 154 0
294 289 251 32 -270 100 -170 166 0
513 285 247 31 0 0 0 170 0

Distributable
Tax Profit (net)

39 -1,313
50 189
48 202
47 216
45 224
43 237
41 247
39 252
37 257
34 478

989
$289.07 $197.46

Policy liability
(boy)

0
-1127
-1063
-981
-879
-767
-635
-490
-336
-170
0
 int on
Reserves -
Gross PolLiab
profit - plus PM
Gross Profit profit Reserves - with Check
Profit Tax Net profit margin margin Pol Liab interest error

128 39 90 125 4 1403 128 0

167 50 117 121 46 1331 167 0
162 48 113 118 43 1243 162 0
156 47 109 115 41 1135 156 0
150 45 105 112 37 1016 150 0
144 43 101 110 34 880 144 0
138 41 96 108 30 730 138 0
130 39 91 105 25 569 130 0
123 37 86 103 20 398 123 0
115 34 80 100 15 0 115 0
989

$364.04
Adjusted net worth 2,000,000
Opening FUM 20,000,000
Term (years) 10 All funds returned at end of 10 years as all members turn 65

Premium p.a - received at start of year

no of members 1,000

Fees:
Member fee p.a. 90 net of policyholder tax and paid at start of year
% fee 1.20% net of policyholder tax and paid over the year

risk discount rate 12%

Expenses:
$ per member exp 75 paid at start of year
% per member exp 1.10% paid over the year

Policyholder tax rate 15%

Shareholder tax rate 30%

Investment return 8%
Investment return equity 4%
Lapse rate 12% leaving mid way through the year

Margin above FUM for PCR 1%

Assumes no deferred acquisition costs that are running off

Distributable profits paid at end of year

Number of P/H FUM at P/H P/H tax on P/H fees

Time members boy boy Premiums interest interest gross of tax
1 1,000 20,000,000 0 1,504,000 -225,600 -380,318
2 880 18,487,930 0 1,390,292 -208,544 -346,864
3 774 17,094,173 0 1,285,482 -192,822 -316,558
4 681 15,809,021 0 1,188,838 -178,326 -289,084
5 600 14,623,611 0 1,099,696 -164,954 -264,159
6 528 13,529,849 0 1,017,445 -152,617 -241,531
7 464 12,520,333 0 941,529 -141,229 -220,974
8 409 11,588,297 0 871,440 -130,716 -202,284
9 360 10,727,547 0 806,712 -121,007 -185,280
10 316 9,932,414 0 746,918 -112,038 -169,800

S/H S/H tax on

Time PCR at boy PCR at eoy Int on PCR S/H fees expenses int on PCR
1 200,000 184,879 8,000 380,318 -286,684 -2,400
2 184,879 170,942 7,395 346,864 -261,702 -2,219
3 170,942 158,090 6,838 316,558 -239,048 -2,051
4 158,090 146,236 6,324 289,084 -218,490 -1,897
5 146,236 135,298 5,849 264,159 -199,821 -1,755
6 135,298 125,203 5,412 241,531 -182,856 -1,624
 7 125,203 115,883 5,008 220,974 -167,428 -1,502
8 115,883 107,275 4,635 202,284 -153,388 -1,391
9 107,275 99,324 4,291 185,280 -140,602 -1,287
10 99,324 0 3,973 169,800 -78,364 -1,192

Adjusted net worth $2,000,000

Value of business $404,715
Imputation Credits $92,868
Appraisal value $2,497,583
P/H tax P/H FUM at
on fees Lapses Maturity eot
57,048 -2,467,200 0 18,487,930
52,030 -2,280,671 0 17,094,173
47,484 -2,108,737 0 15,809,021
43,363 -1,950,201 0 14,623,611
39,624 -1,803,969 0 13,529,849
36,230 -1,669,042 0 12,520,333
33,146 -1,544,508 0 11,588,297
30,343 -1,429,532 0 10,727,547
27,792 -1,323,350 0 9,932,414
25,470 -1,225,263 -9,197,701 0

