Glossary

The process of calculating and analyzing A/E ratios over a selected time period; for example, across different ages, genders and durations. This is also known as an A/E study. (ASOP No. 48)

Actual deaths, (either face amount or number of lives) in a group of lives being evaluated, over a specified period divided by the expected deaths over the same period. (ASOP No. 48)

The stated cutoff date for reflecting events and recording amounts as paid or unpaid in a financial statement or accounting system. The accounting date is sometimes referred to as the “as of date.” (ASOP No. 36)

The amount of a participant’s benefit (whether or not vested) as of a specified date, determined in accordance with the terms of a retirement plan and based on compensation (if applicable) and service to that date. (ASOP No. 4)

The amount of a participant’s benefit (whether or not vested) as of a specified date, determined in accordance with the terms of a retirement plan and based on compensation (if applicable) and service to that date (ASOP No. 4)

Basic functions used as measurement standards to determine levels of personal functioning capacity. Typical ADLs include bathing, continence, dressing, eating, toileting, and transferring (between bed and chair or wheelchair). (ASOP. No 18)

Historical results and trends in those results.

The process of calculating and analyzing A/E ratios over a selected time period; for example, across different ages, genders and durations. This is also known as an A/E study. (ASOP No. 48)

Actual deaths, (either face amount or number of lives) in a group of lives being evaluated, over a specified period divided by the expected deaths over the same period. (ASOP No. 48)

The portion of the actuarial present value of projected benefits (and expenses, if applicable), as determined under a particular actuarial cost method, that is not provided for by future normal costs. Under certain actuarial cost methods, the actuarial accrued liability is dependent upon the actuarial value of assets.

An appraisal of an insurance business presenting a set of actuarial appraisal values. A set of actuarial appraisal values is based on a range of discount rates or a range of assumption sets, but may, in certain circumstances, present a single unique value for the business. (ASOP No. 19)

The present value, calculated as of the appraisal date, of projected distributable earnings of an insurance business where the distributable earnings are based on a set of assumptions. (ASOP No. 19)

The value of a parameter, or other actuarial choice, having an impact on an estimate of a future cost, or other actuarial item, under evaluation.

A measure of the assets and liabilities, as of the valuation date, associated with current residents.

An estimate that represents an expected value over the range of reasonably possible outcomes. (ASOP No. 43)

A written, electronic, or oral communication issued by an actuary with respect to actuarial services. (ASOP No. 41)

Conclusions that have been formed based on actuarial analysis of data or other information. Examples of such actuarial analysis include ratemaking, pricing, experience studies, reserving, valuation, cost estimates, financial audits/exams, asset/liability management, assumption setting, risk assessments, appraisals, and the review of such analysis.

The contribution a particular policy or class of similar eligible policies has made to the company’s statutory surplus and the asset valuation reserve, plus the present value of contributions that the same policy or class of similar eligible policies is expected to make in the future. (ASOP No. 37)

A procedure for allocating the actuarial present value of projected benefits (and expenses, if applicable) to time periods, usually in the form of a normal cost and an actuarial accrued liability. For purposes of this standard, a pay-as- you-go method is not considered to be an actuarial cost method.

The documents (for example, workpapers, spreadsheets, text messages, emails, presentations) that the actuary determines to be relevant to specific actuarial findings. Such documentation may include documents that are not part of an actuarial report.

An actuarial communication in any recorded form (such as paper, e-mail, spreadsheets, presentations, audio or video recordings, web sites, and court or hearing transcripts). Notes taken by someone other than the actuary are not considered actuarial documents. (ASOP No. 41)

The results of professional services provided to a principal by an individual acting in the capacity of an actuary (including commentary on another actuary’s work). Such services include providing advice, conclusions, statements of actuarial opinion, other opinions, or recommendations, based upon actuarial considerations. (ASOP No. 41, Actuarial Communications)

A measure of the difference between actual experience and that expected based upon a set of actuarial assumptions, during the period between two actuarial valuation dates, as determined in accordance with a particular actuarial cost method. (ASOP No. 4)

The portion of the actuarial present value of projected benefits (and expenses, if applicable), as determined under a particular actuarial cost method, that is not provided for by future normal costs. Under certain actuarial cost methods, the actuarial accrued liability is dependent upon the actuarial value of assets. (ASOP No. 4)

A document that provides information regarding the analyses completed.

