Bulletin 94-7
Office of the Chief Actuary
APPENDIX A
Basis For Interest Rate Calculations
Reference Interest Rate R
Features in the determination of the value of R include:
- The source: Moody's Corporate Bond Yield Average - Monthly Average Corporates as published by Moody's Investors Services, Inc.
- The averaging period:
- Averaging over a period of twelve months. (12)
- The lesser of the average over a period of thirty-six months and the average over a period of twelve months. (12/36)
- The end of the averaging period is June 30 of the calendar year:
- of issue or purchase. (YI)
- next preceding the year of issue. (YI-1)
- of the change in fund. (YF)
Formula For Determining The Maximum Valuation Interest Rate, I
There are two formulae used to calculate:
(A) I = .03+W(R1-.03)+(W/2)(R2 -.09)
(B) I = .03+W(R-.03)
Where: | |
R1 is the lesser of R and .09 | |
R2 is the greater of R and .09 | |
R is the reference interest rate | |
W is the weighting factor |
Life Insurance (Formula A) Annuities | |||||||||||||
Calendar Year |
R | R | R | Calendar Year |
Formula A R1 |
R2 | Formula B R1 |
R2 | |||||
81 | 9.89 | 9.00 | 9.89 | 81 | 11.57 | 9.00 | 11.57 | 13.71 | |||||
82 | 11.57 | 9.00 | 11.57 | 82 | 13.64 | 9.00 | 13.64 | 15.70 | |||||
83 | 13.64 | 9.00 | 13.64 | 83 | 13.39 | 9.00 | 13.39 | 13.39 | |||||
84 | 13.39 | 9.00 | 13.39 | 84 | 13.22 | 9.00 | 13.22 | 13.22 | |||||
85 | 13.22 | 9.00 | 13.22 | 85 | 13.01 | 9.00 | 13.01 | 13.01 | |||||
86 | 13.01 | 9.00 | 13.01 | 86 | 10.75 | 9.00 | 10.75 | 10.75 | |||||
87 | 10.75 | 9.00 | 10.75 | 87 | 9.40 | 9.00 | 9.40 | 9.40 | |||||
88 | 9.40 | 9.00 | 9.40 | 88 | 10.15 | 9.00 | 10.15 | 10.32 | |||||
89 | 10.15 | 9.00 | 10.15 | 89 | 9.93 | 9.00 | 9.93 | 10.09 | |||||
90 | 9.93 | 9.00 | 9.93 | 90 | 9.52 | 9.00 | 9.52 | 9.52 | |||||
91 | 9.52 | 9.00 | 9.52 | 91 | 9.63 | 9.00 | 9.63 | 9.63 | |||||
92 | 9.63 | 9.00 | 9.63 | 92 | 8.88 | 8.88 | 9.00 | 8.88 | |||||
93 | 8.88 | 8.88 | 9.00 | 93 | 8.13 | 8.13 | 9.00 | 8.13 | |||||
94 | 8.13 | 8.13 | 9.00 | 94 | 7.52 | 7.52 | 9.00 | 7.52 | |||||
95 | 7.52 | 7.52 | 9.00 |
STATE OF CALIFORNIA
DEPARTMENT OF INSURANCE
425 South Market Street
Sixth Floor
San Francisco, California 94105
Bulletin No. 94-7
Date: September 1, 1994
To: All Admitted Life and Disability Insurers and Other Interested Persons
SUBJECT: Rates of Interest for Minimum Reserves and Nonforfeiture Values - 1995 Life Insurance; 1994 Annuities
This replaces Bulletin No. 93-5.
