ACTUARIAL NOTES

UPSecu25 TERM LIFE INSURANCE AND DEFERRED ANNUITY

Peso, Non-Participating

PRODUCT DESCRIPTION

UPSecu25 has the following features:

1. The death benefit equals to 100% of the policy amount will be given to the beneficiaries when the
insured dies before reaching age 25.

2. Upon reaching age 18, the insured will receive 12% of the policy amount at the beginning of each
year until age 25.

3. Premium Paying Period (PPP) is either 5-pay or 10-pay subject to a maximum age eligibility of the
insured wherein payments can be made annually, semi-annually, quarterly or monthly through
auto debit, cash, bank payments or agents.

4. Product is designed for child with maximum age of 10 for PPP of 10 years and maximum age of 15
for PPP of 5 years.

5. Age is calculated as of the insured’s last birthday.

ASSUMPTIONS
1. Mortality Rates

a. Reserve Mortality Rates are based on 1973-78 Philippine Intercompany Table. This table is
the same for both male and female and thus, age setback was done from age 18 wherein
𝑓
𝑞𝑥𝑚 = 𝑞𝑥+3 .

b. Pricing Mortality Rates are based on 1 over 1.25 of 1973-78 Philippine Intercompany Table.

2. Interest Rates

a. Interest rates used for pricing are based on Philippine Treasury Reference Rates - PM
(PDST-R2). 25-year tenor has been chosen as the product is up to 25 years and the average
of the rates from September 8 to September 30 is 4.71%

b. Interest rates used for reserve has been adjusted to a lower percentage which is 3.83%
3. Inflation

Inflation rate is based on the maximum percentage which is 2.50% in the Summary Inflation
Report Consumer Price Index for the year 2015 from Philippine Statistics Authority.

4. Commissions

Payment Period
Policy Year
5-pay 10-pay
1 10% 15%
2 5% 10%
3 5% 10%
4 3% 5%
5 3% 5%
6 3%
7 3%
8 3%
9 3%
10 3%

5. Lapse and Surrender Rate

Payment Period
Policy Year
5-pay 10-pay
1 15% 20%
2 10% 15%
3 10% 15%
4 5% 10%
5 5% 10%
6 3% 5%
7 3% 5%
8 3% 5%
9 3% 5%
10 3% 5%
11 2% 3%
12 2% 3%
13 2% 3%
14 2% 3%
15 2% 3%
16 1% 2%
17 1% 2%
18 1% 2%
19 1% 2%
20 1% 2%
21 – 25 1% 1%
 6. Expenses

a. Per Policy Expenses

Expense Amount, in PHP

Acquisition 1,000.00
Maintenance (Premium Paying Period) 500.00
Maintenance (Paid Up Period) 100.00
Per Death 1,000.00
Per Surrender 750.00
Per Maturity 250.00

b. Per 1000 of Policy Amount

Expense Per 1000

Acquisition 1.00
Maintenance 0.50
Per Death 1.00
Per Maturity 1.00

c. Percentage of Premium Expenses

Expense % of Premium
Acquisition 5.00%
Maintenance (Premium Paying Period) 2.00%
Maintenance (Paid Up Period) 0.00%
Premium Taxes 2.00%
Local Government Tax 0.50%

FORMULATIONS

1. Term Life Insurance

The death benefit payable at the moment of death for this term life insurance given age of
insured, 𝑥, is calculated as

25−𝑥−1
1 𝑖
𝐷𝐵 ⋅ 𝐴𝑥:25−𝑥| = 𝐷𝐵 ⋅ ∑ 𝑣 𝑘+1 𝑘 𝑝𝑥 𝑞𝑥+𝑘
𝛿
𝑘=0

where 𝛿 = ln(1 + 𝑖).

2. Endowment Benefit

If the insured survives at age 18, insured will receive endowment benefit of 12% of the policy
amount payable at the beginning of each year until age 25 given that insured is alive. The annuity
is calculated as

0 , 𝑥 < 18
24−𝑥
18−𝑥| 𝑎̈ 𝑥:7| ={
∑ 𝑣 𝑘 𝑘 𝑝𝑥 , 18 ≤ 𝑥 < 25
𝑘=18−𝑥

3. Premium

The Net Single Premium is computed as

1
𝑁𝑆𝑃 = 𝐷𝐵 (𝐴𝑥:25−𝑥| + 0.12 18−𝑥| 𝑎̈ 𝑥:7| ) .

The Net Level Benefit Premium is equivalent to

𝑁𝑆𝑃
𝑁𝐿𝐵𝑃 =
𝑎̈ 𝑥:ℎ|
where ℎ is the payment term.

4. Terminal Reserve

Prospective approach is used to compute for the terminal reserve. The terminal reserve is

𝑡𝑉 = 𝐷𝐵[ 𝑡 𝑉 (𝑡𝑒𝑟𝑚) + 0.12 𝑡 𝑉 (𝑒𝑛𝑑𝑜𝑤𝑚𝑒𝑛𝑡) ] − 𝑁𝐿𝐵𝑃 𝑡 𝑉 (𝑎𝑛𝑛𝑢𝑖𝑡𝑦)

where

1
𝑡𝑉
(𝑡𝑒𝑟𝑚)
= {𝐴𝑥+𝑡:25−𝑥−𝑡| 𝑡 < 25 − 𝑥
0 𝑡 ≥ 25 − 𝑥

18−𝑥−𝑡| 𝑎̈ 𝑥+𝑡:7| 𝑡 < 18 − 𝑥

(𝑒𝑛𝑑𝑜𝑤𝑚𝑒𝑛𝑡)
𝑡𝑉 ={
𝑎̈ 𝑥+𝑡:25−𝑥−𝑡| 𝑡 ≥ 18 − 𝑥

(𝑎𝑛𝑛𝑢𝑖𝑡𝑦)
𝑎̈ 𝑡<ℎ
𝑡𝑉 = { 𝑥+𝑡:ℎ−𝑡|
0 𝑡≥ℎ