Profit, Surplus and Reserves in a Life Office

Abstract

The actuarial concepts of profit, surplus and reserves as applied in life insurance underwent change in the nineteenth century with development of different bonus systems, and fundamental developments have taken place since the end of the Second World War. Actuaries work with algebra and are often described as ‘mathematicians’, but a closer analogy would be a comparison with physicists or engineers, because it is the numerical result in the real world which is the object of the work. As a result, ideas are most easily explained with simplified numerical examples and the reader is invited to follow the arithmetic as each idea and its numerical consequences are illustrated.