EX-99.(M) 3 dex99m.txt CALCULATION EXHIBIT CALCULATION EXHIBIT FOR ENTERPRISE EXECUTIVE ADVANTAGE ASSUMPTIONS: UNISEX, ISSUE AGE 50, AUTOMATIC ISSUE NONSMOKER FACE AMOUNT OF 1,600,000.00 CASH VALUE ACCUMULATION TEST, LEVEL DB OPTION, ENHANCED NSP CORRIDOR PLANNED ANNUAL PREMIUM OF 102,351.00 USING CURRENT CHARGES, 6.00% GROSS INTEREST RATE THE FOLLOWING IS A DETAILED REPRESENTATION OF THE MONTHLY PROCESSING DURING POLICY YEAR 5:
BEGINNING COST MORTALITY & OF MONTH GROSS OF EXPENSE POLICY POLICY CASH PREMIUM PREMIUM ADMIN RIDER INSURANCE RISK YEAR MONTH VALUE PAID LOAD CHARGE CHARGE CHARGE CHARGE ---------------------------------------------------------------------------------------------- 5 1 392,469.38 102,351.00 10,235.10 5.50 0.00 604.98 302.48 5 2 485,746.80 0.00 0.00 5.50 0.00 604.68 303.21 5 3 486,912.87 0.00 0.00 5.50 0.00 604.37 303.94 5 4 488,083.53 0.00 0.00 5.50 0.00 604.06 304.67 5 5 489,258.78 0.00 0.00 5.50 0.00 603.75 305.41 5 6 490,438.64 0.00 0.00 5.50 0.00 603.44 306.14 5 7 491,623.14 0.00 0.00 5.50 0.00 603.12 306.88 5 8 492,812.30 0.00 0.00 5.50 0.00 602.80 307.63 5 9 494,006.14 0.00 0.00 5.50 0.00 602.47 308.37 5 10 495,204.66 0.00 0.00 5.50 0.00 602.15 309.12 5 11 496,407.91 0.00 0.00 5.50 0.00 601.82 309.88 5 12 497,615.89 0.00 0.00 5.50 0.00 601.49 310.63 END END END NET OF MONTH OUTSTANDING OF MONTH OF MONTH POLICY INVESTMENT CASH SURRENDER LOAN CASH SURR DEATH YEAR EARNIGS VALUE CHARGE BALANCE VALUE BENEFIT -------------------------------------------------------------------------------- 5 2,074.48 485,746.80 0.00 0.00 485,746.80 1,600,000.00 5 2,079.46 486,912.87 0.00 0.00 486,912.87 1,600,000.00 5 2,084.46 488,083.53 0.00 0.00 488,083.53 1,600,000.00 5 2,089.48 489,258.78 0.00 0.00 489,258.78 1,600,000.00 5 2,094.52 490,438.64 0.00 0.00 490,438.64 1,600,000.00 5 2,099.58 491,623.14 0.00 0.00 491,623.14 1,600,000.00 5 2,104.66 492,812.30 0.00 0.00 492,812.30 1,600,000.00 5 2,109.76 494,006.14 0.00 0.00 494,006.14 1,600,000.00 5 2,114.88 495,204.66 0.00 0.00 495,204.66 1,600,000.00 5 2,120.02 496,407.91 0.00 0.00 496,407.91 1,600,000.00 5 2,125.17 497,615.89 0.00 0.00 497,615.89 1,600,000.00 5 2,130.35 498,828.63 0.00 0.00 498,828.63 1,600,000.00
THE FOLLOWING IS A DESCRIPTION OF EACH COLUMN OF THE DETAILED REPRESENTATION: POLICY YEAR The policy year is assumed to be 5, as described above. POLICY MONTH The policy month ranges from 1 through 12, to describe the monthly processing that occurs throughout the policy year. BEGINNING OF MONTH CASH VALUE The beginning of month cash value (BOM CV) in each current month is equal to the end of month cash value from each previous month. This demonstration assumes that the cash value is comprised of variable account cash value only; no fixed account cash value or loan account cash value are present. GROSS PREMIUM PAID The gross premium paid is the planned ANNUAL premium of 102,351.00 as described above. PREMIUM LOAD The premium load is the sum of the sales charge and premium tax as described in the Transaction Fees table. For year 5, this sum is 10.00% of gross premium paid up to target premium, and 3.00% of gross premium paid in excess of target premium. With a target premium of 102,351.96 in year 5 month 1, the premium load is therefore 10.00% x 102,351.00 + 3.00% x 0.00 = 10,235.100. ADMIN CHARGE The admin charge is the sum of the Policy Fee and the Administrative Charge (per 1000) multiplied by the face amount divided by 1000 as described in the Periodic Fees table (although the Administrative Charge (per 1000) listed in the Periodic Fees table is rounded to 2 places, whereas the exact charge is used here). In year 5, this sum is therefore 5.50 + (0.000 x 1,600,000.00 / 1,000) = 5.50. RIDER CHARGE The rider charge is the sum of all of the charges for riders present, except for the Waiver of Monthly Deduction Rider (WMD). The WMD is calculated after the Cost of Insurance Charge because it uses that charge in its calculation. This illustration assumes no riders (including WMD) are present; the rider charge (as well as WMD charge) is therefore 0.00. A list of available riders can be found in the Rider Fees Table. COST OF INSURANCE CHARGE The cost of insurance (COI) charge is the product of the monthly COI rate and the net amount at risk (NAR). The NAR is the difference between the death benefit (DB) and the cash value (floored at 0), both at the time that the NAR is calculated. There are 12 different DB options: (Enh = Enhanced, ROP = Return Of Premiums) level DB option, guideline premium test, IRS corridor: level DB option, guideline premium test, Enh corridor: increasing DB option, guideline premium test, IRS corridor: increasing DB option, guideline premium test, Enh corridor: level + ROP DB option, guideline premium test, IRS corridor: level + ROP DB option, guideline premium test, Enh corridor: level DB option, cash value accumulation test, NSP corridor: level DB option, cash value accumulation test, Enh NSP corridor: increasing DB option, cash value accumulation test, NSP corridor: increasing DB option, cash value accumulation test, Enh NSP corridor: level + ROP DB option, cash value accumulation test, NSP corridor: level + ROP DB option, cash value accumulation test, Enh NSP corridor:
DB = Max (face amount , cash value x IRS Corridor Factor) DB = Max (face amount , cash value x Enh Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x IRS Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh Corridor Factor) DB = Max (face amount + ROP , cash value x IRS Corridor Factor) DB = Max (face amount + ROP , cash value x Enh Corridor Factor) DB = Max (face amount , cash value x NSP Corridor Factor) DB = Max (face amount , cash value x Enh NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh NSP Corridor Factor) DB = Max (face amount + ROP , cash value x NSP Corridor Factor) DB = Max (face amount + ROP , cash value x Enh NSP Corridor Factor)
At the time that the NAR is calculated, the face amount is comprised of those attributable to the base policy and the Adjustable Term Insurance Rider if the rider face amount is included with the base face when determining the corridor death benefit. It is divided by a monthly discount factor which is calculated based upon the guaranteed interest rate. The guaranteed interest rate is 4.00%, so the monthly discount factor is calculated as follows: monthly discount factor = (1 + guaranteed interest rate) ^ (1/12) monthly discount factor = (1 + 4.00%) ^ (1/12) monthly discount factor = 1.0032737397822 The NAR is: NAR = death benefit - Max (0, cash value) and finally the COI charge is: COI charge = [monthly COI rate / (1 - monthly COI rate)] x NAR For example, in year 5 month 1, we have the following: level DB option, cash value accumulation test, Enh NSP corridor face amount = 1,600,000.00 cash value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge cash value = 392,469.37712959 + 102,351.00 - 10,235.100 - 5.50 - 0.00 cash value = 484,579.77712959 Enh NSP Corridor Factor = 2.27 monthly discount factor = 1.0032737397822 monthly COI rate = 0.0005446 DB = Max (face amount / monthly discount factor, cash value x Enh NSP Corridor Factor) DB = Max (1,600,000.00 / 1.0032737397822, 484,579.77712959 x 2.27) DB = Max (1,594,779.10818970, 1,100,154.61) DB = 1,594,779.10818970 NAR = DB - Max (0, cash value) NAR = 1,594,779.10818970 - Max (0, 484,579.77712959) NAR = 1,594,779.10818970 - 484,579.77712959 NAR = 1,110,199.33106011 COI charge = [monthly COI rate / (1 - monthly COI rate)] x NAR COI charge = [0.0005446 / (1 - 0.0005446)] x 1,110,199.33106011 COI charge = 604.98105519 MORTALITY & EXPENSE RISK CHARGE The mortality & expense (M&E) risk charge is a percentage of the sum of the variable account cash value and the loan account cash value at the time that the charge is deducted. This demonstration assumes that all cash value is comprised of variable account cash value only. The annual percentages are described in the Periodic Fees table. The monthly percentages are 1/12th of the annual percentages. For example, in year 5 month 1, the percentage is 0.75% and the cash value at the time that the charge is deducted is: Cash Value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - Cost Of Insurance Charge Cash Value = 392,469.37712959 + 102,351.00 - 10,235.100 - 5.50 - 0.00 - 604.98105519 Cash Value = 483,974.79607440 The mortality & expense risk charge is