A procedure by which data are analyzed and utilized for the purpose of estimating a future cost or other actuarial item.

A conclusion drawn by an actuary from actuarial knowledge or from the application of one or more actuarial methods to a body of data. (ASOP No. 17)

The value of an amount or series of amounts payable or receivable at various times, determined as of a given date by the application of a particular set of actuarial assumptions with regard to future events, observations of market or other valuation data, or a combination of assumptions and observations.

The actuarial present value of benefits that are expected to be paid in the future, taking into account the effect of such items as future service, advancement in age, and expected future per capita health care costs (sometimes referred to as the present value of future benefits).

The set of actuarial documents that the actuary determines to be relevant to specific actuarial findings that is available to an intended user.

The portion of the actuarial present value of projected benefits (and expenses, if applicable), as determined under a particular actuarial cost method, that is not provided for by future normal costs. Under certain actuarial cost methods, the actuarial accrued liability is dependent upon the actuarial value of assets. (ASOP No. 4)

Professional services provided to a principal by an individual acting in the capacity of an actuary. Such services include the rendering of advice, recommendations, findings, or opinions based upon actuarial considerations.

The phrase “actuarial soundness” has different meanings in different contexts and might be dictated or imposed by an outside entity. In rendering actuarial services, if the actuary identifies the process or result as “actuarially sound,” the actuary should define the meaning of “actuarially sound” in that context. (ASOP No. 1)

A statement, adopted by the Actuarial Standards Board, the Interim Actuarial Standards Board, or the Board of Directors of the American Academy of Actuaries (AAA) and binding on members of the AAA, that defines acceptable practices in actuarial work.

A measure of the relative value of program income and program assets to program costs over a specified period of time.

The determination, as of a measurement date, of the actuarial present value of a retirement plan benefit and any related benefits.

The value of pension plan investments and other property, used by the actuary for the purpose of an actuarial valuation (sometimes referred to as valuation assets or market-related value of assets). (ASOP No. 44)

A measure of the proportion of total covered medical costs that the health insurance plan is contractually obligated to pay. The actuarial value calculated by the AV Calculator is the percentage of total allowed costs a health insurance plan expects to pay for a standard population, using standard assumptions and taking into account cost-sharing provisions. The actuarial value includes only expected benefit costs paid by the plan and not premium costs paid by the enrollee. The ACA’s actuarial value represents an average for a population and does not reflect the actual or even expected cost-sharing experience for each individual. For example, a plan with an actuarial value of 70% means that for a standard population, the plan is expected to pay 70% of their health care expenses, while the enrollees themselves are expected to pay 30% through some combination of deductibles, copays, and coinsurance on average. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

The result of an actuary’s work. The term applies to the following actuarial communications, whether written or oral: statements of actuarial opinion, actuarial reports, statements of actuarial review, and required actuarial documents. (ASOP No. 9)

A potential payment to the plan as determined by the actuary using a contribution allocation procedure. It may or may not be the amount actually paid by the plan sponsor or other contributing entity.

Medicaid capitation rates are “actuarially sound” if, for business for which the certification is being prepared and for the period covered by the certification, projected capitation rates, and other revenue sources provide for all reasonable, appropriate, and attainable costs. For purposes of this definition, other revenue sources include, but are not limited to, expected reinsurance and governmental stop loss cash flows, governmental risk adjustment cash flows, and investment income. For purposes of this definition, costs include, but are not limited to, health benefits; health benefit settlement expenses; administrative expenses; government- mandated assessments, fees, and taxes; and the cost of capital. (Medicaid Managed-Care Capitation – Rate Development and Certification)

An amount that may be payable by a resident, in accordance with a residency agreement, for services made available but not covered by the advance fee and the periodic fees (such as guest meals, additional meals, barber/beauty shop, use of a carport, and non-covered health care services).

