Independent
Thinks s/he gets paid by the post
- Joined
- Oct 28, 2006
- Messages
- 4,629
That makes sense for an insurance company. They really pay out just 50% of the scheduled benefits in the year that exactly 50% of the original buyers are alive.I think a sensible approach would be to calculate expected cash flows (contractual annuity benefit * probability that you will be living) and then calculate an IRR that equates that expected cash flow to the upfront premium.
I know how to do that math, but I'm not sure what the answer does for me, (other than to give a very rough estimate of whether the insurance company seems to be investing about like I'd invest).