S/H tax S/H tax on Distributable Imputation

on fees expenses profits credits
-114,095 86,005 86,265 21,343
-104,059 78,510 78,728 19,437
-94,967 71,714 71,895 17,713
-86,725 65,547 65,696 16,153
-79,248 59,946 60,069 14,739
-72,459 54,857 54,956 13,458
-66,292 50,228 50,308 12,296
-60,685 46,016 46,079 11,242
-55,584 42,181 42,229 10,283
-50,940 23,509 166,110 20,036
Adjusted net worth 2,080,000
Opening FUM 18,487,930
Term (years) 9 All funds returned at end of 9 years as all members turn 65

Premium p.a - received at start of year

no of members 880

Fees:
Member fee p.a. 90 net of policyholder tax and paid at start of year
% fee 1.20% net of policyholder tax and paid over the year

risk discount rate 12%

Expenses:
$ per member exp 75 paid at start of year 5000
% per member exp 1.10% paid over the year

Policyholder tax rate 15%

Shareholder tax rate 30%

Investment return on units 8%

Investment return on equity 4%
Lapse rate 12% leaving mid way through the year

Margin above FUM for PCR 1%

Assumes no deferred acquisition costs that are running off

Distributable profits paid at end of year

Time No of members boy P/H FUM at boy Prems p/h Interest

1 880 18,487,930 - 1,390,292
2 774 17,094,173 - 1,285,482
3 681 15,809,021 - 1,188,838
4 600 14,623,611 - 1,099,696
5 528 13,529,849 - 1,017,445
6 464 12,520,333 - 941,529
7 409 11,588,297 - 871,440
8 360 10,727,547 - 806,712
9 316 9,932,414 - 746,918

Additional PCR Additional PCR Interest on

Time at boy at eoy PCR S/H Fees
1 184,879 170,942 7,395 346,864
2 170,942 158,090 6,838 316,558
3 158,090 146,236 6,324 289,084
4 146,236 135,298 5,849 264,159
5 135,298 125,203 5,412 241,531
6 125,203 115,883 5,008 220,974
 7 115,883 107,275 4,635 202,284
8 107,275 99,324 4,291 185,280
9 99,324 0 3,973 169,800

Adjusted net worth 2,187,608

Value of business $367,015
Imputation credits $82,669
Appraisal value 2,637,293
all members turn 65

75

p/h tax on interesp/h fees gross of P/H tax on fees lapses maturity P/H FUM at eoy
- 208,544 - 346,864 52,030 - 2,280,671 0 17,094,173
- 192,822 - 316,558 47,484 - 2,108,737 0 15,809,021
- 178,326 - 289,084 43,363 - 1,950,201 0 14,623,611
- 164,954 - 264,159 39,624 - 1,803,969 0 13,529,849
- 152,617 - 241,531 36,230 - 1,669,042 0 12,520,333
- 141,229 - 220,974 33,146 - 1,544,508 0 11,588,297
- 130,716 - 202,284 30,343 - 1,429,532 0 10,727,547
- 121,007 - 185,280 27,792 - 1,323,350 0 9,932,414
- 112,038 - 169,800 25,470 - 1,225,263 - 9,197,701 -

S/H tax on int on

S/H Expenses PCR S/H tax on fees S/H tax on expenS/H distributable pImputation credits
-261,702 -2,219 -104,059 78,510 78,728 19,437
-239,048 -2,051 -94,967 71,714 71,895 17,713
-218,490 -1,897 -86,725 65,547 65,696 16,153
-199,821 -1,755 -79,248 59,946 60,069 14,739
-182,856 -1,624 -72,459 54,857 54,956 13,458
-167,428 -1,502 -66,292 50,228 50,308 12,296
-153,388 -1,391 -60,685 46,016 46,079 11,242
-140,602 -1,287 -55,584 42,181 42,229 10,283
-78,364 -1,192 -50,940 23,509 166,110 20,036
Adjusted net worth 2,080,000
Opening FUM 18,487,930
Term (years) 9 All funds returned at end of 9 years as all members turn 65

Premium p.a - received at start of year

no of members 880

Fees:
Member fee p.a. 90 net of policyholder tax and paid at start of year
% fee 1.20% net of policyholder tax and paid over the year

risk discount rate 12%

Expenses:
$ per member exp 80 paid at start of year
% per member exp 1.10% paid over the year

Policyholder tax rate 15%

Shareholder tax rate 30%

Investment return 8%
Investment return on equity 4%
Lapse rate 12% leaving mid way through the year

