On the Franchise Value of a Group Yearly Renewable Term

8/18/2019 On the Franchise Value of a Group Yearly Renewable Term

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On the Franchise Value of a Group Yearly Renewable Term

Microinsurance Product

A Special Problem Presented

To the Faculty of the

nstitute of Mathematical Sciences and Physics

!olle"e of Arts and Sciences#ni$ersity of the Philippines %os &a'os

n Partial Fulfillment of the Re(uirements for the )e"ree of &achelor of Science in Applied Mathematics

Ma*or in Actuarial Science

&y

+essa Ortillo +abonillo

October ,--.

1



TA&%/ OF !O0T/0TS

INTRODUCTION ------------------------------------------------------------------------------- 1

Background of the Study --------------------------------------------------------------- 1

Statement of the Problem --------------------------------------------------------------

S!gn!f!cance of the Study --------------------------------------------------------------

Ob"ect!#e$ -------------------------------------------------------------------------------- %

Sco&e and '!m!tat!on$ ------------------------------------------------------------------ %

R()I(* O+ R(',T(D 'IT(R,TUR( ----------------------------------------------------

T.(OR(TIC,' +R,/(*OR0 ------------------------------------------------------------ 1

/(T.ODO'O23 ----------------------------------------------------------------------------- 11

R(SU'TS ,ND DISCUSSIONS ------------------------------------------------------------ 14

R(CO//(ND,TIONS ---------------------------------------------------------------------- 1

R(+(R(NC(S ---------------------------------------------------------------------------------- 1%

,PP(NDIC(S ---------------------------------------------------------------------------------- 15



1 0TRO)#!TO0

A1 Background of the Study

The #alue of the f!rm6 !n f!nanc!al conte7t6 refer$ to the #alue of all !t$ a$$et$8

+!nanc!al a$$et$6 !n &art!cular6 contr!bute to the 9ealth of the !nd!#!dual$ or the f!rm$

hold!ng them8 Th!$ #alue !$ $o $!gn!f!cant that !t !$ managed &r!mar!ly by the $en!or

off!cer$ of the f!rm8 In fact6 many $tud!e$ are $t!ll be!ng conducted on ho9 to manage !t

9!$ely becau$e of !t$ !m&act !n the f!nanc!al 9orld8 But unfortunately6 9hat the $en!or

management bel!e#e$ are manag!ng !$ "u$t a &ort!on of the f!rm:$ #alue that !$ #!$!ble to

them8 /o$t of them fa!l to recogn!;e the !n#!$!ble &ort!on6 thu$6 unable to manage !t

effect!#ely8 Th!$ !n#!$!ble &ort!on !$ called the franchise value8

+ranch!$e #alue !$ def!ned a$ the &re$ent #alue of future rene9al$ of the f!rm8 It !$

a #aluable a$$et not u$ually recogn!;ed by the account!ng rule$ that go#ern a f!nanc!al

!n$t!tut!on8 Th!$ #alue !$ real!;ed 9hen a &ol!cy !$ $old at a lo$$ !n the f!r$t year and then

y!eld$ &rof!t on the $ucceed!ng year$ 9hen a &ol!cy contract !$ rene9ed8 S!nce e7&en$e$

are le$$er and comm!$$!on$ are lo9er on the$e later year$6 the f!r$t year lo$$ 9ould be

more than off$et by the return of the rene9al$< con$e=uently6 the tran$act!on$ 9!ll g!#e

&o$!t!#e return$ to the f!rm8

Pr!c!ng an !n$urance &roduct !$ an !m&ortant a$&ect !n manag!ng the #alue of the

f!rm8 In fact6 !t !$ con$!dered !n r!$k-management $trateg!e$ of f!nanc!al cor&orat!on$8

Prem!um$ are &r!ced !n $uch a 9ay that !t 9!ll meet the ob"ect!#e of the com&any8 ,$!de

from &rof!tab!l!ty6 !n$urer$ mu$t al$o con$!der the!r &roduct:$ com&et!t!#ene$$6 $o that

they 9ould be able to $ur#!#e and thr!#e !n the !ndu$try8 They al$o mu$t ha#e a target

1



market to focu$ on< other9!$e6 the!r bu$!ne$$ 9!ll not $ucceed8 The!r goal then !$ to ga!n

the fa#or of tho$e &ro$&ect!#e cl!ent$ by de#elo&!ng &roduct$ that 9!ll be$t $er#e the!r

!ntere$t$ 9!thout com&rom!$!ng the f!rm:$ #alue8

, $!gn!f!cant fract!on of the Ph!l!&&!ne &o&ulat!on !$ com&r!$ed of &eo&le 9ho are

belo9 the &o#erty thre$hold6 de$&!te the fact that th!$ country ha$ been re&orted to ha#e

h!gher 2NP !n com&ar!$on to !t$ &eer countr!e$8 ,nd the real!ty !$ that &oor &eo&le are

mo$t #ulnerable to r!$k becau$e of the many factor$ that come 9!th the!r &o#erty8 The

demand for microinsurance !$ d!rectly related to #ulnerab!l!ty< !t gro9$ out of the r!$k$

and r!$k management $trateg!e$ of the lo9-!ncome hou$ehold$ >Barb!n?8 ,nd to &r!ce th!$

!n$urance6 !n$urer$ mu$t take !nto con$!derat!on not only the &rof!tab!l!ty and

com&et!t!#ene$$ of the &roduct6 but al$o the affordab!l!ty a$ 9ell8 One 9ay !$ to

