1.1. In text-books concerned with the study of pension funds the space devoted to the calculation of emerging costs is usually small and this is probably in keeping with the number of occasions when such estimates are necessary.

If, however, it is accepted that the purpose is to produce the best estimate of the emerging costs, the calculations become interesting and consideration of the appropriate bases provides a useful background to the selection of a suitable basis for valuing the capital liabilities of the fund.

1.2. This paper develops some ideas generated while preparing detailed estimates of the emerging costs of several immature pension schemes with high rates of turnover of staff. A computer model is described which at the moment is in the early stage of development. Having outlined the pattern of costs derived from the model, the paper considers the effects of simplifying the original assumptions and in particular compares the results of using a traditional valuation basis.

I am delighted to be able to speak to you tonight. In view of the pressures on my programme at the moment, you may feel that my delight is a bit shallow but I can assure you that it is not. It is a most refreshing and agreeable change to be talking to members of a profession that I do not cross swords with! In fact, I do have the very greatest respect for your profession and I am sure that what I have to say this evening, should be relevant. I intend to talk about Management Development and I am sure that you will agree that Actuaries are themselves managers: they are managers of money in one form or another and I become particularly interested when it is my money that they are managing. So any help that I may be able to give you most certainly is given with a personal and ulterior motive.

I want what I say tonight to be as practically based as possible, and for this reason I shall be talking mainly about Reed International. I want to tell you some of the ways in which managers should be—and are being—developed in Reed.

It is difficult to say exactly when the Continuous Mortality Investigation began, beyond saying that the first report of the Committee was on the experience of assured lives in 1924–29. There are, however, some earlier developments which are worth following, although it is still difficult to know where to start recording the process of evolution.

If we start in the Institute of Actuaries Year Book we find that the Bureau was established soon after the 1914–18 war. However, in the Presidential Address of the late W. P. Phelps published in J.I.A. 54 there was a reference to a decision having been taken by the Institute and the Faculty in 1912–13, and a perusal of various Minutes of the Institute Council during the period immediately prior to the 1914–18 war yields much information. But perhaps we should start even earlier than that.

When I realized that this was a jubilee lecture my mind flew to our 21st supper and celebration. The guest of honour was Sir Andrew, then Mr. Rowell. When the waitresses had cleared the tables he rose to propose our health and said he was glad to be able to welcome us among the grown-ups; that we were grown-up he knew because he had just seen the women take our napkins away.

No-one can emulate Sir Andrew but I share his pleasure. One of the sweetest fruits of autumn is a smile of welcome from the young. So, thank you. Another reason is that I've loved many things in life from Lancashire hot-pot to Shirley MacLaine, but most of all I love a captive audience. So thank you twice.

To have leisure is to have time to stand and stare. It is a hill with a perspective. When I look around from the hill of leisure which I now enjoy–and enjoy is the word–I sometimes catch a glimpse of that other hill, 45 years down the road, from which I peered forward in my student days. Much has happened since then which seemed important at the time to that little figure scurrying along the road, but surveying the whole scene there has been an unbelievable change.

1.1. A longer title to this paper might be ‘Reflections of a Consulting Actuary on his professional relationship with Friendly Societies’. The term ‘Friendly Society’ is defined by law, but from the actuary's point of view it can be divided into a range of organizations, summarized as follows:

(a) Large Collecting Societies with assets exceeding £1 million. Many of these Societies operate on a national basis.

(b) Medium to small Collecting Societies. Most of these Societies serve a fairly localized area, and some are very small, being linked to churches to provide for burial expenses.

(c) The large Friendly Societies known as Affiliated Orders which have a large number of branches.

(d) The smaller Affiliated Orders with branches.

(e) Large Friendly Societies with assets exceeding £1 million.

(f)The smaller Friendly Societies with assets of less than £1 million including many with assets of less than £500,000.

The purpose of this Note is to provide easily remembered rules for finding approximately the time required for money to multiply itself by any whole number up to 12, and by certain larger numbers, at a given rate of interest. The rules hold good for rates of interest up to about 100% per period. For ease of reference they are summarized at the end of the Note.

It may well be asked why anyone should want to memorize such rules when reference to tables of compound interest, or calculation by logarithms, would give the results very easily. One answer is that in a time of increasing wage and salary levels it is important for the actuary to be able to point out at once the practical effect of any proposed assumption as to future rates of increase. Such information is often needed at a meeting, where the overt or surreptitious consultation of a book of tables would not enhance his reputation.

When we were asked to present a paper to the Students' Society we were asked to bear in mind the need of the actuarial student for a simple up-to-date paper on this subject. The impossibility of this task hit us immediately—the subject is not itself simple and the currency of the paper is dependent on the whims of Government. However, we write of the current situation as we see it and we shall try to bring out the basic facts of life office taxation whilst at the same time giving, for the benefit of those without first-hand experience, some feeling for the practical as well as the theoretical aspects of the subject.