therefore 0.75%/12 x 483,974.79607440 = 302.48424755. NET INVESTMENT EARNINGS The net investment earnings represent the policy performance of the cash value. The cash value is actually tracked separately for each sub-account that has invested cash value, as well as for a loan fund if any loan balance is present. This demonstration assumes fund performance across all funds to average a gross annual interest rate of 6.00% and an investment management fee of 0.69%. To calculate the annual net interest rate (used to calculate the net investment earnings), given the annual gross interest rate and the investment management fee, we use the following: annual net interest rate = ROUND{([ {(1+I)^(1/365)} x {1-(IMF/365)} ] ^ 365) - 1, 4} where: I = annual gross interest rate IMF = investment management fee For I = 6.00% and IMF = 0.69%, we have: annual net interest rate = ROUND{([ {(1+I)^(1/365)} x {1-(IMF/365)} ] ^ 365) - 1, 4} annual net interest rate = ROUND{([ {(1+6.00%)^(1/365)} x {1-(0.69%/365)} ] ^ 365) - 1, 4} annual net interest rate = ROUND{([ {(1.06)^(1/365)} x {1-0.00001890} ] ^ 365) - 1, 4} annual net interest rate = ROUND{([ 1.00015965 x 0.99998110 ] ^ 365) - 1, 4} annual net interest rate = ROUND{(1.00014075 ^ 365) - 1, 4} annual net interest rate = ROUND{(1.05271111 - 1, 4} annual net interest rate = ROUND{0.05271111, 4} annual net interest rate = 0.0527 which expressed as a percentage is 5.27%. To calculate the net investment earnings for the month, we calculate the product of the cash value at the time the net investment earnings is calculated and the monthly net interest rate. The cash value at the time the net investment earnings is calculated is: cash value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge The monthly net interest rate is not simply 1/12th of the annual net interest rate, but rather we use a compound formula to solve: monthly net interest rate = [(1 + annual net interest rate) ^ (1/12)] - 1 monthly net interest rate = [(1 + 0.0527) ^ (1/12)] - 1 monthly net interest rate = [1.0527 ^ (1/12)] - 1 monthly net interest rate = 1.0042890 - 1 monthly net interest rate = 0.0042890 For example, in year 5 month 1, we have the following: cash value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge cash value = 392,469.37712959 + 102,351.00 - 10,235.100 - 5.50 - 0.00 - 604.98105519 - 302.48424755 cash value = 483,672.31182685 net investment earnings = cash value x monthly net interest rate net investment earnings = 483,672.31182685 x 0.0042890 net investment earnings = 2,074.48474620 END OF MONTH CASH VALUE The end of month cash value (EOM CV) is simply: EOM CV = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge + Net Investment Earnings In year 5 month 1, we have: EOM CV = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge + Net Investment Earnings EOM CV = 392,469.37712959 + 102,351.00 - 10,235.100 - 5.50 - 0.00 - 604.98105519 - 302.48424755 + 2,074.48474620 EOM CV = 485,746.79657306 SURRENDER CHARGE No surrender charge exists. However, upon a mid-policy month surrender, the policyholder receives the unearned portion of the COI charge in addition to the fund value: COIRefund = BeginningOfMonthCOICharge x ( 1 - ( # days since monthiversary / # days in policy month) ) If the policy is surrendered in the first or second year, the policyholder will also receive a refund of all but 2% of the actual premium load deducted during the first year (including all payments prior to the first anniversary). This refund is available only on total surrender and not upon a 1035 exchange. This refund is currently equal to 8% of premium paid in the first year up to target and 1% of premium paid in the first year above target. This refund is based on target premium in the first policy year (which may be different than target premium at time of surrender). After the second year no refund will be made. If the Enhanced Surrender Value Rider is attached to the policy, the return of sales load provision described above will not apply. Instead, if the policy is surrendered within seven years after the Date of Policy, in addition to any Net Cash Value, we will refund part of the cumulative Expense Charge paid under the