!ncor&orate the franch!$e #alue !n &r!c!ng an !n$urance &roduct8

, group insurance !$ a ty&e of &lan that co#er$ !nd!#!dual$ 9h!ch $hare $ome

common character!$t!c$6 !nde&endent of be!ng co#ered by the !n$urance &ol!cy8 Ty&!cal

grou&$ !nclude em&loyee$ of a $!ngle em&loyer or grou& of em&loyer$6 debtor$ to a

common cred!tor6 member$ of &rofe$$!onal or trade a$$oc!at!on$6 labor un!on$6 or

!nd!#!dual$ el!g!ble under a go#ernment &lan >Bluhm6 @?8 , grou& &lan ha$ a lo9er

co$t than !nd!#!dual !n$urance &lan$ becau$e the adm!n!$trat!#e6 o&erat!on$ and $ell!ng

co$t$ of the former are much le$$ to the !n$urance com&any8 Thu$6 th!$ ty&e of &lan !$

$u!table for le$$ f!nanc!ally endo9ed &eo&le8 +urthermore6 a grou& !n$urance &lan ha$ t9o

ty&e$A >1? annual rene9able term >,RT? &lan< and >@? &ermanent l!fe !n$urance8 Bet9een

the t9o6 ,RT !$ the mo$t common &rogram and !t &ro#!de$ the lo9e$t co$t of l!fe

!n$urance co#erage8

@



/utual Benef!t ,$$oc!at!on$ >/B,$? !$ a $oc!al de#elo&ment a$$oc!at!on !n the

Ph!l!&&!ne$ that addre$$e$ !t$ &rogram$ to the f!nanc!ng need$ of the lo9-!ncome fam!l!e$

and $mall entre&reneur$ of the country >Barb!n?8 They are m!cro-!n$urance $cheme$ run

on a non-for-&rof!t ba$!$6 &r!mar!ly becau$e the!r &ur&o$e !$ to hel& the!r member$8 /B,$

are regulated by the In$urance Comm!$$!on >IC?6 a go#ernment agency re$&on$!ble !n

regulat!ng !n$urance f!rm$ !n the Ph!l!&&!ne$ and mak!ng $ure that the!r f!nanc!al and

actuar!al &r!nc!&le$ are $ound !n accordance 9!th the In$urance Code of 18 They

mandate m!n!mum re=u!rement$ !n term$ of ca&!tal!;at!on and $tandard$ for &rudence !n

r!$k management to !n$urance com&an!e$8

Un!ted 'abor Com&any6 an /B,6 9a$ founded !n @@ 9!th the ob"ect!#e of

offer!ng m!cro-!n$urance &roduct$ to $mall &eo&le l!ke &ea$ant$ and laborer$8 It o&erate$

a$ a $tand-alone m!cro-!n$urance com&any6 and !$ off!c!ally reg!$tered on the Secur!t!e$

and (7change Comm!$$!on >S(C?6 duly l!cen$ed by the In$urance Comm!$$!on >IC? a$ a

mutual benef!t organ!;at!on8 ,$ of the moment6 they are try!ng to de#elo& the!r ne9

&roduct6 the 0,IS,0, 2rou& In$urance8 ,nd to !llu$trate the effect of !ncor&orat!ng

franch!$e #alue !n &r!c!ng an !n$urance &roduct6 th!$ $&ec!al &roblem 9!ll &r!ce the

0,IS,0, co#erage &lan u$!ng the data of +rankhau$ Internat!onal Cor&orat!on

>2arment D!#!$!on? labor un!on8

4



&1 Statement of the Problem:

Normally6 yearly rene9able term &lan$ are &r!ced on a yearly ba$!$8 Only the year

that 9!ll be co#ered by the &ol!cy !$ be!ng con$!dered !n &r!c!ng the &rem!um8 Therefore6

franch!$e #alue !$ not be!ng accounted for8 But 9e kno9 that th!$ #aluable a$$et !$ real

and mu$t be determ!ned $o that the f!rm:$ #alue 9!ll be effect!#ely managed8

In th!$ $&ec!al &roblem6 the !m&act of franch!$e #alue !n &r!c!ng a grou& rene9able

term m!cro!n$urance &roduct6 and ho9 9ould !t make the &roduct more affordable and

com&et!t!#e6 9!ll be looked !nto more clo$ely8

!1 Significance of the Study

Determ!nat!on of the f!rm:$ franch!$e #alue !$ certa!nly e$$ent!al !n a$$et-l!ab!l!ty

management8 Th!$ #aluable a$$et !$ not #!$!ble $!nce !t !$ not recogn!;ed by the

account!ng rule$6 9here!n f!nanc!al f!rm$ are gu!ded8 But by mak!ng !t kno9n to the

com&any6 !t can be ut!l!;ed to ma7!m!;e the #alue of the com&any8

Incor&orat!ng franch!$e #alue !n &rem!um &r!c!ng can make the &roduct more

com&et!t!#e becau$e &rem!um$ can be le$$ened to a con$!derable degree or &ercentage6

mak!ng !t more affordable8 Th!$ $trategy !$ a&&ro&r!ate !n &r!c!ng !n$urance &roduct$ here

!n the Ph!l!&&!ne$ $!nce ma"or!ty of the &o&ulat!on !$ f!nanc!ally under&r!#!leged6 thu$

cannot afford e7&en$!#e !nd!#!dual &lan$8



)1 Objectives

The general ob"ect!#e of th!$ $tudy !$ to determ!ne and ut!l!;e franch!$e #alue !n

&r!c!ng a grou& yearly rene9able term m!cro!n$urance &roduct8 Th!$ $tudy 9!ll make u$e

of the data gathered from +rankhau$ Internat!onal Cor&orat!on >2arment D!#!$!on? un!on

member$6 and &r!c!ng 9!ll be ba$ed on the 0,IS,0, grou& !n$urance of Un!ted 'abor