Margin above FUM for PCR 1%

Assumes no deferred acquisition costs that are running off

Distributable profits paid at end of year

No of P/H FUM at p/h tax on

Time members boy boy Prems p/h Interest interest
1 880 18,487,930 0 1,390,292 -208,544
2 774 17,094,173 0 1,285,482 -192,822
3 681 15,809,021 0 1,188,838 -178,326
4 600 14,623,611 0 1,099,696 -164,954
5 528 13,529,849 0 1,017,445 -152,617
6 464 12,520,333 0 941,529 -141,229
7 409 11,588,297 0 871,440 -130,716
8 360 10,727,547 0 806,712 -121,007
9 316 9,932,414 0 746,918 -112,038

S/H
Time PCR at boy PCR at eyo Int on PCR S/H fees expenses
1 184,879 170,942 7,395 346,864 -266,102
2 170,942 158,090 6,838 316,558 -242,920
3 158,090 146,236 6,324 289,084 -221,897
4 146,236 135,298 5,849 264,159 -202,820
5 135,298 125,203 5,412 241,531 -185,495
6 125,203 115,883 5,008 220,974 -169,750
 7 115,883 107,275 4,635 202,284 -155,431
8 107,275 99,324 4,291 185,280 -142,401
9 99,324 0 3,973 169,800 -79,947

Adjusted net worth $2,177,608 Profit effect on worse expen

Value of business $355,647 -286,684
Imputation credits $79,259 -297673
Appraisal value $2,612,514 10,989
as all members turn 65

p/h fees P/H tax P/H FUM at

gross of tax on fees lapses maturity eoy
-346,864 52,030 -2,280,671 0 17,094,173
-316,558 47,484 -2,108,737 0 15,809,021
-289,084 43,363 -1,950,201 0 14,623,611
-264,159 39,624 -1,803,969 0 13,529,849
-241,531 36,230 -1,669,042 0 12,520,333
-220,974 33,146 -1,544,508 0 11,588,297
-202,284 30,343 -1,429,532 0 10,727,547
-185,280 27,792 -1,323,350 0 9,932,414
-169,800 25,470 -1,225,263 -9,197,701 0

S/H tax on S/H tax S/H tax on Distributable Imputation

int on margin on fees expenses profits credits
-2,219 -104,059 79,830 75,648 18,513
-2,051 -94,967 72,876 69,185 16,900
-1,897 -86,725 66,569 63,311 15,437
-1,755 -79,248 60,846 57,970 14,110
-1,624 -72,459 55,648 53,109 12,904
-1,502 -66,292 50,925 48,683 11,809
 -1,391 -60,685 46,629 44,649 10,812
-1,287 -55,584 42,720 40,971 9,906
-1,192 -50,940 23,984 165,003 19,704

Profit effect on worse expenses

86005.0838 -60203.56 -260,882 Year 1
89301.9 -62511.33 -270,882 Implied year 1
-3296.81616 2307.771 10,000 Check
If all goes as expected
Net Worth Value of Inforce Embedded Value
Values at time 0 $2,000,000 $497,583 $2,497,583
Expected change in value $80,000 $59,710 $139,710
Move distributable profits to Net Worth $107,608 -$107,608 $0
Expected value at end of period $2,187,608 $449,685 $2,637,293
Actual value at time 1 $2,187,608 $449,685 $2,637,293

Note this assumes a cash return is expected (and earned) on net worth of 4% after allowing for tax and imputation credits

Expenses different from expected

During period expenses (after allowing for tax and imputation credits) were $10,000 worse than expected
The future expense assumption per member is $5 higher

Net Worth Value of Inforce Embedded Value

Values at time 0 $2,000,000 $497,583 $2,497,583
Expected change in value $80,000 $59,710 $139,710
Move distributable profits to Net Worth $107,608 -$107,608 $0
Expected value at end of period $2,187,608 $449,685 $2,637,293
Expenses higher than expected in period -$10,000 $0 -$10,000
Change in expense assumption $0 -$14,779 -$14,779
Unexplained $0 $0 $0
Actual value at time 1 $2,177,608 $434,906 $2,612,514
$434,906
 Value of New Business Total
$0 $2,497,583
$0 $139,710
$0
$0 $2,637,293
$0 $2,637,293

allowing for tax and imputation credits

worse than expected

Value of New Business Total

$0 $2,497,583
$0 $139,710
$0 $0
$0 $2,637,293
$0 -$10,000
$0 -$14,779
$0 $0
$0 $2,612,514