Policy and part of the cost of term insurance charges deducted in the current Policy Year, as shown below. However, we will not pay this refund if the full cash withdrawal is related to a 1035 exchange. Portion of Portion of Policy Year of Cumulative Expense Cost of Insurance Charges Full Cash Withdrawal Charge to be Refunded* to be Refunded** ------------------------------------------------------------------------- 1 100% 75% 2 90% 50% 3 75% 25% 4 60% None 5 45% None 6 30% None 7 15% None 8 and later None None * The percent shown is applied to the cumulative expense charge exclusive of the charge for this Rider. ** The percent shown is applied to the cost of insurance (base plan and term rider) charges deducted during the Policy Year in which the full cash withdrawal occurs. The amount of this refund is not available for policy loans or partial cash withdrawals and has no effect on the determination of the grace period described in the Policy. In year 5 month 1, the surrender charge is 0.00000. OUTSTANDING LOAN BALANCE The outstanding loan balance represents the amount of cash value loaned, including loan charged interest as described in the Periodic Fees table. This illustration assumes no loans have been taken; the outstanding loan balance is therefore 0.00. END OF MONTH NET CASH VALUE The end of month net cash value (EOM NCV) is the end of month cash value net of surrender charge and outstanding loan balance. That is: EOM NCV = EOM CV - surrender charge - outstanding loan balance In year 5 month 1, we have: EOM NCV = EOM CV - surrender charge - outstanding loan balance EOM NCV = 485,746.79657306 - 0.00000 - 0.00 EOM NCV = 485,746.79657306 END OF MONTH DEATH BENEFIT The end of month death benefit (EOM DB) is calculated based upon the DB option. The DB options are as follows: (Enh = Enhanced, ROP = Return Of Premiums) level DB option, guideline premium test, IRS corridor: level DB option, guideline premium test, Enh corridor: increasing DB option, guideline premium test, IRS corridor: increasing DB option, guideline premium test, Enh corridor: level + ROP DB option, guideline premium test, IRS corridor: level + ROP DB option, guideline premium test, Enh corridor: level DB option, cash value accumulation test, NSP corridor: level DB option, cash value accumulation test, Enh NSP corridor: increasing DB option, cash value accumulation test, NSP corridor: increasing DB option, cash value accumulation test, Enh NSP corridor: level + ROP DB option, cash value accumulation test, NSP corridor: level + ROP DB option, cash value accumulation test, Enh NSP corridor:
DB = Max (face amount , cash value x IRS Corridor Factor) DB = Max (face amount , cash value x Enh Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x IRS Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh Corridor Factor) DB = Max (face amount + ROP , cash value x IRS Corridor Factor) DB = Max (face amount + ROP , cash value x Enh Corridor Factor) DB = Max (face amount , cash value x NSP Corridor Factor) DB = Max (face amount , cash value x Enh NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh NSP Corridor Factor) DB = Max (face amount + ROP , cash value x NSP Corridor Factor) DB = Max (face amount + ROP , cash value x Enh NSP Corridor Factor)
The face amount is the same as that used to calculate the NAR in the COI charge. If the Adjustable Term Insurance Rider is present and the rider face amount is excluded from the base face when determining the corridor death benefit, the face amount attributable to that rider is added to the DB. The DB is actually the gross DB, before the reduction of any outstanding loan balance. The EOM DB is therefore: EOM DB = DB - outstanding loan balance In year 5 month 1, we have: level DB option, cash value accumulation test, Enh NSP Corridor face amount = 1,600,000.00 cash value = EOM CV = 485,746.79657306 Enh NSP Corridor Factor = 2.27 DB = Max (face amount, cash value x Enh NSP Corridor Factor) DB = Max (1,600,000.00, 485,746.79657306 x 2.27) DB = Max (1,600,000.00, 1,102,804.12518659) DB = 1,600,000.00 EOM DB = DB - outstanding loan balance EOM DB = 1,600,000.00 - 0.00 EOM DB = 1,600,000.00 CALCULATION EXHIBIT FOR ENTERPRISE EXECUTIVE ADVANTAGE ASSUMPTIONS: UNISEX, ISSUE AGE 50, AUTOMATIC ISSUE NONSMOKER FACE AMOUNT OF 1,600,000.00 CASH VALUE ACCUMULATION TEST, LEVEL DB OPTION, ENHANCED NSP CORRIDOR PLANNED ANNUAL PREMIUM OF 88,356.00 USING CURRENT CHARGES, 6.00% GROSS INTEREST RATE THE FOLLOWING IS A DETAILED REPRESENTATION OF THE MONTHLY PROCESSING DURING POLICY YEAR 5:
BEGINNING COST MORTALITY & OF MONTH GROSS OF EXPENSE POLICY POLICY CASH PREMIUM PREMIUM ADMIN RIDER INSURANCE RISK YEAR MONTH VALUE PAID LOAD CHARGE CHARGE CHARGE CHARGE -------------------------------------------------------------------------------------------- 5 1 335,618.80 88,356.00 8,835.60 5.50 0.00 642.82 259.06 5 2 416,008.47 0.00 0.00 5.50 0.00 642.70 259.60 5 3 416,881.05 0.00 0.00 5.50 0.00 642.58 260.15 5 4 417,756.95 0.00 0.00 5.50 0.00 642.45 260.69 5 5 418,636.18 0.00 0.00 5.50 0.00 642.32 261.24 5 6 419,518.77 0.00 0.00 5.50 0.00 642.19 261.79 5 7 420,404.71 0.00 0.00 5.50 0.00 642.05 262.35 5 8 421,294.04 0.00 0.00 5.50 0.00 641.92 262.90 5 9 422,186.75 0.00 0.00 5.50 0.00 641.78 263.46 5 10 423,082.87 0.00 0.00 5.50 0.00 641.64 264.02 5 11 423,982.41 0.00 0.00 5.50 0.00 641.50 264.58 5 12 424,885.39 0.00 0.00 5.50 0.00 641.36 265.15 END END END NET OF MONTH OUTSTANDING OF MONTH OF MONTH POLICY INVESTMENT CASH SURRENDER LOAN CASH SURR DEATH YEAR EARNIGS VALUE CHARGE BALANCE VALUE BENEFIT -------------------------------------------------------------------------------- 5 1,776.65 416,008.47 0.00 0.00 416,008.47 1,600,000.00 5 1,780.38 416,881.05 0.00 0.00 416,881.05 1,600,000.00 5 1,784.12 417,756.95 0.00 0.00 417,756.95 1,600,000.00 5 1,787.87 418,636.18 0.00 0.00 418,636.18 1,600,000.00 5 1,791.64 419,518.77 0.00 0.00 419,518.77 1,600,000.00 5 1,795.43 420,404.71 0.00 0.00 420,404.71 1,600,000.00 5 1,799.23 421,294.04 0.00 0.00 421,294.04 1,600,000.00 5 1,803.04 422,186.75 0.00 0.00 422,186.75 1,600,000.00 5 1,806.87 423,082.87 0.00 0.00 423,082.87 1,600,000.00 5 1,810.71 423,982.41 0.00 0.00 423,982.41 1,600,000.00 5 1,814.56 424,885.39 0.00 0.00 424,885.39 1,600,000.00 5 1,818.43 425,791.82 0.00 0.00 425,791.82 1,600,000.00
THE FOLLOWING IS A DESCRIPTION OF EACH COLUMN OF THE DETAILED REPRESENTATION: POLICY YEAR The policy year is assumed to be 5, as described above. POLICY MONTH The policy month ranges from 1 through 12, to describe the monthly processing that occurs throughout the policy year. BEGINNING OF MONTH CASH VALUE The beginning of month cash value (BOM CV) in each current month is equal to the end of month cash value from each previous month. This demonstration assumes that the cash value is comprised of variable account cash value only; no fixed account cash value or loan account cash value are present. GROSS PREMIUM PAID The gross premium paid is the planned ANNUAL premium of 88,356.00 as described above. PREMIUM LOAD The premium load is the sum of the sales charge and premium tax as described in the Transaction Fees table. For year 5, this sum is 10.00% of gross premium paid up to target premium, and 3.00% of gross premium paid in excess of target premium. With a target premium of 88,356.67 in year 5 month 1, the premium load is therefore 10.00% x 88,356.00 + 3.00% x 0.00 = 8,835.600. ADMIN CHARGE The admin charge is the sum of the Policy Fee and the Administrative Charge (per 1000) multiplied by the face amount divided by 1000 as described in the Periodic Fees table (although the Administrative Charge (per 1000) listed in the Periodic Fees table is rounded to 2 places, whereas the exact charge is used here). In year 5, this sum is therefore 5.50 + (0.000 x 1,600,000.00 / 1,000) = 5.50. RIDER CHARGE The rider charge is the sum of all of the charges for riders present, except for the Waiver of Monthly Deduction Rider (WMD). The WMD is calculated after the Cost of Insurance Charge because it uses that charge in its calculation. This illustration assumes no riders (including WMD) are present; the rider charge (as well as WMD charge) is therefore 0.00. A list of available riders can be found in the Rider Fees Table. COST OF INSURANCE CHARGE The cost of insurance (COI) charge is the product of the monthly COI rate and the net amount at risk (NAR). The NAR is the difference between the death benefit (DB) and the cash value (floored at 0), both at the time that the NAR is calculated. There are 12 different DB options: (Enh = Enhanced, ROP = Return Of Premiums)