Com&any6 ado&t!ng only the th!rd cond!t!on of the &ol!cy6 9here!n benef!t &ayment$ 9!ll

only be &ro#!ded for on the occurrence of death of the !n$ured &er$on from the age of 1%

and before reach!ng the age of 51 due to natural cau$e$8

The $&ec!f!c ob"ect!#e$ of the $tudy areA

to com&ute for the &rem!um of the grou& yearly rene9able term &lan u$!ng the

data of the un!on member$ of +rankhau$ Internat!onal Cor&orat!on >2arment

D!#!$!on?<

to determ!ne the franch!$e #alue to the f!rm of future rene9al$<

to determ!ne the &rem!um of the &roduct 9!th the franch!$e #alue !ntegrated !n the

formula< and

to com&are the !n!t!al &rem!um 9!th the re#!$ed &rem!um8

/1 Scope and Limitations of the Study

Determining the present value of future renewals of the United Labor Company

was only based on, and is limited to, their group insurance product. Franchise value of

other plans was not included in this study. Model adopted in this paper was based from

%



the work of William H. Panning on his paper “Managing the Invisible: ALM, Solvency,

and Franchise Value”.

For the purpose of creating understanding rather than application, premium

calculations were simplified since the focus of this work was on the franchise value and

its effect on the price of the product.

The data gathered is from the union members of Frankhaus International

Corporation (Garment Division), one of the target markets of United Labor Company.

Philippine Inter-company Mortality Table was utilized in conducting actuarial

computations of this study. Benefit is patterned from the KAISAKA group insurance

policy which stated that if the death of the insured person, between the age of 15 and

before reaching age 61, occurred due to natural causes, benefit will be payable at the end

of the year of death. Premiums will be paid annually at the beginning of the year of each

transaction. Other provisions which are written on the insurance agreement were not

considered and were excluded in premium computations.

5



1 Re$iew of Related %iterature

, central =ue$t!on !n cor&orate f!nance !$ ho9 to mea$ure the #alue of the f!rm8 ,

f!rm:$ #alue !$ determ!ned by the total a$$et$ 9h!ch the com&any !$ currently hold!ng8 It !$

com&r!$ed of t9o com&onent$6 !t$ book #alue and econom!c #alue8 &oo2 $alue !$ the

#alue of !t$ a$$et$ at the t!me they entered the balance $heet8 The book #alue !$

e$tabl!$hed by a&&ly!ng a $et of arb!trary account!ng rule$ to $&read the ac=u!$!t!on co$t

of a$$et$ o#er a $&ec!f!ed number of year$ >Bod!e et8 al6 @5?8 On the other hand6

/conomic $alue !$ the market #alue of the f!rm:$ a$$et$ m!nu$ the e$t!mated &re$ent

#alue of the f!rm:$ l!ab!l!t!e$6 9h!ch !$ obta!ned by d!$count!ng the foreca$t l!ab!l!ty ca$h

flo9$ >Pann!ng6 @4?8

There !$ a &ort!on of the econom!c #alue of the f!rm that !$ !n#!$!ble to mo$t of the

!n$urer$8 Th!$ #alue !$ called the franchise $alue and !$ def!ned a$ the &re$ent #alue of

future rene9al$8 Sen!or management that rel!e$ on the account!ng number$ could not $ee

th!$ becau$e account!ng &r!nc!&le$ fa!l$ recogn!;e !t$ e7!$tence8 But !t ha$ been $ho9n

that th!$ #aluable a$$et &lay$ a $!gn!f!cant role !n effect!#ely manag!ng a$$et$ and

l!ab!l!t!e$8

+ranch!$e #alue can be u$ed !n &r!c!ng !n$urance &roduct$8 In &art!cular6 an annual

rene9able term &roduct !$ normally &r!ced on a one-year ba$!$ only6 thu$6 fa!l!ng to

account for the #alue of &ro$&ect!#e rene9al$8 *!th con$!derat!on to future &rof!t$6 &r!ce

of the &roduct can be ad"u$ted 9!thout com&rom!$!ng the &rof!t ob"ect!#e of the f!rm8

Stud!e$ regard!ng econom!c $!tuat!on of the Ph!l!&&!ne$ $ho9 that there !$ a

d!$&ar!ty of !ncome$ and 9ell be!ng acro$$ the country8 ,ccord!ng to a +!eld Study of





grou& co#erage8 ,n annual rene9able term >,RT? &ol!cy !$ the mo$t common &lan

offered by a com&any to a grou& becau$e !t &ro#!de$ the lo9e$t co$t of l!fe !n$urance

co#erage8 The lo9 co$t re$ult$ from the fact that the !n$urer ha$ the r!ght to !ncrea$e

&rem!um$ each year ba$ed on the grou&:$ e7&er!ence dur!ng the &re#!ou$ year8 The

&ol!cyholder al$o ha$ the r!ght to rene9 co#erage each &ol!cy year8

,n ,nnual Rene9able Term >,RT? &lan !$ a ty&e of a more general form6 the n-

year term l!fe !n$urance8 ,n N -3ear Term '!fe In$urance &ro#!de$ for a &ayment only !f

the !n$ured d!e$ 9!th!n the n-year term of an !n$urance commenc!ng at !$$ue >Bo9er$?8 In

the ca$e of ,RT6 nF18 ,nd $!nce mo$t of the a#a!lable mortal!ty table$ are on a one-year

!nter#al ba$!$6 com&ut!ng for th!$ &lan:$ &rem!um !$ $tra!ghtfor9ard8



1 Theoretical Framewor2

Franchise $alue Gthe econom!c #alue to the f!rm of future rene9al$G!$ another

e$$ent!al com&onent to manag!ng the f!rm:$ #alue8 Th!$ con$!derable &ort!on of the f!rm:$