Basic functions used as measurement standards to determine levels of personal functioning capacity. Typical ADLs include bathing, continence, dressing, eating, toileting, and transferring (between bed and chair or wheelchair). (ASOP. No 18)

A program of social and health-related services designed to meet the needs of functionally or cognitively impaired adults, provided in a group setting other than the adult client’s home. (ASOP No. 18)

An amount payable by the resident at the inception of a residency agreement. The advance fee is usually specified in the residency agreement and is usually payable prior to the resident assuming occupancy of a living unit (sometimes referred to as an entrance fee, endowment fee, entry fee, or founder’s fee).

A modeled or actual event that either a) causes capital to be significantly less than the risk capital target(s) or b) causes capital to be less than the risk capital threshold(s).

Actions taken by one party using risk characteristics or other information known to or suspected by that party that cause a financial disadvantage to the retiree group benefits program (sometimes referred to as antiselection). (ASOP No. 6)

An actuary’s communication or other work product in oral, written, or electronic form setting forth the actuary’s professional opinion or recommendations concerning work that falls within the scope of this standard. (ASOP No. 12)

Benefits for which the amount or timing of benefit payments depends on the covered party’s age or length of service. (ASOP No. 34 Revision)

A method under which the excess of the actuarial present value of projected benefits of the group included in an actuarial valuation over the actuarial value of assets is allocated on a level basis over the earnings or service of the group between the valuation date and assumed exit. This allocation is performed for the group as a whole, not as a sum of individual allocations. That portion of the actuarial present value allocated to a valuation year is called the normal cost. The actuarial accrued liability is equal to the actuarial value of assets. (ASOP No. 4)

The date through which the benefits earned during the marriage are determined. Generally, this is the last day of the allocation period. (ASOP No. 34)

A method used to determine the portion of retirement plan benefits that is included in marital property. (ASOP No. 34)

The allocation of retirement plan benefits into two or more portions: a portion that is fully considered to be marital property and a portion that is not marital property, and perhaps a portion that is determined to be partially marital property. (ASOP No. 34)

The period over which the benefits earned during the marriage are determined. This is typically the period from the date of marriage (or, if later, the hire date or plan entry date) to the date of marital separation. (ASOP No. 34)

A method under a contribution allocation procedure or cost allocation procedure for determining the amount, timing, and pattern of recognition of the unfunded actuarial accrued liability.

An expectation of future experience for a risk factor, given available, relevant information pertaining to the assumption being estimated. (Medicaid Managed-Care Capitation – Rate Development and Certification)

An assumption that reflects anticipated experience and may be used to determine nonguaranteed charges or benefits. A particular anticipated experience factor reflects future experience of a specific type. Examples of experience factors include investment income, mortality, policy termination, and expense rates.

An expectation of future experience for a risk factor given available, relevant information pertaining to the assumption being estimated. (Standards for Principle-Based Reserves for Life Products)

The appointed actuary’s assumption about the mortality to be experienced in the future on a group of policies. (ASOP No. 40)

The actions of individuals, acting for themselves or for others, who are motivated directly or indirectly to take financial advantage of the risk classification system. (ASOP No. 40)

An NAIC actuarial guideline that provides guidance on the application of the Model. Such actuarial guidelines include NAIC Actuarial Guideline XLIX (AG 49) and Actuarial Guideline XLIX-A (AG 49-A).

Federal, state, and local statutes, regulations, case law, and other legal binding authority that may govern the actuarial work being performed. (ASOP No. 2)

Any individual who is appointed or retained in accordance with the requirements set forth by applicable law. (ASOP No. 22)

The date as of which an appraisal value is assessed. (ASOP No. 19)

An assessment of the value of an insurance business including, but not limited to, an actuarial appraisal. (ASOP No. 19)

For purposes of data quality, data are appropriate if they are suitable for the intended purpose of an analysis and relevant to the system or process being analyzed. (ASOP No. 23)

For purposes of data quality, data are appropriate if they are suitable for the intended purpose of an analysis and relevant to the system or process being analyzed. (ASOP No. 23)

An analysis of the adequacy of reserves and other liabilities being tested, in light of the assets supporting such reserves and other liabilities, as specified in the opinion.

