Future New Sales of liability products can be modeled using a dynamic or static approach. Future sales projections correspond liability model points with issue dates at Time Index values > 0.
Static New Sales
Static New Sales are modeled using model point files that include future new sales assumptions. Static sales are modeled exactly as represented in the model point files without any adjustments. Static sales use a bottom-up modeling approach to model new sales, where aggregate sales amounts equal to the summation of model point new sales assumptions.
Static New Sales assumptions depend upon the particular product and its corresponding model point file definition. In these model point files, static new sales include a future date value (after the projection start date) in the Issue Date model point field corresponding to a Time Index > 0. Model points with future issue dates will not begin to be calculated until the Current Date equals the Issue Date for each model point.
In the example below extracted from a Projection Template, distinct static new sales assumptions for Term Life and Whole Life liability products can be embedded within their assigned model point files as highlighted below. You assign model point files by clicking the icon in the upper left corner.
Dynamic New Sales
Dynamic New Sales are modeled using a top-down modeling approach. An initial set of nominal new sales assumptions for each product are proportionally scaled to meet future aggregate sales amounts that can vary over time.
SLOPE uses the Sales Amount Variable setting within Portfolio variables to obtain aggregate new sales assumed over future projection time periods (Time Index > 0).
SLOPE uses Liability Allocations created from Product Set Allocations to dynamically distribute aggregate sales assumptions across each modeled product and its corresponding nominal new business distribution:
- Product Allocation - Aggregate New Sales are distributed across each product included in the Liability Allocation using the Model Point Allocation field
- Model Point Allocation - Product allocations are distributed across each product's nominal new sales distributions assumed for each product within the Liability Allocation. Model point allocations are proportionally scaled based upon end-user selected model point fields.
In the example below, the New Sales portfolio variable is assigned to the Sales Amount Variable setting within the Life Insurance Portfolio portfolio name. The New Sales time-indexed portfolio variable retrieves the Sales Amount field value for each distinct Time Index = t from a Data Table named Sales Table to obtain aggregate new sales assumption values that vary by future projection month. The condition that Time Index > 0 implies that aggregate new sales assumptions correspond to future projection periods in SLOPE.
The New Sales variable defines two key assumptions for dynamic new sales
- Aggregate New Sales Amount(s)
- New Sales Frequency
Model Point New Sales Distributions
Aggregate sales targets are distributed across two dimensions to dynamically create new sales model point distributions for each product.
- Product Allocation - Aggregate sales are allocated across products included within the Liability Allocation assumption using the Model Point Allocation field
- Model Point Allocation - New Sales model points are dynamically created for each product by proportionally scaling end user selected Model Point fields against each product's nominal new business distributions included within the Liability Allocation.
In the sample TwoProducts Liability Allocation file below, we see that Aggregate Sales are split 25% Whole Life and 75% Term Life based upon the Premiums per Year Model Point Allocation field.
A Liability Allocation assumption is assigned within the Projection Template as highlighted below. Click the icon in the upper left corner to assign a predefined Liability Allocation to the Sales Allocation setting.
Since the nominal sales distribution will be scaled to meet an aggregate sales target for each projection month, original Issue Dates for each model point within the Liability Allocation are ignored and are set equal to the Current Date corresponding to the projection month.
Model Point Allocation
There are two steps to define how the nominal sales distribution for each product within your Liability Allocation will be scaled to meet aggregate sales targets.
- Click on the Edit Model Point Definition icon available from any Product variable
- For each field that will be used to scale the nominal sales distribution, check mark the Scales on Purchase or Sales box
1. Click on Edit Model Point Definition icon available from any Product variable.
See the highlighted icon for the Whole Life example displayed below.
This action will open the Model Point File Definition file corresponding to your liability product as shown in step 2 below. Remember, when dynamically projecting sales across various liability products, you will need to select scaling fields for each product's unique Model Point File Definition file.
2. For each field that will be used to scale the nominal sales distribution, checkmark the Scales on Purchase or Sales box.
Select the highlighted icon to the right of each model point field intended to dynamically scale.
As an example, the Whole Life Model Point Definition below confirms via checkboxes that the Face Amount, Initial Premium, and Policy Count fields will all be used to dynamically scale the nominal sales distribution assumption.
After clicking the icon for each desired field intended to scale the Liability Allocation, you open a dialog box similar to the one shown below. Make sure you select the Scales on Purchase or Sale checkbox to activate the field's scaling functionality.