#alue !$ !n#!$!ble or only d!mly #!$!ble to the f!rm:$ $en!or off!cer$6 becau$e that #alue !$

not !ncluded !n the account!ng number$ u&on 9h!ch they rely8

To calculate the f!rm:$ franch!$e #alue6 &re$ent #alue of ca$h flo9$ from !t$ future

rene9al$ mu$t be obta!ned6 tak!ng !nto account both the t!me #alue of money and the

f!rm:$ cl!ent retent!on rate cr 8 If !ntere$t rate$ rema!n con$tant6 for e#ery monetary un!t

>that !$6 &e$o? of &rem!um$ rece!#ed and e7&en$e$ &a!d at the beg!nn!ng of a g!#en year6

the f!rm 9!ll rece!#e and &ay cr &e$o$ !n the $ub$e=uent year8 S!m!larly6 for e#ery &e$o of

e7&ected lo$$ occurr!ng at the end of a g!#en year6 the f!rm can e7&ect to &ay cr dollar$ !n

the $ub$e=uent year8 So to f!nd the &re$ent #alue$ of the$e ca$h flo9$ 9e mu$t take

cu$tomer retent!on !nto account a$ 9ell a$ the t!me #alue of money8 To do th!$ 9e create a

mult!&l!er d = cr/(1+y). Pro#!ded that !ntere$t rate$ rema!n unchanged6 the &re$ent #alue

of future &rem!um$ P e=ual$ P*(d+d 2+d 3+ . . .+ d n )8

S!m!larly6 &re$ent #alue$ of e7&en$e$ and lo$$e$ can be real!;ed on the $ame

manner6 e7ce&t for lo$$e$6 becau$e they are &a!d a year later6 and $o the!r &re$ent #alue$

are *(d+d 2+d 3+ . . .+ d n ) and !"*(d+d 2+d 3+ . . .+ d n )#/(1+y) re$&ect!#ely8

Comb!n!ng the$e three com&onent$Gby $ubtract!ng the &re$ent #alue$ of

e7&en$e$ and lo$$e$ from the &re$ent #alue of &rem!um$G9!ll g!#e you the franch!$e

#alue8

1



V1 Methodolo"y

A1 )ata Gatherin"

Data 9a$ gathered from the +rankhau$ Internat!onal Cor&orat!on >2arment

D!#!$!on? un!on grou&8 The Un!ted 'abor Com&any d!$tr!buted $ur#ey$6 9!th blank$ on

name$ and b!rthday$6 and 9a$ then collected and entered to the databa$e8 The databa$e

9a$ $ent to my e-ma!l and got a $oft co&y of the data8

I rechecked the age !n&ut$ on the databa$e and made $ome change$8 ,ge$ no9 are

tabulated by calendar year$ of b!rth8

+or mortal!ty com&utat!on$6 the Ph!l!&&!ne Inter-Com&any /ortal!ty Table 9a$

u$ed !n determ!n!ng total e7&ected number of death$ of the grou& 9!th!n a year8

&1 nitial Premium

In!t!al 2ro$$ &rem!um >I2P? for the firs$ policy year 6 or the or!g!nal &rem!um6 !$

com&r!$ed of annual ba$!c &rem!um6 &lu$ an amount of Ph&4 for f!7ed e7&en$e

>,dm!n!$trat!#e and O&erat!ng (7&en$e$?6 and @H of the I2P for f!7ed e7&en$e

>comm!$$!on$?8 )ar!able e7&en$e rate decrea$e$ by %H >%H of @H? on the f!r$t

rene9al year6 and from %H6 rate of decrement !$ %H on the $ucceed!ng rene9al year$

>%H of @H6 H of @H6 etc8?8 The follo9!ng formula$ $ummar!;e the abo#e $cheme$A

I2P F NetPrem!um +!7ed(7&en$e )ar!able(7&en$e

IRPF NetPrem!um +!7ed(7&en$e 8%)ar!able(7&en$e

IRPtF NetPrem!um +!7ed(7&en$e >r t-1-8%?)ar!able(7&en$e 6 t J 1

11



Prem!um$ al$o de&end on the face amount !nd!cated on each Plan6 9!th 9h!ch

there are $!7 >5? categor!e$A

Plan A Plan B Plan C Plan D Plan E Plan F

Beneft 5,000 10,000 15,000 20,000 25,000 30,000

The effect!#e rate of !ntere$t u$ed !$ %H8

!1 Re$ised Premium

+ranch!$e #alue !$ the &re$ent #alue of future ca$h flo9$ of the f!rm:$ future

rene9al$6 tak!ng !nto account both the t!me #alue of the money and the f!rm:$ cl!ent

retent!on rate cr 8 To com&ute for th!$ #alue6 9e "u$t ha#e to get the &re$ent #alue of

future &rem!um$ le$$ the &re$ent #alue of future e7&en$e$ and future lo$$e$ a$$oc!ated

9!th reta!ned bu$!ne$$8 *e ha#e a$$umed an effect!#e rate of !ntere$t of %H and cr