Attached is Table 1 showing the rates of interest to be used fordetermining minimum reserves and nonforfeiture values accordingto Sections 10163.2(i) and 10489.4 of the California Insurance Code applicable to life insurance policies issued in 1995 and annuity contracts issued or undergoing a change in fund in 1994. Also shown in Table 1 are the interest rates applicable to life insurance policies issued in 1982 through 1995 and to annuity contracts issued or funded in 1981 through 1994. The Moody's Corporate Bond Yield Averages used in these calculations are those for the period ending June 30 for each calendar year shown. These were:
Average over period ending June 30 | ||||
Calendar Year |
Of a 12-Month Period |
Of a 36-Month Period |
||
1979 | 9.49% | 8.92% | ||
1980 | 11.51 | 9.89 | ||
1981 | 13.71 | 11.57 | ||
1982 | 15.70 | 13.64 | ||
1983 | 13.39 | 14.26 | ||
1984 | 13.22 | 14.10 | ||
1985 | 13.01 | 13.21 | ||
1986 | 10.75 | 12.33 | ||
1987 | 9.40 | 11.05 | ||
1988 | 10.32 | 10.15 | ||
1989 | 10.09 | 9.93 | ||
1990 | 9.52 | 9.97 | ||
1991 | 9.63 | 9.74 | ||
1992 | 8.88 | 9.34 | ||
1993 | 8.13 | 8.88 | ||
1994 | 7.52 | 8.18 |
Appendix A is a brief background outline of the basis for the calculation of the interest rates shown in Table 1.
John Garamendi
Insurance Commissioner
TABLE 1
STATUTORY CALENDAR YEAR INTEREST RATES BASED ON NAIC STANDARD VALUATION AND NONFORFEITURE LAWS
A. Life Insurance Guarantee Duration (Years) Calendar Valuation Nonforfeiture Year Interest Rate
Interest Rate | (100%) | (125%) | ||
10 or less | ||||
82 | 6.75 | 8.50 | ||
83-86 | 7.25 | 9.00 | ||
87 | 6.50 | 8.25 | ||
88-93 | 6.00 | 7.50 | ||
94 | 5.50 | 7.00 | ||
95 | 5.50 | 7.00 | ||
More than 10, not more than 20 | ||||
82 | 6.25 | 7.75 | ||
83-86 | 6.75 | 8.50 | ||
87-93 | 6.00 | 7.50 | ||
94 | 5.25 | 6.50 | ||
95 | 5.25 | 6.50 | ||
More than 20 | ||||
82 | 5.50 | 7.00 | ||
83-86 | 6.00 | 7.50 | ||
87-92 | 5.50 | 7.00 | ||
93-94 | 5.00 | 6.25 | ||
95 | 4.50 | 5.75 |
B. Single premium immediate annuities, and annuity benefits involving life contingencies arising from other annuities with cash settlement options and from guaranteed interest contracts with cash settlement options.
Calendar Year |
Valuation Interest Rate |
Calendar Year |
Valuation Interest Rate |
|||
81 | 11.50 | 88-89 | 8.75 | |||
82 | 13.25 | 90-91 | 8.25 | |||
83-84 | 11.25 | 92 | 7.75 | |||
85 | 11.00 | 93 | 7.00 | |||
86 | 9.25 | 94 | 6.50 | |||
87 | 8.00 |
C. Other Annuities and Guaranteed Interest Contracts
