The Cell Assumption Screen is a long, scrolling screen that allows you to define all the assumptions and control parameters necessary to produce a variety of reports. The three main functions of the assumption screen fields are:
to define processing control parameters
to define product features and values
to define which actuarial methods and assumptions will be used to generate cash flows and reserves.
The entry fields used for assumptions are grouped into sections with a common purpose; each section is surrounded with a box and has a section title preceding it. You may navigate around the assumption screen using the sections and you may also customize the appearance of the screen by collapsing sections.
Each section may contain entry fields of four main types:
Menu option fields operate like switches; they require you to select one of a defined set of optional values from (0) to the highest option value used for that field. Each value is associated with an explicit option description that is always displayed to interpret the current setting, and context sensitive help is always available to further assist in understanding the choices.
Scalar value fields allow you to enter numerical values, either as integers, real numbers or percentages, according to the purpose of the field. Sometimes a vector of scalar fields is associated with one field label, such as when a distribution by entry age or calendar month is entered directly in the assumption screen.
Table selection fields are used to display the name of the independent AXIS Tables used to hold a matrix of values for various specific purposes. Tables may be selected from among existing tables of the appropriate table type, and may be created or revised directly from within the assumption screen, using Table editing functions. Associated with each Table are usually one or two Table modifiers, according to the Table purpose and structure. The Modifiers allow you to enter a numeric value used as a flat addition or a multiple adjustment factor of the values otherwise found in the Table. Generally, the final values resulting from the three Table fields in total for a given entry age are determined as: (MULT) X (Table values) + (FLAT)
Other Object selection fields are used to display the name of other independent objects used to store assumptions needed for cell calculations. Like Tables, these other objects may be created or revised directly from within the Cell Assumption screen. Often these objects may have their own assumption contents just like Cells do. Sometimes the links to other objects are found from within Tables as opposed to a specific link field on the Cell Assumption screen. Examples of linked objects includes Investment Accounts, and Asset and Liability Categories.
The Sections found in a cell assumption screen vary according to the Module, but there are common elements and sections in all modules. The Sections are useful for assisting with navigation around the cell assumption screen and for customizing its appearance. The following provides a description of the general purpose and contents of each section first in Liability Module Cells and then in Asset and Reinvestment Cells:
Processing Section
The Processing Section of the Cell Assumption Screen includes switches to select the type and number of calculations which will be run in an interactive calculation and to control the approach to modeling when running the calendar year projections. The Inforce and/or New Business data to be used for financial projections is also defined and accessed in this section.
Dividend Section (Par only)
The Dividend Section of the Participating Module Cell Assumption Screen contains the various tables necessary to define a first-principles dividend scale generation as part of the cell calculations. There is also a switch to select the dividend formula applied or revert to precalculated dividends as found in the Product Features section.
Product Features Sections
The Product Features Section of the Cell Assumption Screen for the Insurance Modules includes all the switches and tables necessary to define the benefit and premium features and policyholder values for the plan from a direct issued or reinsurance assumed viewpoint (corresponding assumptions for reinsurance are in another section). Policy Illustration reports are available based on Product Features assumptions. Assumptions in this section are generally used consistently for both pricing/projections purposes and for valuation purposes.
In the UL, Par, Annuity and Group Annuity Modules, there are additional supplementary Product Features sections to allow you to define advanced product features specific to that module.
Reinsurance Section
The Reinsurance Section of the Cell Assumption Screen for the Insurance Modules includes all the switches and tables necessary to define the benefit and premium features and policyholder values for the plan from the reinsurance ceded viewpoint. These assumptions have no effect on the Policy Illustration report. Assumptions in this section are used consistently for both pricing/projections purposes and for valuation purposes. There is no Reinsurance Section in the Annuity module.
General Assumptions Section
The General Assumptions Section of the Cell Assumption Screen contains switches, tables and scalar values which affect the use and application of various assumptions for all purposes, including pricing/projections and reserves.
Pricing Assumptions Section
The Pricing Assumptions Section of the Cell Assumption Screen contains switches, tables and values used to generate the expected cash flows and decrements which from the basis of calendar year projections of earnings and profit measures calculated on a policy year basis. The definition of standard profit measures and the discount rates used may also be defined in this section. Assumptions used in the calculation of terminal or mean reserves are defined in other sections.
Taxes Section
The Taxes Section of the Cell Assumption Screen contains switches and parameters used to define and control various types of corporate tax calculations, including corporate income taxes, premium taxes, Canadian Investment Income Tax, and several special U.S. taxes (Regular Module only). Actuarial reserves impacting tax calculations and features affecting policyholder tax treatment are controlled through other sections.
Policyholder Tax Section
The Policyholder Tax Section (Regular, UL and Par modules only) enables the definition of assumptions controlling the tax treatment of investment income from the policy from the policyholder viewpoint. Typically this includes the ability to test the product illustration to verify the income is exempt from policyholder tax on an accrual basis. Policyholder tax treatment can affect corporate tax for the insurer, as with the Canadian Investment Income Tax (IIT).