level DB option, guideline premium test, IRS corridor: level DB option, guideline premium test, Enh corridor: increasing DB option, guideline premium test, IRS corridor: increasing DB option, guideline premium test, Enh corridor: level + ROP DB option, guideline premium test, IRS corridor: level + ROP DB option, guideline premium test, Enh corridor: level DB option, cash value accumulation test, NSP corridor: level DB option, cash value accumulation test, Enh NSP corridor: increasing DB option, cash value accumulation test, NSP corridor: increasing DB option, cash value accumulation test, Enh NSP corridor: level + ROP DB option, cash value accumulation test, NSP corridor: level + ROP DB option, cash value accumulation test, Enh NSP corridor: DB = Max (face amount , cash value x IRS Corridor Factor) DB = Max (face amount , cash value x Enh Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x IRS Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh Corridor Factor) DB = Max (face amount + ROP , cash value x IRS Corridor Factor) DB = Max (face amount + ROP , cash value x Enh Corridor Factor) DB = Max (face amount , cash value x NSP Corridor Factor) DB = Max (face amount , cash value x Enh NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh NSP Corridor Factor) DB = Max (face amount + ROP , cash value x NSP Corridor Factor) DB = Max (face amount + ROP , cash value x Enh NSP Corridor Factor)
At the time that the NAR is calculated, the face amount is comprised of those attributable to the base policy and the Adjustable Term Insurance Rider if the rider face amount is included with the base face when determining the corridor death benefit. It is divided by a monthly discount factor which is calculated based upon the guaranteed interest rate. The guaranteed interest rate is 4.00%, so the monthly discount factor is calculated as follows: monthly discount factor = (1 + guaranteed interest rate) ^ (1/12) monthly discount factor = (1 + 4.00%) ^ (1/12) monthly discount factor = 1.0032737397822 The NAR is: NAR = death benefit - Max (0, cash value) and finally the COI charge is: COI charge = [monthly COI rate / (1 - monthly COI rate)] x NAR For example, in year 5 month 1, we have the following: level DB option, cash value accumulation test, Enh NSP corridor face amount = 1,600,000.00 cash value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge cash value = 335,618.80276025 + 88,356.00 - 8,835.600 - 5.50 - 0.00 cash value = 415,133.70276025 Enh NSP Corridor Factor = 2.58 monthly discount factor = 1.0032737397822 monthly COI rate = 0.0005446 DB = Max (face amount / monthly discount factor, cash value x Enh NSP Corridor Factor) DB = Max (1,600,000.00 / 1.0032737397822, 415,133.70276025 x 2.58) DB = Max (1,594,779.10818970, 1,069,711.15) DB = 1,594,779.10818970 NAR = DB - Max (0, cash value) NAR = 1,594,779.10818970 - Max (0, 415,133.70276025) NAR = 1,594,779.10818970 - 415,133.70276025 NAR = 1,179,645.40542945 COI charge = [monthly COI rate / (1 - monthly COI rate)] x NAR COI charge = [0.0005446 / (1 - 0.0005446)] x 1,179,645.40542945 COI charge = 642.82431286 MORTALITY & EXPENSE RISK CHARGE The mortality & expense (M&E) risk charge is a percentage of the sum of the variable account cash value and the loan account cash value at the time that the charge is deducted. This demonstration assumes that all cash value is comprised of variable account cash value only. The annual percentages are described in the Periodic Fees table. The monthly percentages are 1/12th of the annual percentages. For example, in year 5 month 1, the percentage is 0.75% and the cash value at the time that the charge is deducted is: Cash Value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - Cost Of Insurance Charge Cash Value = 335,618.80276025 + 88,356.00 - 8,835.600 - 5.50 - 0.00 - 642.82431286 Cash Value = 414,490.87844739 The mortality & expense risk charge is therefore 0.75%/12 x 414,490.87844739 = 259.05679903. NET INVESTMENT EARNINGS The net investment