SYNOPSES value of guaranteed liabilities (i.e. including bonuses declared to date, but not future bonuses). This amount can be expressed as a percentage of the market value of assets. Next, the present value of future reversionary bonuses at present rates on the in-force business is established, and the free reserves less this amount are compared with the market value of assets. Finally, the free reserves, less the value of future reversionary bonuses on the in-force business, are compared with

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... the support required to allow the latest year's new business to pay current rates of reversionary bonus. Other relevant factors are discussed, including shareholders' participation (if any), new business trends, expense ratios, underwriting standards, investment strategy, financial guarantees, and transfers from investment reserves. The methodology is based on the mutualization price techniques first developed in the late 1960's for evaluating proprietary life companies. The basis for calculations is Schedule 5 of the DTI returns, updated as necessary to take into account subsequent movements. Together with other schedules, it allows a reasonably full picture of the life company's products and portfolios to be formed. However, other sources of information are necessary as well, such as trade journals. The valuation itself is a gross premium one, with realistic mortality, interest and other assumptions. Various problems arise: timing of the DTI returns, deficiencies in the information provided, and treatment of subsidiaries. Finally, an example is given of the results of the calculations for three life offices.