!ncrea$e$ e#ery year for $ome &er!od of t!me8

Re#!$ed 2ro$$ Prem!um >R2P? !$ "u$t the I2P that ut!l!;ed franch!$e #alue8 R2P$

9ere determ!ned $o that !t 9!ll g!#e a Total )alue of ;ero >?8 Total )alue !$ the $um of the

f!r$t year &rof!t and the franch!$e #alue8

Illu$trat!on of th!$ model !$ $ho9n on ,&&end!7 ,8

1@



V1 Results and )iscussion

By ado&t!ng the Prof!t Ob"ect!#e de#elo&ed by K8 C8 .8 ,nder$on6

P)>Rene9al 3ear Prof!t$? F +!r$t 3ear 'o$$

Re#!$ed 2ro$$ Prem!um$ >R2P$? 9ere determ!ned8 It can be ob$er#ed that by

!ncor&orat!ng franch!$e #alue !n the calculat!on$6 I2P$ 9ere lo9ered to a tolerable

degree8 It can al$o be !nferred from the outcome$ $ho9n on ,&&end!7 , that the longer

the ob$er#at!on &er!od6 the h!gher the d!fference &ercentage8 The follo9!ng table !$ a

$ummary of the conclu$!onA

Initial GrossPremium

Revised Gross Premium Diference in %

in 3 years in 5 years in 3 years in 5 years

Plan A 2,028.06 1,841.32 1,779.40 9.21% 12.26%

Plan B 3,681.13 3,334.29 3,220.03 9.42% 12.53%

Plan C 5,334.19 4,827.27 4,660.66 9.50% 12.63%

Plan D 6,987.25 6,320.25 6,101.29 9.55% 12.68%

Plan E 8,640.31 7,813.22 7,541.91 9.57% 12.71%

Plan F 10,293.38 9,306.20 8,982.54 9.59% 12.73%

14



V1 Recommendations

There are many factor$ that can affect the #alue of the f!rm:$ future rene9al$8 The

model that th!$ &a&er had de#elo&ed !gnored the many real!$t!c but !rrele#ant

com&le7!t!e$ of an !n$urance f!rm8 Intere$t rate$6 !nflat!on rate$6 &rem!um $cheme$6 &rof!t

ob"ect!#e$6 etc8 can be u$ed to de#elo& th!$ model8

Pr!c!ng other ty&e$ of &roduct$ a$!de from a grou& rene9able term &lan may al$o

be a 9orth9h!le $tudy8 *hole l!fe and endo9ment &roduct$ co#er long &er!od$ of t!me8

+!nd!ng the l!m!t of the franch!$e #alue of a &roduct a$ year nLM !$ ad#!$able8

,&&ly!ng th!$ model to real 9orld $!tuat!on$ can be !m&ract!cal but !t can be a

foundat!on !n de#elo&!ng other model$ that 9!ll be$t reflect the actual undertak!ng$ of an

!n$urance com&any8

1



References

&oo2s3Papers

Barb!n6 (lo!$a6 ,8 et8 al8 , f!eld $tudy of m!cro!n$urance !n the Ph!l!&&!ne$8 @@

Bluhm6 *!ll!am6 +8 et8 al8 2rou& In$urance8 ,CT( Publ!cat!on$8 @4

Bod!e6 #! et8 al8 In#e$tment$8 %th (d!t!on8 The /c2ra9-.!ll Com&an!e$8 @1

Church!ll6 Cra!g8 Protect!ng the PoorA , m!cro!n$urance com&end!um8 Internat!onal

'abour Organ!;at!on8 @5

Pann!ng6 *!ll!am .8 /anag!ng the In#!$!bleA ,'/6 Sol#ency6 and +ranch!$e )alue8 /ay

@58

nternet Sources

9998actuar!alfoundat!on8org

9998!ca@58com

9998$oa8org

1%

http://www.actuarialfoundation.org/

http://www.ica2006.com/papiers/1003/1003

http://www.soa.org/library/professional-actuarial-specialty-guides/professional-actuarial-specialty-guides/1998/august/spg9808alm

http://www.actuarialfoundation.org/

http://www.ica2006.com/papiers/1003/1003

http://www.soa.org/library/professional-actuarial-specialty-guides/professional-actuarial-specialty-guides/1998/august/spg9808alm



15



Appendi4 A

nitial and Re$ised Gross Premiums with Franchise Values

PlanA

Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$al

Pre!&

'ar!ale

E(pen)e*ate

E(pen)e)+ar!ale - f(e/ o))e) Proft

Pre!&

'ar!ale

E(pen)e*ate

E(pen)e)+ar!ale - f(e/ o))e) Proft

0 2!2"#!

$ 20% 705.61 1,322.45 0.00"&#

32 20% 668.26 1322.45

149.40

1 70%2,028.0

6 10% 502.81 1,322.45177.1

91,841.3

2 10% 484.13 1322.45 65.14

2 80%2,028.0

6 9% 482.53 1,322.45207.5

71,841.3

2 9% 465.72 1322.45 84.26

Fran!)e 'al&e

3"&#'$

Fran!)e'al&e

&(#&!

otal 'al&e 0.00

PlanA

Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$al

Pre!&

'ar!aleE(pen)e

*ate

E(pen)e)+ar!ale - f(e/

o))e) ProftPre!&

'ar!aleE(pen)e

*ate


o))e) Proft

0

2!2"#!$ 20% 705.61 1,322.45 0.00

''(#&! 20% 655.88 1322.45

198.93

1

70%

2,028.0

6 10% 502.81 1,322.45

177.1

9

1,779.4

0 10% 477.94 1322.45 27.992

80%2,028.0

6 9% 482.53 1,322.45207.5

71,779.4

0 9% 460.15 1322.45 43.38

385%

2,028.06 8% 462.25 1,322.45

224.93

1,779.40 8% 442.35 1322.45 56.96

490%

2,028.06 7% 441.96 1,322.45

241.84

1,779.40 7% 424.56 1322.45 70.61

Fran!)e 'al&e

"5#5&

Fran!)e'al&e

("#(3

otal 'al&e 0.00



Plan B Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$al

Pre!&

'ar!aleE(pen)e

*ate


o))e) ProftPre!&

'ar!aleE(pen)e

*ate


o))e) Proft

03$"#

3 20% 1036.23 2,644.90 0.00333&#

2( 20% 966.86 2,644.90

277.47

170%

3,681.13 10% 668.11 2,644.90 329.37

3,334.29 10% 633.43 2,644.90 121.27

280%

3,681.13 9% 631.30 2,644.90 385.21

3,334.29 9% 600.09 2,644.90 156.19

Fran!)

