New York State seal

July 1, 1952

SUBJECT: INSURANCE

WITHDRAWN

TO ALL FRATERNAL BENEFIT SOCIETIES:

A review of the 1951 Annual Statement and Valuation Report of authorized societies indicates that certain societies have failed to include appropriate reserves to cover the non-deduction of deferred fractional premiums at the death of the insured, in item 26, page 5 of the Annual Statement form. This reserve applies to all outstanding certificates of each society. It corresponds to the reserve required in Exhibit 8 of the Annual Statement blank for life insurance companies.

The use of the approximate methods for determining the above reserve is acceptable. In the case of societies which charge so-called true monthly premiums, the attached comparison would indicate that the reserve for the Whole Life plan should be increased by approximately one per cent and on other plans as indicated therein.

Where a society charges true annual, semi-annual, or quarterly premiums, approximate methods similar to those used by life insurance companies are appropriate.

Will you please see that this letter is called to the attention of the Actuary of your Society and that your Society's 1952 Annual Statement and Valuation Report indicate the amount and manner of reporting the above reserve.

Yours very truly

(Signed) ALFRED J. BOHLINGER

Superintendent of Insurance

Enclosure

Comparison of Terminal Reserves -- American Experience 3 1/2% assuming true Annual and true Monthly Premiums

 

Age 25 at Issue

Age 35 at Issue

 

Monthly

Annual

 

Monthly

Annual

 

Whole Life

Terminal

Terminal

Ratio

Terminal

Terminal

Ratio

5th Terminal

$ 41.21

$ 40.91

1.007

$ 63.31

$ 62.73

1.009

10th "

90.06

89.42

1.007

137.03

135.76

1.009

15th "

147.58

146.54

1.007

221.20

219.15

1.009

20th "

214.55

213.04

1.007

313.65

310.75

1.009

             

20 Payment Life

           
             

5th Terminal

83.22

83.17

1.0006

105.64

105.51

1.001

10th "

184.21

184.14

1.0004

232.42

232.19

1.001

15th "

306.85

306.79

1.0002

384.26

384.02

1.001

 

Age 45 at Issue

 
 

Monthly

Annual

   

Whole Life

Terminal

Terminal

Ratio

 

5th Terminal

$ 97.78

$ 96.48

1.013

 

10th "

205.18

202.47

1.013

 

15th "

318.39

314.19

1.013

 

20th "

432.61

426.90

1.013

 
         

20 Payment Life

       
         

5th Terminal

135.78

135.23

1.004

 

10th "

292.37

291.42

1.003

 

15th "

472.88

471.96

1.002

 

Note: A reasonable approximation of the extra reserve would be to increase the reserves for Whole Life forms with thirty premiums or more by 1 per cent and reserves for other forms by .2 of 1 per cent.