Investment Generation Method

  • New Money (Investment Generation Method) vs Portfolio Method
  • However, it is far less clear as to how to make a, nonmisleading statement, about an investment year method illustration in comparison with a portfolio average illustration.
  • This will be one of the most difficult and important assignments of the Academy Committee.

1980-1, NAIC - Life Insurance (C3) Cost Disclosure Task Force

  • Suggested language which should accompany the illustration, must necessarily be brief.
  • We believe, however , that in all cases there should be an identification of the method of investment income allocation used, because of the significantly different illustrative result.
  • In addition, each required exception statement that appears in the suggested Schedule ii would also need to be briefly summarized.

1981 - Journal, American Academy of Actuaries

  • If a company chooses to use an investment year method or an investment generation method, the committee plans to recommend that the actuary be responsible for more than a statement that such method is not comparable to a portfolio method.
  • For example, consideration will be given to the requirement of quantitative comparisons,¬†such as, indicating the difference between the new money rate assumed in the dividend illustration and the portfolio interest rate and estimating

1980-4, NAIC Proc. 

1. Report of the Advisory Committee on Policy Lapsation - Consumer Disclosure


The suggested changes to the buyer's guide (Attachment One-B2) incorporate several new ideas.

  • First, while the current buyer's guide describes the concept of cost and identifies the differences between illustrations of cost of participating and nonparticipating policies, the redraft recognizes the existence of cost illustrations of products recently introduced.
  • Second, the suggested modifications identify the difference between investment generation and portfolio average methods in the determination of dividends.
    • At the suggestion of the NAIC Advisory Committee on Manipulation, dividends based on investment generation methods are identified as being more sensitive to changes in current interest rates.
  • Finally, the suggested modifications recognize the existence of the newly adopted principles and practices and warn the prospective insured to be aware of any exception language which may be required on the illustration.

1981-2, NAIC Proceedings