In the following remarks:—

P means Office Premiums.

π means Net Premiums.

D means Claims, Surrenders and similar outgo.

E means Expenses and Commission.

i means Earned rate of interest.

i means Valuation rate of interest.

ϕ means Loading, i.e., P –π either for a particular policy or for the whole business.

1. Surplus is the balance of estimated assets over estimated liabilities, and is therefore dependent upon the valuation assumptions. Some valuation gains or losses are not real, e.g.:—

(a) Strain of new business.

(b) Mortality profit (this is usually quite fictitious).

(c) Interim Bonuses.