Contracts Valued On An Issue Year Basis | ||||||||||||
Cash | Future | Guarantee | Valuation Interest Rate | |||||||||
Settlement | Interest | Duration | Calendar | For Plan Type | ||||||||
Options? | Guarantee? | (Years) | Year | A | B | C | ||||||
Yes | Yes | 5 or less | ||||||||||
81 | 11.50 | 9.50 | 8.25 | |||||||||
82 | 13.25 | 10.50 | 9.25 | |||||||||
83 | 11.25 | 9.25 | 8.25 | |||||||||
84 | 11.25 | 9.25 | 8.00 | |||||||||
85 | 11.00 | 9.00 | 8.00 | |||||||||
86 | 9.25 | 7.75 | 6.75 | |||||||||
87 | 8.00 | 6.75 | 6.25 | |||||||||
88 | 8.75 | 7.50 | 6.75 | |||||||||
89 | 8.75 | 7.25 | 6.50 | |||||||||
90-91 | 8.25 | 7.00 | 6.25 | |||||||||
92 | 7.75 | 6.50 | 6.00y | |||||||||
93 | 7.00 | 6.00 | 5.50 | |||||||||
more than 5 but not more than 10 | ||||||||||||
81 | 11.00 | 9.50 | 8.25 | |||||||||
82 | 12.50 | 10.50 | 9.25 | |||||||||
83 | 10.75 | 9.25 | 8.25 | |||||||||
84 | 10.75 | 9.25 | 8.00 | |||||||||
85 | 10.50 | 9.00 | 8.00 | |||||||||
86 | 8.75 | 7.75 | 6.75 | |||||||||
87 | 7.75 | 6.75 | 6.25 | |||||||||
88 | 8.50 | 7.50 | 6.75 | |||||||||
89 | 8.25 | 7.25 | 6.50 | |||||||||
90-91 | 8.00 | 7.00 | 6.25 | |||||||||
92 | 7.50 | 6.50 | 6.00 | |||||||||
93 | 6.75 | 6.00 | 5.50 | |||||||||
more than 10 but not more than 20 | ||||||||||||
81 | 7.75 | 6.75 | 6.25 | |||||||||
82 | 8.50 | 7.25 | 6.75 | |||||||||
83-84 | 8.25 | 7.00 | 6.75 | |||||||||
85 | 8.25 | 7.00 | 6.50 | |||||||||
86 | 7.50 | 6.50 | 6.00 | |||||||||
87 | 7.00 | 6.00 | 5.75 | |||||||||
88-89 | 7.25 | 6.25 | 6.00 | |||||||||
90-91 | 7.00 | 6.25 | 5.75 | |||||||||
92 | 6.75 | 6.00 | 5.75 | |||||||||
93 | 6.25 | 5.50 | 5.25 | |||||||||
more than 20 | ||||||||||||
81 | 6.25 | 5.50 | 5.50 | |||||||||
82 | 6.75 | 6.00 | 6.00 | |||||||||
83-84 | 6.75 | 5.75 | 5.75 | |||||||||
85 | 6.50 | 5.75 | 5.75 | |||||||||
86 | 6.00 | 5.50 | 5.50 | |||||||||
87 | 5.75 | 5.25 | 5.25 | |||||||||
88-89 | 6.00 | 5.25 | 5.25 | |||||||||
90-91 | 5.75 | 5.25 | 5.25 | |||||||||
92 | 5.75 | 5.00 | 5.00 | |||||||||
93 | 5.25 | 4.75 | 4.75 | |||||||||
Yes | No | 5 or less | ||||||||||
81 | 12.00 | 10.00 | 9.00 | |||||||||
82 | 13.75 | 11.25 | 10.00 | |||||||||
83 | 11.75 | 9.75 | 8.75 | |||||||||
84 | 11.75 | 9.75 | 8.50 | |||||||||
85 | 11.50 | 9.50 | 8.50 | |||||||||
86 | 9.50 | 8.00 | 7.25 | |||||||||
87 | 8.50 | 7.25 | 6.50 | |||||||||
88 | 9.25 | 7.75 | 7.00 | |||||||||
89 | 9.00 | 7.50 | 7.00 | |||||||||
90 | 8.50 | 7.25 | 6.50 | |||||||||
91 | 8.75 | 7.25 | 6.75 | |||||||||
