Gain Loss Analysis
The Gain/Loss Analysis tool automatically computes liability gains and losses from active decrements, inactive mortality and new entrants. Additional sources, such as data corrections, salary growth and regulatory increases, are optional. If these sources are not selected, the gains and losses they cause will appear as “unreconciled”, as will other miscellaneous gains and losses. Asset and expense gains and losses will also be computed if selected. For an exposition on ProVal’s implementation of gain/loss analysis, including a glossary of terms used to explain computing the gain or loss, see the Technical Reference article “Gain/loss analysis: a conceptual framework”.
To run a gain/loss analysis, choose Gain/Loss Analysis from the Tools menu.
The first dialog box displays the library of all Gain/Loss Analyses previously specified, if any, in the current Project. An asterisk next to the name of a Gain/Loss Analysis indicates that the analysis has not been run. An unexecuted Gain/Loss Analysis can be run by clicking its name and then the Run button in the next (Gain/Loss Analysis) dialog box. Click the New button to define a new Gain/Loss Analysis.
The items requested in the Gain/Loss Analysis dialog box are as follows:
Name is the description, by which it will be displayed in the Gain/Loss Analysis Library, of the Gain/Loss Analysis currently being defined. You are encouraged to use a name that will readily allow you or a colleague to understand the underlying nature of the analysis.
Valuations to reconcile lists two entries that you must complete: Beginning-of-Period Valuations and End-of-Period Valuations. These indicate, respectively, at least one beginning-of-period and one end-of-period funding Valuation to reconcile. The period between the beginning of-period valuation date and the end-of-period valuation date may be longer than one year but must be an integral number of years; a fractional period is not permitted. Just as for a Valuation Set, the results will be summed if multiple Valuations are specified. In any case, all Valuations must already have been run and saved in the same ProVal client and Project. Selecting either entry leads to the next (Add/Omit...Valuations) dialog box.
The liability gain or loss computed and analyzed by the Gain/Loss Analysis tool is the experience gain or loss only, except for certain implicit assumption changes and an interest rate assumption change (see the discussion in Gain/Loss Analysis Output for details); therefore, the end-of-period Valuation(s) should be your (baseline) Valuation(s) before reflecting assumption changes (except that ProVal will compute the gain or loss resulting from changing the interest rate assumption), plan changes or a change in actuarial cost method. That is, the selected beginning-of-period and end-of-period Valuation(s) should use the same logical valuation assumptions and plan benefits (though not necessarily the same ProVal entries for Valuation Assumptions and Plan Definition), again, except for the interest rate assumption. Here, “same” means cosmetically identical. For example, if your beginning-of-period valuation assumptions use spot rates of X, Y, and Z at durations x, y, and z, then your end-of-period valuation assumptions are “the same”, or cosmetically identical, if spot rates X, Y and Z are entered for those durations. If your beginning-of-period valuation assumptions use dynamic mortality table X, so should your end-of-period valuation assumptions.
To compare the gain or loss calculated by the Gain/Loss Analysis tool to the gain or loss calculated by the Valuation Set referencing the end-of-period Valuation(s), the end-of-period date must be the same as the Valuation Date of the Valuation Set and the Gain/Loss Analysis should use the same cost method as the Valuation Set.
Select a topic contains entries for each category of information (topic) found in the Gain/Loss Analysis section. Click the name of a topic to access its parameters, which are described on the following pages:
Click the Run button to execute the Gain/Loss Analysis. ProVal will check for to see that all the specified parameters are complete and then, if no errors are found, execute the Gain/Loss Analysis. An indication that the Gain/Loss Analysis is running, as well as percentage complete and elapsed time, will show on the screen during execution.
When the run is complete, the cursor will be on a View button that you click to view the Gain/Loss Analysis output.
To run Sample Lives, select the Sample Lives button. A table will appear with a column for each key field. Enter the key field(s) associated with the desired sample lives. Up to 20 lives may be run at a time. Note that, unlike in a valuation, selection expressions are not permitted in a Gain/Loss.