earnings represent the policy performance of the cash value. The cash value is actually tracked separately for each sub-account that has invested cash value, as well as for a loan fund if any loan balance is present. This demonstration assumes fund performance across all funds to average a gross annual interest rate of 6.00% and an investment management fee of 0.69%. To calculate the annual net interest rate (used to calculate the net investment earnings), given the annual gross interest rate and the investment management fee, we use the following: annual net interest rate = ROUND{([ {(1+I)^(1/365)} x {1-(IMF/365)} ] ^ 365) - 1, 4} where: I = annual gross interest rate IMF = investment management fee For I = 6.00% and IMF = 0.69%, we have: annual net interest rate = ROUND{([ {(1+I)^(1/365)} x {1-(IMF/365)} ] ^ 365) - 1, 4} annual net interest rate = ROUND{([ {(1+6.00%)^(1/365)} x {1-(0.69%/365)} ] ^ 365) - 1, 4} annual net interest rate = ROUND{([ {(1.06)^(1/365)} x {1-0.00001890} ] ^ 365) - 1, 4} annual net interest rate = ROUND{([ 1.00015965 x 0.99998110 ] ^ 365) - 1, 4} annual net interest rate = ROUND{(1.00014075 ^ 365) - 1, 4} annual net interest rate = ROUND{(1.05271111 - 1, 4} annual net interest rate = ROUND{0.05271111, 4} annual net interest rate = 0.0527 which expressed as a percentage is 5.27%. To calculate the net investment earnings for the month, we calculate the product of the cash value at the time the net investment earnings is calculated and the monthly net interest rate. The cash value at the time the net investment earnings is calculated is: cash value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge The monthly net interest rate is not simply 1/12th of the annual net interest rate, but rather we use a compound formula to solve: monthly net interest rate = [(1 + annual net interest rate) ^ (1/12)] - 1 monthly net interest rate = [(1 + 0.0527) ^ (1/12)] - 1 monthly net interest rate = [1.0527 ^ (1/12)] - 1 monthly net interest rate = 1.0042890 - 1 monthly net interest rate = 0.0042890 For example, in year 5 month 1, we have the following: cash value = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge cash value = 335,618.80276025 + 88,356.00 - 8,835.600 - 5.50 - 0.00 - 642.82431286 - 259.05679903 cash value = 414,231.82164836 net investment earnings = cash value x monthly net interest rate net investment earnings = 414,231.82164836 x 0.0042890 net investment earnings = 1,776.65244503 END OF MONTH CASH VALUE The end of month cash value (EOM CV) is simply: EOM CV = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge + Net Investment Earnings In year 5 month 1, we have: EOM CV = BOM CV + Gross Premium Paid - Premium Load - Admin Charge - Rider Charge - COI Charge - M&E Risk Charge + Net Investment Earnings EOM CV = 335,618.80276025 + 88,356.00 - 8,835.600 - 5.50 - 0.00 - 642.82431286 - 259.05679903 + 1,776.65244503 EOM CV = 416,008.47409339 SURRENDER CHARGE No surrender charge exists. However, upon a mid-policy month surrender, the policyholder receives the unearned portion of the COI charge in addition to the fund value: COIRefund = BeginningOfMonthCOICharge x ( 1 - ( # days since monthiversary / # days in policy month) ) If the policy is surrendered in the first or second year, the policyholder will also receive a refund of all but 2% of the actual premium load deducted during the first year (including all payments prior to the first anniversary). This refund is available only on total surrender and not upon a 1035 exchange. This refund is currently equal to 8% of premium paid in the first year up to target and 1% of premium paid in the first year above target. This refund is based on target premium in the first policy year (which may be different than target premium at time of surrender). After the second year no refund will be made. If the Enhanced Surrender Value Rider is attached to the policy, the return of sales load provision described above will not apply. Instead, if the policy is surrendered within seven years after the Date of Policy, in addition to any Net Cash Value, we will refund part of the cumulative Expense Charge paid under the Policy and part of the cost of term insurance