e 'al&e'&#5

( Fran!)e

'al&e2''#&

'

otal'al&e 0.00

Plan B Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$al

Pre!&

'ar!aleE(pen)e

*ate


o))e) ProftPre!&

'ar!aleE(pen)e

*ate


o))e) Proft

0

3$"#3 20% 1036.23 2,644.90 0.00

322!#!3 20% 944.01 2,644.90

368.88

170%

3,681.13 10% 668.11 2,644.90 329.37

3,220.03 10% 622.00 2,644.90 52.71

2 80% 3,681.13 9% 631.30 2,644.90 385.21 3,220.03 9% 589.80 2,644.90 80.74

385%

3,681.13 8% 594.49 2,644.90 416.83

3,220.03 8% 557.60 2,644.90 105.35

490%

3,681.13 7% 557.68 2,644.90 447.59

3,220.03 7% 525.40 2,644.90 130.07

Fran!)e 'al&e

5'(#!!

Fran!)e'al&e

3$"#""

otal'al&e 0.00



Plan C Initial Gross Premium Revised Gross Premium

Yearproa!l!t

" o#

rene$al

Pre!&

'ar!aleE(pen)e

*ate

E(pen)e)+ar!ale -

f(e/

o))e) ProftPre!&

'ar!aleE(pen)e

*ate


o))e) Proft

0

533&#( 20% 1366.84 3,967.35 0.00

&"2'#2' 20% 1265.45 3,967.35

405.53

170%

5,334.19 10% 833.42 3,967.35 481.56

4,827.27 10% 782.73 3,967.35 177.41

280%

5,334.19 9% 780.08 3,967.35 562.85

4,827.27 9% 734.45 3,967.35 228.13

Fran!)e

'al&e!&&#

& Fran!)e

'al&e&!5#5

3

otal 'al&e 0.00

Plan C Initial Gross Premium Revised Gross Premium

Yearproa!l!t

" o# rene$al

Pre!&

'ar!aleE(pen)e

*ate

E(pen)e)+ar!ale -

f(e/

o))e) ProftPre!&

'ar!aleE(pen)e

*ate


o))e) Proft

0

533&#( 20% 1366.84 3,967.35 0.00

&$$!#$$ 20% 1232.13 3,967.35

538.82

170%

5,334.19 10% 833.42 3,967.35 481.56

4,660.66 10% 766.07 3,967.35 77.44

2 80% 5,334.19 9% 780.08 3,967.35 562.85 4,660.66 9% 719.46 3,967.35 118.11

385%

5,334.19 8% 726.74 3,967.35 608.72

4,660.66 8% 672.85 3,967.35 153.74

490%

5,334.19 7% 673.39 3,967.35 653.33

4,660.66 7% 626.25 3,967.35 189.54

Fran!)e

'al&e23!$#

&' Fran!)e

'al&e53"#"

2

otal 'al&e 0.00



Plan D Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$alPre!&

'ar!aleE(pen)e

*ate

E(pen)e)+ar!ale -

f(e/

o))e) ProftPre!&

'ar!aleE(pen)e

*ate

E(pen)e)+ar!ale -

f(e/

o))e) Proft

0

$("'#25 20% 1697.45 5,289.80 0.00

$32!#25 20% 1564.05 5,289.80

533.60

170% 6,987.25 10% 998.73 5,289.80 633.75

6,320.25 10% 932.02 5,289.80 233.54

280% 6,987.25 9% 928.85 5,289.80 740.49

6,320.25 9% 868.82 5,289.80 300.06

Fran!)e 'al&e

3'&#2&

Fran!)e'al&e

533#$!

otal 'al&e 0.00

Plan D Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$alPre!&

'ar!aleE(pen)e

*ate

E(pen)e)+ar!ale -

f(e/

o))e) ProftPre!&

'ar!aleE(pen)e

*ate

E(pen)e)+ar!ale -

f(e/

o))e) Proft

0

$("'#25 20% 1697.45 5,289.80 0.00

$!#2( 20% 1520.26 5,289.80

708.77

170% 6,987.25 10% 998.73 5,289.80 633.75

6,101.29 10% 910.13 5,289.80 102.17

2 80% 6,987.25 9% 928.85 5,289.80 740.49 6,101.29 9% 849.12 5,289.80 155.48

385% 6,987.25 8% 858.98 5,289.80 800.61

6,101.29 8% 788.10 5,289.80 202.13

490% 6,987.25 7% 789.11 5,289.80 859.08

6,101.29 7% 727.09 5,289.80 249.00

Fran!)

e 'al&e3!33#

(3 Fran!)e

'al&e'!"#'

