Universal life products with long-term secondary guarantees (ULSG) have been sold since the late 1990s.
This report explores several aspects of ULSG products from a pricing and financial reporting perspective and covers a variety of topics, including:
- The relationship of internal rate of return (IRR) to return on equity (ROE)
- The American Institute of Certified Public Accountants (AICPA) Statement of Position (SOP) 03-1
- Stochastic projections
- Sources of profit
- Cost of the secondary guarantee
- C3 Phase III
This report provides an updated perspective on a market that has matured since the publication of the 2007 research report Secondary Guarantee Universal Life: Practical Considerations, which discussed product risks, pricing considerations, risk management, and reserve financing.