2009 Seminar for the Appointed ActuaryColloque pour l’actuaire désigné 2009

Canadian Institute

of Actuaries

L’Institut canadien desactuaires

PD -2 (Life)

The Actuary and Changing Times

John Brierley

RBC Life Invested Assets

AAA Government Bonds

AA Corporate Bonds

AA Government Bonds

AA Corporate Bonds

A Government Bonds

A Corporate Bonds

BBB Government Bonds

BBB Corporate Bonds

BB: Government

BB Corporate Bonds

Equities/Futures

Commercial Mortgages

Loans on Policies

Cash & short term

RBC Life Liabilities

Non-Par Life

Universal Life

Individual Health

Group Life and Health

Annuity

Participating Life

Segregated Funds

RBC Insurance

Canadian LifeCanadian Home and AutoCanadian TravelUS LifeUS TravelInternational Reinsurance

RBC

Bank Insurance

Impacts

• Asset Defaults: – None in Canadian Life– Minor elsewhere in other insurance

• Equities:– Very small segregated fund portfolio– Material impact in traditional life

• Disability:– Less impact than expected from an economic

downturn

Impacts

• Lower interest rates– Provide for 50% excess credit spread– Keeping ahead of ultimate

reinvestment rate reductions– Looks a lot like last year’s DCAT

adverse interest rate scenario• Asset Extension

– Better matching generated liability reductions in CALM

Impacts

• Small income impact from volatility in the Initial Reinvestment Rate:– Market value change on excess HFT

assets tends to offset much of the impact of IRR changes

• Quarterly income volatility from equity assets held in the general account

Impacts

• Investment Restrictions:– Tight money lending conditions– Asset sector limits– Limitation on commercial mortgages

Impacts

• Universal Life– Less change in policyholder behaviour

than expected• Deposits still being made• No significant difference in fund transfers

or partial surrenders• Policy lapses not significantly impacted

Summary

• No impact from asset default• Equity market downturn noticeable• Providing for lower interest rates• Disability experience slightly adverse• Universal Life neutral• Asset extension favourable to income• Limitations in asset choices

• “not really that bad a year”