The risk that the amount or timing of items of cash flow connected with assets will differ from expectations or assumptions for reasons other than a change in investment rate of return. Asset risk includes delayed collectability, default, or other financial nonperformance. This has been commonly referred to in actuarial literature as the C-1 risk or credit risk. (ASOP No. 7)

The plan by which an insurer allocates assets among lines of business for reporting investment income for statutory purposes. (Principle-Based Reserves for Life Products)

The method used to determine the stated value  of  a  particular  asset. (ASOP No. 20)

A method used by the actuary to determine the actuarial value of assets. (ASOP No. 44)

Any resource that can generate revenue or reduce disbursement cash flows.

A facility that provides residents some assistance with activities of daily living. Residents have apartments, rooms, or shared dwellings and often share community living and dining areas with other residents. Usually meals, utilities, housekeeping, laundry, ambulation assistance, and personal care supervision are provided. Staff members may supervise the self-administration of medication.

The entity accepting insurance risk in a reinsurance agreement, such as an insurer accepting risk from a stop-loss program, a reinsurer accepting risk from an insurance company, or a retrocessionaire accepting risk from a reinsurer.

The form in which a particular demographic assumption will be used or expressed. In some cases, the assumption will take the form of a table where the probability of the occurrence of a given event depends on parameters such as gender, age, service, or calendar year. In other cases, the assumption may be a point estimate, implying 100% probability of occurrence of a given event at the stated point. An example of a point estimate assumption is an assumption that 100% of the population will retire at age 62. The assumption format may include different tables or point estimates for different segments of the covered population.

For each demographic assumption, a universe consisting of the possible options that the actuary might reasonably use for the specific assumption. For example, an assumption universe for a mortality assumption might reasonably include relevant published or proprietary mortality tables and possible adjustments, such as projections of mortality improvement. For some pension plans, an assumption universe for a specific assumption might reasonably include a table or factors developed specifically for that plan.

A type of input to a model that represents expectations or possibilities based on professional judgment.

An organization that provides social and health care services in return for some combination of an advance fee, periodic fees, and additional fees. At Home Programs differ from CCRCs in that they do not provide a direct independent living unit for members.

A method under which the excess of the actuarial present value of projected benefits over the actuarial accrued liability in respect of each individual included in an actuarial valuation is allocated on a level basis over the earnings or service of the individual between the valuation date and assumed exit. The portion of this actuarial present value, which is allocated to a valuation year, is called the normal cost. The actuarial accrued liability is determined using the unit credit actuarial cost method. (ASOP No. 4)

To conduct a formal and systematic examination of a set of data for the purpose of testing its accuracy, using techniques commonly employed by audit professionals. (ASOP No. 23)

The firm or professional engaged to conduct an examination in accordance with generally accepted auditing standards for the purpose of issuing an opinion on a financial statement.

A measure of the proportion of total covered medical costs that the health insurance plan is contractually obligated to pay. The actuarial value calculated by the AV Calculator is the percentage of total allowed costs a health insurance plan expects to pay for a standard population, using standard assumptions and taking into account cost-sharing provisions. The actuarial value includes only expected benefit costs paid by the plan and not premium costs paid by the enrollee. The ACA’s actuarial value represents an average for a population and does not reflect the actual or even expected cost-sharing experience for each individual. For example, a plan with an actuarial value of 70% means that for a standard population, the plan is expected to pay 70% of their health care expenses, while the enrollees themselves are expected to pay 30% through some combination of deductibles, copays, and coinsurance on average. (Determining Minimum Value and Actuarial Value Under the Affordable Care Act)

A spreadsheet released by Health and Human Services (HHS), used to determine the AV, is referred to as an “AV Calculator.” (Determining Value and Actuarial Value Under the Affordable Care Act)

The excess of assets over liabilities that is available to cover the required capital, calculated on a basis consistent with required capital.

A spreadsheet released by Health and Human Services (HHS), used to determine the AV, is referred to as an “AV Calculator.” (Determining Value and Actuarial Value Under the Affordable Care Act)

The actuarial value calculated using the AV Calculator, including any adjustments for non-standard plan designs. (Determining Minimum Value and Actuarial Value under the Affordable Care Act)