We shall in sections 1–11 of the paper take the reader through the main points concerning the computations of tax for a proprietary life office, then in sections 12–18 give brief notes about some of the complications and finally in an Appendix give a simplified computation.

The first four sections of this note discuss loan plans and bonus funding generally, and some simple examples are shown. Section V and the appendix describe a more powerful method of solution using linear programming techniques, and the final section draws some practical conclusions.

No attempt has been made to describe the basic theories of linear programming. I am indebted for the slight knowledge of the subject I possess to the text-book mentioned in Section V; the object of this note is to demonstrate that linear programming methods can be applied in a somewhat unusual context to solve loan plan and bonus funding problems. Any errors in the technical content of this note are due to my misapplication of the text-book methods rather than to the methods themselves.

The purpose of this paper is to outline the development and current status of variable annuities and variable life insurance in the United States of America. The author was fortunate in being granted a Fellowship by the Winston Churchill Memorial Trust which enabled him to travel extensively in North America for two months in the summer of 1971. It is pointed out that this paper is the result of a large number of impressions formed by the author and has no claim to be a comprehensive treatise on the subjects. However, it is hoped that the paper will be of real interest to actuaries and others in the United Kingdom.

Part I of the paper deals with variable annuities, Part II with variable life insurance, and Part III with the special problem of providing minimum death benefit guarantees and maturity value guarantees for these variable products. Variable annuities are much more established in the United States than in this country, but variable life insurance is just in the process of being developed. Mention will be made of the broader issues as well as of actuarial matters.

The reader of this note will know well the method used in the U.K. for the verification of technical reserves (i.e. the net liability) in life assurance. The net liability must be calculated by a qualified actuary and the methods and bases used must be described in sufficient detail in Schedule 4 of The Insurance Companies (Accounts and Forms) Regulations 1968 for their suitability to be apparent from a careful scrutiny of these and the other financial statistics submitted in accordance with the Regulations. As the data are made public, this scrutiny can be made not only by the Government Actuary in advising the supervisory authorities at the Department of Trade and Industry, but also by any other qualified actuary who cares to do so, which is an equally important discipline. Under this system, the maximum freedom can be allowed to the company and its actuary, but there has hitherto been no equally satisfactory method available for the objective scrutiny of non-life technical reserves. However, the new Claim Frequency Analyses and Claim Settlement Analyses prescribed in Parts II and III of Schedule 3 to the 1968 Regulations should go a long way towards remedying this deficiency. These analyses are to be supplied separately for each class of insurance in each of a company's main markets, and separately for such risk groups within each class as the company decides to be appropriate.

This article discusses the random walk hypothesis, examines some of the evidence that has been put forward to support it, and draws some implications for the theory of investment analysis. There seem to be only three references to the random walk hypothesis in U.K. actuarial literature—Weaver and Hall (1967), Hemstead (1969) and Moore (1972), all of whom discuss it very briefly. The vast majority of the research in share prices, portfolio analysis, etc. has been performed in the U.S.A., but this article will attempt to discuss this problem in the light of current U.K. research, as well as its application to maturity guarantees for equity-linked policies.

Does Industrial Branch life assurance exist on the mainland of Europe? It is probably true to say that the average insurance man in the U.K. knows more about life assurance in North America, Australasia and South Africa than in France or Germany. This is particularly true when one considers Industrial Branch business. Certainly in my own case knowledge of European I.B. was limited to a vague idea that it did exist in a minor way in one or two countries such as France, Belgium and, possibly, Italy.

In fact, Industrial Branch life assurance exists in most Western European countries and the following is an attempt to summarize some of the features encountered during a tour which included visits to nine I.B. offices in France, Belgium, the Netherlands, West Germany, Austria and Italy. It does not pretend to be a technical actuarial treatise nor can it claim to be wholly representative of I.B. in these countries; rather it is a series of impressions.

An investor who put £1,000 into 2½% Consols at the end of 1947 and reinvested all his gross income in the same stock at the end of each year would at the end of 1970 have stock valued at £921. Adjusted to take account of inflation, in 1947 £'s his investment with all income reinvested is worth £365. Why bother to revisit the gilt-edged market?

An investor who put £1,000 into 2½% Consols at the beginning of January 1971 and reinvested the gross dividends as they were received in the same stock would, by the middle of September 1971, hold stock worth £1,194. He is showing a 19% return on his investment after under ten months. I do not wish to draw the conclusion that we have reached a new dawn in the gilt-edged market. I draw the conclusion that money can still be made in gilts. It is a market worth revisiting.

There are two methods of dealing with the actuarial features of sickness insurance—the collective method and the reversionary method.

Unfortunately, perhaps the two methods have developed quite independently of each other, for historical reasons.

The collective method was used in Great Britain to investigate Friendly Society experience. The pattern for all subsequent investigations was set in the 1820s and brought to its culmination of refinement in Watson's Manchester Unity Experience still in the Institute's examination syllabus, 66 years after publication. No investigation of insured lives has yet been made in Great Britain. In the rest of this note the term ‘Manchester Unity method’ will be used to describe the collective method.