The table below contain the expected and actual payouts in respect of the lapse by year.

Expected payouts in respect Actual payouts in respect of

Year
of lapses lapses
2015 143,767,446 121,774,575
2016 181,244,022 161,890,816
2017 178,138,758 181,177,802
2018 152,604,107 191,588,138
2019 170,349,129 189,353,332
2020 186,216,000 195,040,124
2021 191,499,664 246,163,957
2022 187,968,157 250,548,243
 Lapses 7 year 5 year 2 year 1 year
113.4% 120.7% 130.9% 133.3%
Expected Actual Observed Sample Sample
Year
decrement decrement A/E mean variance
2015 143,767,446 121,774,575 84.7%
2016 181,244,022 161,890,816 89.3%
2017 178,138,758 181,177,802 101.7%
2018 152,604,107 191,588,138 125.5%
2019 170,349,129 189,353,332 111.2% 102.5% 2.743%
2020 186,216,000 195,040,124 104.7% 106.5% 1.764%
2021 191,499,664 246,163,957 128.5% 114.3% 1.473%
2022 187,968,157 250,548,243 133.3% 120.7% 1.474%
1,537,536,987

Actual vs. Expected Decrements

140.0%
130.0%
Actual vs Expected

120.0%
110.0% Column Z
100.0% 1 in 10 ye
90.0% 1 in 20 ye
80.0%
70.0% Observed
60.0%
50.0%
2019 2020 2021 2022
Year

Comments:
1) Gradually lapse rates are rising (especially in recent years).
2) Observed lapse rates for 2021 and 2022 are outside the 1 in 10 and 1 in 20 confidence intervals, and just with
3) Therefore, the current fixed lapse rate of 3.8% is not appropriate and needs to be revised upwards.
4) Considering the last eight years' data, there has been an average lapse rate of 4.2% (i.e., total decrements/to
5) Potentially, we could consider having a variable lapse rate assumption going forward as the lapse rates have b
 1 std dev 1/10 1/10 1/20 1/20
12.1% 100% 86.0% 94.0% 94.0% 96.0%
lower upper lower upper
X bar Lapse Assumption df
bound bound bound bound
3.8%
3.8%
3.8%
3.8%
102% 3.8% 4 90.8% 114.6% 85.4% 117.3%
106% 3.8% 4 92.6% 111.7% 88.3% 113.9%
114% 3.8% 4 93.2% 110.7% 89.3% 112.7%
121% 3.8% 4 93.2% 110.7% 89.3% 112.7%
4.20%

crements

Column Z
1 in 10 years
1 in 20 years
Observed 5 year A/E

2022

ce intervals, and just within 1 in 100 years confidence interval.

vised upwards.
(i.e., total decrements/total number of policies). Therefore, the lapse rate assumption should at least be increased to 4.2%
as the lapse rates have been increasing. Albeit, this might increase calculation complexities.
 1/100 1/100
98.5% 99.5% Bias adj. 1/10 1/10 1/20
lower upper
bound bound 86% lower 94% upper 94% lower
Year 5 Year A/E bound bound bound

75.6% 134.1% 2019 102% 75.6% 9.8% 5.4%

80.4% 127.3% 2020 106% 80.4% 7.9% 4.3%
82.1% 125.0% 2021 114% 82.1% 7.2% 3.9%
82.1% 125.0% 2022 121% 82.1% 7.2% 3.9%
0

at least be increased to 4.2% per annum.

1/20 1/100 1/100
98.5% 99.5%
96% upper lower upper
bound bound bound

23.8% 2.7% 16.8%

19.1% 2.1% 13.5%
17.5% 2.0% 12.3%
17.5% 2.0% 12.3%
 Lapses 7 year
102.6%
Number of Expected Actual
Year Experience
policies decrement decrement
2015 3,783,353,838 (37,126,286) 158,900,861 121,774,575
2016 4,769,579,523 (38,431,524) 200,322,340 161,890,816
2017 4,687,862,048 (15,712,404) 196,890,206 181,177,802
2018 4,015,897,557 22,920,440 168,667,697 191,588,138
2019 4,482,871,803 1,072,717 188,280,616 189,353,332
2020 4,900,421,059 (10,777,561) 205,817,684 195,040,124
2021 5,039,464,840 34,506,433 211,657,523 246,163,957
2022 4,946,530,442 42,793,964 207,754,279 250,548,243
36,625,981,109 1,537,536,987

Actual vs. Expected Decrements

140.0%
130.0%
Actual vs Expected

120.0%
110.0% Column Z
100.0% 1 in 10 years
90.0% 1 in 20 years
80.0%
70.0% Observed 5 year A/E
60.0%
50.0%
2019 2020 2021 2022
Year

Comments:
1) The proposed rate of 4.2% looks reasonable; however, it is worth considering variable lapse rates for future ye
 5 year 2 year 1 year 1 std dev 1/10
109.2% 118.4% 120.6% 11.0% 100% 86.0%
Observed Sample Sample lower
X bar Lapse Assumption df
A/E mean variance bound
76.6% 4.2%
80.8% 4.2%
92.0% 4.2%
113.6% 4.2%
100.6% 92.7% 2.245% 93% 4.2% 4 91.6%
94.8% 96.4% 1.444% 96% 4.2% 4 93.3%
116.3% 103.4% 1.206% 103% 4.2% 4 93.9%
120.6% 109.2% 1.206% 109% 4.2% 4 93.9%
4.20%

nts

Column Z
1 in 10 years
1 in 20 years
Observed 5 year A/E

e lapse rates for future years.

1/10 1/20 1/20 1/100 1/100
94.0% 94.0% 96.0% 98.5% 99.5% Bias adj.
upper lower upper lower upper
bound bound bound bound bound
Year 5 Year A/E

113.2% 86.8% 115.6% 77.9% 130.9% 2019 93%

110.6% 89.4% 112.5% 82.3% 124.7% 2020 96%
109.7% 90.3% 111.5% 83.8% 122.6% 2021 103%
109.7% 90.3% 111.5% 83.8% 122.6% 2022 109%
1/10 1/10 1/20 1/20 1/100 1/100
98.5% 99.5%
86% lower 94% upper 94% lower 96% upper lower upper
bound bound bound bound bound bound

77.9% 8.9% 4.8% 21.6% 2.4% 15.2%

82.3% 7.1% 3.9% 17.3% 1.9% 12.2%
83.8% 6.5% 3.6% 15.8% 1.8% 11.2%
83.8% 6.5% 3.6% 15.8% 1.8% 11.2%