'

otal 'al&e 0.00



Plan E Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$alPre!&

'ar!aleE(pen)e

*ate


o))e) ProftPre!&

'ar!aleE(pen)e *ate


o))e) Proft

0

"$&!#3 20% 2028.06 6,612.25 0.00

'"3#22 20% 1862.64 6,612.25

661.67

170% 8,640.31 10% 1164.03 6,612.25 785.93

7,813.22 10% 1081.32 6,612.25 289.68

280% 8,640.31 9% 1077.63 6,612.25 918.13

7,813.22 9% 1003.19 6,612.25 371.99

Fran!)e

'al&e '!&#

!' Fran!)e

'al&e$$#$

'

otal 'al&e 0.00

Plan E Initial Gross Premium Revised Gross Premium

Yearproa!l!t" o#

rene$alPre!&

'ar!aleE(pen)e

*ate


o))e) ProftPre!&

'ar!aleE(pen)e *ate


o))e) Proft

0

"$&!#3 20% 2028.06 6,612.25 0.00

'5&#( 20% 1808.38 6,612.25

878.72

170% 8,640.31 10% 1164.03 6,612.25 785.93

7,541.91 10% 1054.19 6,612.25 126.90

2 80% 8,640.31 9% 1077.63 6,612.25 918.13

7,541.9

1 9% 978.77 6,612.25 192.84

385% 8,640.31 8% 991.23 6,612.25 992.51

7,541.91 8% 903.35 6,612.25 250.52

490% 8,640.31 7% 904.82 6,612.25

1064.82

7,541.91 7% 827.93 6,612.25 308.46

Fran!)e 'al&e

3'$#&!

Fran!)e'al&e

"'"#'2

otal 'al&e 0.00



Plan F Initial Gross Premium Revised Gross Premium

Yearproa!l!t"o# rene$al

Pre!&'ar!aleE(pen)e

*ate


o))e) ProftPre!&

'ar!aleE(pen)e

*ate


o))e) Proft

0

!2(3#3" 20% 2358.68 7,934.70 0.00

(3!$#2! 20% 2161.24 7,934.70 789.74

170%

10,293.38 10% 1329.34 7,934.70 938.12

9,306.20 10% 1230.62 7,934.70 345.82

280%

10,293.38 9% 1226.40 7,934.70

1095.77

9,306.20 9% 1137.56 7,934.70 443.93

Fran!)

e 'al&e2!33#

"( Fran!)e

'al&e '"(#'&

otal 'al&e 0.00

Plan F Initial Gross Premium Revised Gross Premium

Yearproa!l!t"o# rene$al

Pre!&'ar!aleE(pen)e

*ate


o))e) ProftPre!&

'ar!aleE(pen)e

*ate


o))e) Proft

0

!2(3#3" 20% 2358.68 7,934.70 0.00

"("2#5& 20% 2096.51 7,934.70

1,048.6

6

170%

10,293.38 10% 1329.34 7,934.70 938.12

8,982.54 10% 1198.25 7,934.70 151.62

280%

10,293.38 9% 1226.40 7,934.70

1095.77

8,982.54 9% 1108.43 7,934.70 230.21

385%

10,293.38 8% 1123.47 7,934.70

1184.40

8,982.54 8% 1018.60 7,934.70 298.91

490%

10,293.38 7% 1020.54 7,934.70

1270.57

8,982.54 7% 928.78 7,934.70 367.93

Fran!)