92 | 8.00 | 6.75 | 6.25 | |||||||||
93 | 7.25 | 6.25 | 5.75 | |||||||||
more than 5 but not more than 10 | ||||||||||||
81 | 11.50 | 10.00 | 9.00 | |||||||||
82 | 13.25 | 11.25 | 10.00 | |||||||||
83 | 11.25 | 9.75 | 8.75 | |||||||||
84 | 11.25 | 9.75 | 8.50 | |||||||||
85 | 11.00 | 9.50 | 8.50 | |||||||||
86 | 9.25 | 8.00 | 7.25 | |||||||||
87 | 8.00 | 7.25 | 6.50 | |||||||||
88 | 8.75 | 7.75 | 7.00 | |||||||||
89 | 8.75 | 7.50 | 7.00 | |||||||||
90 | 8.25 | 7.25 | 6.50 | |||||||||
91 | 8.25 | 7.25 | 6.75 | |||||||||
92 | 7.75 | 6.75 | 6.25 | |||||||||
93 | 7.00 | 6.25 | 5.75 | |||||||||
more than 10 but not more than 20 | ||||||||||||
81 | 8.00 | 7.00 | 6.75 | |||||||||
82 | 8.75 | 7.50 | 7.25 | |||||||||
83-84 | 8.75 | 7.50 | 7.00 | |||||||||
85 | 8.50 | 7.50 | 7.00 | |||||||||
86 | 7.75 | 6.75 | 6.50 | |||||||||
87 | 7.25 | 6.50 | 6.00 | |||||||||
88-91 | 7.50 | 6.50 | 6.25 | |||||||||
92 | 7.00 | 6.25 | 6.00 | |||||||||
93 | 6.50 | 5.75 | 5.50 | |||||||||
more than 20 | ||||||||||||
81 | 6.75 | 6.00 | 6.00 | |||||||||
82 | 7.25 | 6.25 | 6.25 | |||||||||
83-84 | 7.00 | 6.25 | 6.25 | |||||||||
85 | 7.00 | 6.25 | 6.25 | |||||||||
86 | 6.50 | 5.75 | 5.75 | |||||||||
87 | 6.00 | 5.50 | 5.50 | |||||||||
88 | 6.25 | 5.75 | 5.75 | |||||||||
89-91 | 6.25 | 5.50 | 5.50 | |||||||||
92 | 6.00 | 5.25 | 5.25 | |||||||||
93 | 5.50 | 5.00 | 5.00 | |||||||||
Yes | Yes or No | 5 or less | ||||||||||
81 | 11.50 | NOT | ||||||||||
82 | 13.25 | APPLICABLE | ||||||||||
83-84 | 11.25 | FOR ANY | ||||||||||
85 | 11.00 | GUARANTEE | ||||||||||
86 | 9.25 | DURATION | ||||||||||
87 | 8.00 | FOR PLAN | ||||||||||
88-89 | 8.75 | TYPES | ||||||||||
90-91 | 8.25 | B AND C | ||||||||||
92 | 7.75 | |||||||||||
93 | 7.00 | |||||||||||
more than 5 but not more than 10 | ||||||||||||
81 | 11.00 | |||||||||||
82 | 12.50 | |||||||||||
83-84 | 10.75 | |||||||||||
85 | 10.50 | |||||||||||
86 | 8.75 | |||||||||||
87 | 7.75 | |||||||||||
88 | 8.50 | |||||||||||
89 | 8.25 | |||||||||||
90-91 | 8.00 | |||||||||||
92 | 7.50 | |||||||||||
93 | 6.75 | |||||||||||
more than 10 but not more than 20 | ||||||||||||
81 | 10.00 | |||||||||||
82 | 11.25 | |||||||||||
83-84 | 9.75 | |||||||||||
85 | 9.50 | |||||||||||
86 | 8.00 | |||||||||||
87 | 7.25 | |||||||||||
88 | 7.75 | |||||||||||
89 | 7.50 | |||||||||||
90-91 | 7.25 | |||||||||||
92 | 6.75 | |||||||||||
93 | 6.25 | |||||||||||
more than 20 | ||||||||||||
81 | 7.75 | |||||||||||
82 | 8.75 | |||||||||||
83 | 7.75 | |||||||||||
84-85 | 7.50 | |||||||||||
&am |