charges deducted in the current Policy Year, as shown below. However, we will not pay this refund if the full cash withdrawal is related to a 1035 exchange. Portion of Portion of Policy Year of Cumulative Expense Cost of Insurance Charges Full Cash Withdrawal Charge to be Refunded* to be Refunded** ------------------------------------------------------------------------- 1 100% 75% 2 90% 50% 3 75% 25% 4 60% None 5 45% None 6 30% None 7 15% None 8 and later None None * The percent shown is applied to the cumulative expense charge exclusive of the charge for this Rider. ** The percent shown is applied to the cost of insurance (base plan and term rider) charges deducted during the Policy Year in which the full cash withdrawal occurs. The amount of this refund is not available for policy loans or partial cash withdrawals and has no effect on the determination of the grace period described in the Policy. In year 5 month 1, the surrender charge is 0.00000. OUTSTANDING LOAN BALANCE The outstanding loan balance represents the amount of cash value loaned, including loan charged interest as described in the Periodic Fees table. This illustration assumes no loans have been taken; the outstanding loan balance is therefore 0.00. END OF MONTH NET CASH VALUE The end of month net cash value (EOM NCV) is the end of month cash value net of surrender charge and outstanding loan balance. That is: EOM NCV = EOM CV - surrender charge - outstanding loan balance In year 5 month 1, we have: EOM NCV = EOM CV - surrender charge - outstanding loan balance EOM NCV = 416,008.47409339 - 0.00000 - 0.00 EOM NCV = 416,008.47409339 END OF MONTH DEATH BENEFIT The end of month death benefit (EOM DB) is calculated based upon the DB option. The DB options are as follows: (Enh = Enhanced, ROP = Return Of Premiums) level DB option, guideline premium test, IRS corridor: level DB option, guideline premium test, Enh corridor: increasing DB option, guideline premium test, IRS corridor: increasing DB option, guideline premium test, Enh corridor: level + ROP DB option, guideline premium test, IRS corridor: level + ROP DB option, guideline premium test, Enh corridor: level DB option, cash value accumulation test, NSP corridor: level DB option, cash value accumulation test, Enh NSP corridor: increasing DB option, cash value accumulation test, NSP corridor: increasing DB option, cash value accumulation test, Enh NSP corridor: level + ROP DB option, cash value accumulation test, NSP corridor: level + ROP DB option, cash value accumulation test, Enh NSP corridor:
DB = Max (face amount , cash value x IRS Corridor Factor) DB = Max (face amount , cash value x Enh Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x IRS Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh Corridor Factor) DB = Max (face amount + ROP , cash value x IRS Corridor Factor) DB = Max (face amount + ROP , cash value x Enh Corridor Factor) DB = Max (face amount , cash value x NSP Corridor Factor) DB = Max (face amount , cash value x Enh NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x NSP Corridor Factor) DB = Max (face amount + cash value (floored at 0), cash value x Enh NSP Corridor Factor) DB = Max (face amount + ROP , cash value x NSP Corridor Factor) DB = Max (face amount + ROP , cash value x Enh NSP Corridor Factor)
The face amount is the same as that used to calculate the NAR in the COI charge. If the Adjustable Term Insurance Rider is present and the rider face amount is excluded from the base face when determining the corridor death benefit, the face amount attributable to that rider is added to the DB. The DB is actually the gross DB, before the reduction of any outstanding loan balance. The EOM DB is therefore: EOM DB = DB - outstanding loan balance In year 5 month 1, we have: level DB option, cash value accumulation test, Enh NSP Corridor face amount = 1,600,000.00 cash value = EOM CV = 416,008.47409339 Enh NSP Corridor Factor = 2.58 DB = Max (face amount, cash value x Enh NSP Corridor Factor) DB = Max (1,600,000.00, 416,008.47409339 x 2.58) DB = Max (1,600,000.00, 1,071,965.24623565) DB = 1,600,000.00 EOM DB = DB - outstanding loan balance EOM DB = 1,600,000.00 - 0.00 EOM DB = 1,600,000.00