e 'al&e&&""#

"$ Fran!)e

'al&e!&"#$

$

otal 'al&e 0.00



Appendi4 &

Philippine nter5!ompany Mortality Table

x qx dx

0 0.00726 0.00726

1 0.00399 0.00396

2 0.00264 0.00261

3 0.00229 0.00226

4 0.00202 0.00199

5 0.00180 0.00177

6 0.00162 0.00159

7 0.00149 0.00146

8 0.00141 0.00138

9 0.00136 0.00133

10 0.00135 0.00132

11 0.00137 0.00133

12 0.00142 0.00138

13 0.00149 0.00145

14 0.00157 0.00152

15 0.00166 0.00161

16 0.00174 0.00168

17 0.00181 0.00175

18 0.00186 0.00179

19 0.00189 0.00182

20 0.00193 0.00185

21 0.00196 0.00188

22 0.00200 0.00191

23 0.00207 0.00197

24 0.00216 0.00205

25 0.00221 0.00210

26 0.00227 0.00215

27 0.00231 0.00218

28 0.00230 0.00217

29 0.00228 0.00214

30 0.00225 0.00211

31 0.00222 0.00208

32 0.00219 0.00205

33 0.00219 0.00204

34 0.00222 0.00206

35 0.00226 0.00210

36 0.00233 0.00216

37 0.00242 0.00224

38 0.00254 0.00234

39 0.00268 0.00246

40 0.00286 0.00262

41 0.00305 0.00279

42 0.00326 0.00297

43 0.00349 0.00317

44 0.00376 0.00340

45 0.00404 0.00364

46 0.00435 0.00391

47 0.00468 0.00418

48 0.00503 0.00448

49 0.00543 0.00481

50 0.00587 0.00517

51 0.00637 0.00558

52 0.00694 0.00604

53 0.00758 0.00655

54 0.00830 0.00712

55 0.00906 0.00770

56 0.00987 0.00832

57 0.01069 0.00892

58 0.01153 0.00952

59 0.01241 0.01012

60 0.01337 0.01077

61 0.01443 0.01147

62 0.01563 0.01225

63 0.01699 0.01310

64 0.01852 0.01404

65 0.02027 0.01508

66 0.02221 0.01619

67 0.02442 0.01741

68 0.02684 0.01866

69 0.02958 0.02002

70 0.03269 0.02147

71 0.03619 0.02299

72 0.04023 0.02463

73 0.04448 0.02614

74 0.04996 0.02805

75 0.05551 0.02961

76 0.06219 0.03133

77 0.06873 0.03248

78 0.07704 0.03390

79 0.08651 0.03513







6

28 CENIDOZA ROSEMARIE BITERANTA40

F09206

8

29 CENINA NANCY RIVERA41

F09246

7

30 CID JOSELITA DIAGO40

F08126

8

31 CORONADO ANATALIA R 35 F07097

3

32 CORONG MARITA MIRAS37

F06027

1

33 CRIBE DINA PORCINCULA34

F08017

4

34 CRUZ DELLA P40

F10236

8

35 CRUZ IRENE CA-EZA39

F10136

9

36 CUDAL ERANIO BILLENA24

01258

4

37 DE BELEN FLORELYN MANTARING29

F01277

9

38 DE BELEN MILDRED MANTARING 36 F

01127

2

39 DEAN ELVIRA R40

F03246

8

40 DELA CRUZ RICARDO VELASCO40

12076

8

41 DOMETITA OLGA MONTEMAYOR36

F08217

2

42 ENRIQUEZ ELSA BITARE39

F05086

9

43 ESP. SANTO LEONORA L31

F12107

7

44 ESPEJON NILO A36

09267

2

45 EVANGELISTA REYNALDO MACATA33

02047

5

46 FALCUNITIN EDUARDO FAMA43

03156

5

47 FERMANTE HELEN LARESMA40

F05026

8

48 FERMANTE VICTOR JR. LARESMA34

12287

4

49 FERMATO EMELITO CADIENTE33

01167

5

50 FLORES MA. ZENAIDA Y42

F03106

6

1 FULGAR SUSAN MENOR38

F01077

0

2 GARCIA RANDY TALAVERA

30

08107

8

3 GARCIA VICTORIA CASTILLO40

F11216

8

4 GAMPESAW NORALYN T.27

F05218

1

5 GOLLAYAN MELITA GUMIRAN40

F02256

8

6 GOMOP-AS JUNEL CASTELLIONES32

04157

6

7 GOTERA MA. LULU B.42

F02246

6





8

39 NORBERTE VERONICA BURCE41

F03106

7

40 ONDONG MILDRED ESTRADA36

F09107

2

41 ORBITA LEONARDO MONTEROLA35

02197

3

42 ORBITA RAQUEL O. 33 F04157

5

43 ORQUITA SHERILYN DICHE31

F12277

7

44 PAJE NOEMY JOVELLANOS31

F07267

7

45 PATUTO WILLY ACUNCION31

04057

7

46 PEDRIGAL CATALINO VILLEGAS34

10227

4

47 PEREZ CARMELITA MANUEL30

F04267

8

48 PENAREDONDO ALEX FELIZARDO30

03137

8

49 PILAPIL URSUS SOLITO 43

09226

5

50 PONCE REYNALDO BOLANIO35

05117

3

1 PORDAN AMELITA MAGSICO23

F03308

5

2 PORE PINKY AVERILLA27

F02238

1

3 QUIAMCO RICHARD ALMIA26

07238

2

4 QUIDEP HENRY REVADAVIA27

07248

1

5 RAGOJOS GODOFREDO T.40

F11086

8

6 RAMOS LORNA ACUNA43

F

02116

5

7 REGINIO BEVERLY DOLIGUEZ30

F04027

8

8 REVEREZA NANCY BIO38

F09257

0

9 REYES CAHRLES NIEL T.29

02097

9

10 RICO JANITA ALEGRE38

F04027

0

11 RIVERA LANY BACTOL24

F12128

4

12 ROBLES REENE ROSE FAJARDO37

F05197

1

13 ROSOLADA MARLINA BUTIL

31

F

05057

7

14 RUBINA LOVELY ROSE TABLATIN24

F06148

4

15 SABANGAN BEMBOY OLFATO23

04018

5

16 SALES ERWIN SAJUL35

11077

3

17 SENORON NOE NAVAL45

01166

3

18 SERAPION RONALD BARBA30

09127

8



19 TABUENA MARISA CRISOSTOMO29

F06057

9

20 TABUENA ANDRES, JR. JAPITANA30

03157

8

21 TATAD ALMA ALMOITE38

F09217

0

22 TERRADO JOEY LETE22

04028

6

23 TIRADOS RICARDO MIRANDA24

05268

4

24 TOLENTINO PAULO RODRIGUEZ29

07167

9

25 TORRADO ARNEL TOSOC24

12138

4

26 UDTUHAN MARIO BARQUIN41

05216

7

27 UMALI EDUARDO SABITSANA30

10067

8

28 VICENCIO ROLAND HERNANDEZ31

10167

7

29 VICTOR ERLIZA ANDAYA32

F06227

6

30 VILLARAN GERALDINE TAGALOG38

F12027

0

31 VILLARIN GRETEL PASTRANA36

F09237

2

32 VILLARINA ISABEL R.39

F02186

9

33 VILLEGAS ABEL28

03078

0

34 ADOC LEA CATUBIG38

F02067

0

35 ALEGRE TRACY ANN SAN JUAN25

F03248

3

36 ANGELES ROSALINDA AGASIN37

F06027

1

37 ARELLANO REGIE MAGANTE34

08017

4

38 BEGATA JOWIL MALABONGA29

09047

9

39 CALINGAN JESUSA USON30

F09267

8

40 CARANZA ARNEL PENDON31

10027

7

41 CATUBIG ROLDAN D35

03147

3

42 CAÑUTE REYNALD G30

04107

8

43 CEBRERO EDDIE TINDENCIA31

09127

7

44 CELERIDAD ROBIN LLARENAS 32 111076

45 CONDE ISMAEL DURANTE39

06176

9

46 COSTOMBRADO VINCENT BIANCA38

04147

0

47 CRUZ ANGELICA BALALA39

F07066

9

48 DE ASIS ROLANDO PANIZAL44

09206

449 DE LEON MARILYN AZUELA 38 F 12217



0

50 DELA ROSA NANCY TOLENTINO34

F01167

4

Documents

On the Franchise Value of a Group Yearly Renewable Term