ACTUARIAL SCIENCE (TURKISH, NON-THESIS)
Master TR-NQF-HE: Level 7 QF-EHEA: Second Cycle EQF-LLL: Level 7

Course Introduction and Application Information

Course Code Course Name Semester Theoretical Practical Credit ECTS
AKB5118 Life Insurance Management and Financial Valuation Spring 3 0 3 8
The course opens with the approval of the Department at the beginning of each semester

Basic information

Language of instruction: Tr
Type of course: Departmental Elective
Course Level:
Mode of Delivery: Face to face
Course Coordinator : Dr. Öğr. Üyesi BAHAR KÖSEOĞLU
Course Objectives: To enable the student to understand the key actuarial issues of solvency and profitability and to be able to analyse the experience of a portfolio, recognising how the actuary’s decisions affect experience, which then affects financial strength and profitability in life insurance.

Learning Outputs

The students who have succeeded in this course;
Students will appreciate the fundamental importance of solvency and profitability for policyholders, shareholders and the regulator. They will develop the actuarial skills needed to assess solvency and to analyse the experience in a life-insurance portfolio. They will also develop proficiency in interpreting profitability and understand the effect of management decisions and actions on an insurance company’s financial strength.

Course Content

Concept of financial strength, solvency margins, profitability, mortality profit, lapse profit, investment and expense profit, short and long term profitability, new business value, embedded value, appraisal value, Solvency II.

Weekly Detailed Course Contents

Week Subject Related Preparation
1) Concept of financial strength. Variation in valuation of assets and liabilities in a stochastic world. Free reserves and margin to cushion against adverse variations
2) Concept of liquidity. Types of risk (e.g. asset risk, interest-rate risk, pricing risk, business risk etc). Statutory calculation of solvency margin in Turkey.
3) Ways to manage and reduce risk. Immunisation theory. Reinsurance. Projection of future solvency margin and use of solvency theory in managing a life company.
4) Introduction to profitability. Distinction between one year result and long-term profitability. Concept of profit signature and its shape for different life insurance products.
5) Mortality profit: derivation of formulae for mortality profit. Specific premium loadings to provide expected profit. Building a simple excel model for profit and comparing profitability when mortality results differ from expectations. The difference between the mortality effect for survival-based products and death-based products
6) Mortality profit: exposure to risk analysis for a life-insurance portfolio. How to deal with adverse mortality results. Mortality improvements.
7) Lapse profit: derivation of formulae for lapse profit. Using a run-off triangle cohort analysis to calculate lapse experience. Methods of avoiding adverse experience.
8) Investment profit: derivation of formulae for investment profit. Investment strategies. Mathematical reserve curves for different types of products. Profit-sharing.
9) Expense profit: concept of acquisition and administration expenses. Use of allocation keys to allocate actual expenses between products. Building an expense model. Calculation of expense overrun and underrun.
10) Life margin analysis: re-expressing the P&L account into the actuarial lines of interest margin, mortality margin and expense margin.
11) Assumption setting process. The concept of best-estimate. Risk-free rate. Market-consistency, yield curves and discounting future profits.
12) New Business Value and building a simple model to calculate NBV for a simple product.
13) Valuing an insurance company. Weaknesses of a pure balance sheet approach. Embedded value. Appraisal value. KPIs looked at by share analysts.
14) Other uses of projected cash flows, in particular Solvency II.
15) Final Exam.
16) Final exam.

Sources

Course Notes: Gerektikçe ders notları dağıtılacaktır. Lecture notes shall be distributed whenever necessary.
References: 1.Embedded Value: Practice and Theory Robert Frasca1 and Ken LaSorella www.soa.org/library/journals/actuarial.../apf-2009-03-frasca-lasorella.pdf 2. http://actuary.org/pdf/life/embed_may09.pdf

Evaluation System

Semester Requirements Number of Activities Level of Contribution
Attendance % 0
Laboratory % 0
Application % 0
Field Work % 0
Special Course Internship (Work Placement) % 0
Quizzes % 0
Homework Assignments 3 % 100
Presentation % 0
Project % 0
Seminar % 0
Midterms % 0
Preliminary Jury % 0
Final % 0
Paper Submission % 0
Jury % 0
Bütünleme % 0
Total % 100
PERCENTAGE OF SEMESTER WORK % 100
PERCENTAGE OF FINAL WORK % 0
Total % 100

ECTS / Workload Table

Activities Number of Activities Duration (Hours) Workload
Course Hours 14 3 42
Laboratory 0 0 0
Application 0 0 0
Special Course Internship (Work Placement) 0 0 0
Field Work 0 0 0
Study Hours Out of Class 14 4 56
Presentations / Seminar 0 0 0
Project 0 0 0
Homework Assignments 3 34 102
Quizzes 0 0 0
Preliminary Jury 0
Midterms 0 0 0
Paper Submission 0
Jury 0
Final 0 0 0
Total Workload 200

Contribution of Learning Outcomes to Programme Outcomes

No Effect 1 Lowest 2 Low 3 Average 4 High 5 Highest
           
Program Outcomes Level of Contribution
1) Acquire the quantitative skills to become an actuary.
2) Will know about risks and ways to manage risk.
3) Will know about financial planning and its role in actuarial management.
4) Will be able to design new products and carry profitability tests and scenario analyses.
5) Besides gaining competence in theoretical subjects, the graduate will also be aware of practical issues and applications through lecturers and instructors who have market experience.
6) Will be able to follow all innovations and carry on research on the particular area.
7) Will share information with colleagues and will use it for project development..
8) Will be able to apply and make the necessary adaptation to all new rules and regulations.