Statutory Reserves Section
The Statutory Reserves Section in the Cell Assumption screen allows you to control the valuation method and assumptions applied to generate Statutory Reserves, which are used to produce the book profits in the Policy Year Results and projected earnings in the Calendar Year Projections.
Second Reserves Section
The Second Reserves Section in the Cell Assumption screen allows you to control the valuation method and assumptions applied to generate Second Reserves, which will be calculated and displayed along with Statutory Reserves in each report, but do not normally affect book profits in the Policy Year Results or projected earnings in the Calendar Year Projections. They may be used for information purposes to determine current or projected reserves on an alternate reserve method or basis.
Tax Reserves Section
The Tax Reserves Section in the Cell Assumption Screen is used to define the valuation method and assumptions used to calculate the Tax Reserves used in generating Policy Year Results or Calendar Year Projections. Tax Reserves may be used instead of Statutory Reserves for purposes of determining Taxable Income for Corporate Income Tax calculations according to the Tax Method selected in the Taxes Section, and are also important for the calculation of Canadian Investment Income Tax, if applicable.
Required Surplus Section
The Required Surplus Section is the Cell Assumption Screen is used to define the approach and factors used for calculating the minimum required surplus for purposes of determining net Contributions to Free Surplus in both Policy Year Results and Calendar Year Projections. The Required Surplus components are also accumulated to higher level objects for various purposes. Separate Required Surplus calculations may be possible based on Statutory reserves vs. Second Reserves.
Stat PFAD Analysis Section
The Stat PFAD Analysis Section in the Cell Assumption Screen allows you to enable and define the approach to analyzing the impact of the provisions for adverse deviation (i.e. the present value of future margins of conservatism) in the Statutory Reserves calculated using Canadian PPM. You may specify the order in which the four main types of PFAD are removed from the full reserve, and how AXIS will determine each expected assumption excluding the relevant margin.
User Defined Scalars Section
The User Defined Scalars Section in the Cell Assumption Screen is used to select and define the parameters required by User Defined Scalars. These fields are menu option switches with associated scalar values that may be used to implement a wide variety of special adjustments or refinements to product features and assumptions beyond those in the other sections of the screen.
User Defined Tables Section
The User Defined Tables Section in the Cell Assumption Screen defines and selects User Defined Tables which may be used to implement a wide variety of special adjustments or refinements to product features and assumptions beyond those in the other sections of the screen.
Processing Section
The Processing Section includes switches to select which reports will be run in interactive calculations and to define the basic asset type of the cell. It also includes all the Tables used to define basic asset cash flows and other features and the corresponding assumptions used for book value and market value calculations.
Asset Features Sections
The Asset Features Section for the Asset and Reinvestment Modules includes all the fields and switches necessary to define the asset cash flows and reported income adjustments. In the Asset Cell, specific issue, purchase and maturity dates may be defined, whereas in Reinvestment Cells, only the expected term of the asset is entered.
Option Features Section (Asset Cells)
The Option Features section of the Asset Cell Assumption Screen allows you to enable Option Pricing calculations for purposes of market value calculations when the asset includes embedded options. Option pricing is implemented using the Black Derman Toy model, and this section includes fields to define parameters for that model as well as option features. Option pricing is not included in Reinvestment cells.
Present Value Section
The Present Value section allows you to define the discount rate used for purposes of various discounted value calculations presented in the Policy Year Reports for assets.
Book Value Section
The Book Value section allows you to select a method of determining the Book Value of the asset for purposes of financial reporting. Additional fields allow you to define some parameters used in certain methods, but the overall assumptions used for book value calculations are generally defined in other sections of the cell.
Market Value Section
The Market Value section allows you to select a method of determining the market value of the asset for purposes of financial reporting, and in the case of reinvestment assets, for determining purchase price. An additional field allows you to define a parameter used in one of the methods, but the overall assumptions used for market value calculations are generally defined in other sections of the cell.
Inforce Volumes Section (Asset only)
The Inforce Volumes Section allows you to specify the actual volume of asset which is held as of a specified Inforce Date, or in the case of committed asset purchases, the volume to be purchased at a future date. You may define par value, book value, market value and accrued adjustments for reporting purposes such as the current balance of amortized unrealized gains. The volume of reinvestment assets purchased is determined at the time reinvestment processing is done in Fund and Office level calculations.
Required Surplus Section
The Required Surplus Section is used to define the factors used for calculating the asset based components of minimum required surplus, which may be carried to Fund and Office levels for purposes of determining net Contributions to Free Surplus in Calendar Year Projections, or for determining MCCSR Ratios at the Office level.
User Defined Scalars Section
The User Defined Scalars Section in the Cell Assumption Screen is used to select and define the parameters required by User Defined Scalars. These fields are menu option switches with associated scalar values that may be used to implement a variety of special adjustments or refinements to asset features and assumptions beyond those in the other sections of the screen.