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From: Joe Blogg, Actuarial Analyst, Risk Products team

To: Roger, Manager, Risk Products team
Cc: Jess, Manager, Risk Products team
Date: 25/07/2023
Subject: Confirmation of Updated Lapse Assumption in Actuarial Models

Hi Roger,

I hope all is well! I wanted to provide you with an update on the recent changes we've implemented regarding the lapse assumption
in our actuarial models, including Prophet.

I'm pleased to confirm that the lapse rate assumption has been successfully updated from 3.8% to 4.2% across all relevant models,
as agreed at July’s Board Risk Committee. The revised lapse assumption will be used in all actuarial calculations for Year-end 2023.

In terms of the impact on the results, I'd like to highlight the following observations:

 Improved Accuracy: The adjustment in the lapse assumption rate has noticeably improved the accuracy of our modelling
of lapse rates.
 Confidence Intervals: This change has brought "the Ratio" of actual decrements over expected decrements comfortably
within the 1 in 10, 1 in 20, and 1 in 100 confidence intervals.
 Statistical Metrics: We've observed a decrease in both the sample mean and sample variance of "the Ratio," indicating
that our models are now better aligned with the experience.
 Temporal Trend: As expected, “the Ratio” shows an interesting temporal trend. It was at the lower end of the confidence
intervals in the earlier years (2019 and 2020) and has gradually moved towards the upper end (2021 and 2022). This trend
aligns well with the increase in the lapse rate assumption.
 Expected Changes: The expected decrements have increased by approximately 10.5%, which is consistent with our
expectations following the lapse assumption adjustment.

Considering these factors, I am confident that the changes we've made are reasonable and broadly consistent with the changes in
inputs.

As for the next steps, I recommend that we continue to monitor the results closely to ensure that the lapse assumption continues to
reflect the evolving landscape accurately. Ongoing monitoring will allow us to make further refinements as needed.

Please feel free to reach out if you have any questions or if there are any additional aspects you'd like me to explore. I look forward
to discussing this further.

Best regards,

Joe Blogg,

Actuarial Analyst