Examination Of The Impact Of Large Numbers Approach In The Valuation Of Life Assurance Business (a Study Of Igi Life Enugu Office)

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Evaluation of the impact of large numbers approach in the valuation of life assurance business using industrial general insurance as a study. the statement of problem ranging from the fact that life assurance valuation has not been adequately impact on the economy, also good valuation model improves the profitability of life assurance firm, also the principles of large numbers p[lays a significant impact on life assurance valuation. The objective of the study is to determine the impact of life assurance valuation on the economy so as to know whether it can improve companies' through primary and secondary means and the research  instrument used was questionnaire  covering the statement of the problem. The population selected for the study was 100 staff of IGI and data for this work is presented using table and is analyzed using simple percentage. At the end, the researcher discovered that life assurance valuation impacts on the economy, improves companies profitability. In recommendation, the researcher suggested that benchmarking will help large number principle valuation. And also, valuation of life assurance business should be regulated.


Title Page    -        -        -        -        -        -        -        -        -        -

Approval Page-    -        -        -        -        -        -        -        -        -

Dedication--        -        -        -        -        -        -        -        -

Acknowledgement-        -        -        -        -        -        -        -        -

Abstract-    -        -        -        -        -        -        -        -        -        -

Table of content --        -        -        -        -        -        -        -




1.1 Background of the study --        -        -        -        -        -       

1.2 Statement of the Problem--        -        -        -        -       

1.3 Objective of the study-      -        -        -        -        -        -

1.4 Research question-   -        -        -        -        -        -        -       

1.5 Research Hypothesis-        -        -        -        -        -        -

1.6 Significance of the study --        -        -        -        -        -

1.7 Scope and Limitation of the study -     -        -        -        -

1.8 Definition of operational terms-  -        -        -        -        -

References--        -        -        -        -        -        -        -        -       



2.1 An overview --        -        -        -        -        -        -        -       

2.2 History and development of life

assurance in Nigeria -    -        -        -        -        -        -       

2.3 The forces driving development of life

assurance policy--        -        -        -        -        -        -       

2.4 Development of life Insurance in

the economic in transition -     -        -        -        -        -

2.5 The life insurance market in the economic

in transition-        -        -        -        -        -        -        -        -

2.6 Reason for determining the value

of Life Insurance Company-    -        -        -        -        -

2.7 The effect of insurance business

in economic development in Nigeria. -        -        -        -       

2.8 The difficulties surmounted by life assurance -        -        -

2.9 Challenges and prospects of life

 insurance business-       -        -        -        -        -        -

2.10 Valuing of life insurance company-    -        -        -        -       

2.11 Four major reasons behind Nigerians negative

attitude to insurance services business. -    -        -       

2.12 Scope and meaning of life assurance--        -        -

2.13 Factors affecting life assurance market-       -        -        -       

2.14 Key benefit of life insurance-    -        -        -        -        -




3.1 An overview --        -        -        -        -        -        -        -       

3.2 Sources of data-       -        -        -        -        -        -        -

3.2.1 Primary source of data --        -        -        -        -        -       

3.2.2 Secondary data-    -        -        -        -        --       -        -

3.3 Population of study-         -        -        -        -        -        --       -       

3.4 Sample size and sampling techniques-  -        -        -       

3.5 Instrument used in selecting sample size-       -        -        -

3.6 Validity and reliability of the instrument used-       -        -       

3.7 Method of data presentation and analysis-    -        -       






4.1 An overview--        -        -        -        -        -        -       

4.2 Data presentation-   -        -        -        -        -        -

4.3 Data Analysis-         -        -        -        -        -        -        -       

4.4 Testing of Hypothesis-      -        -        -        -        -

4.5 Discussion of findings-      -        -        -        -        -





5.1 Summary of Findings-       -        -        -        -        -

5.2 Conclusion -   -        -        -        -        -        -        -       

5.3 Recommendations-  -        -        -        -        -        -       

5.4 Suggestion for further study-      -        -        -        -       

Bibliography-       -        -        -        -        -        -        -        -       

Appendix-  -        -        -        -        -        -        ---      -        -       

Sample Questionnaire-  -        -        -        -        -        -       




Traditionally life assurance companies have reported financial result to shareholders on the basis of the statutory requirements of the insurance companies' legislation. So the most common measure of a life insurance company's financial year was the statutory earnings from operation. This convenient measure since it also represents the amount of money which can be paid to policyholder or paid in the form of dividends.

          The major disadvantage to relying upon statutory earnings as a measure of how well a company is doing is that statutory accounting tends to be designed to protect against insolvency and therefore, by its very nature, suffers from ovens conservatism.

          Statutory earnings do not measure well a company is doing on a going concern basis. For example, capital invested in acquiring business (Acquisition of profitable new business results in an immediate "Loss" followed by a subsequent enhanced series of profits.

          Although suitable for solvency testing, the statutory approach, by charging the "Capital" cost of new business to revenue and ignoring the future surplus stream attributable to new business, fails to display in any accounting period a meaningful account of trading activity of that period for most products, a slowdown in sales will result in an immediate increase in statutory earnings and generally, most would not regard slowdown in sales as being a sign of a healthy company. So, it is as that statutory earning is the wrong method to measure the health of the company.

          Largely, as a result of the inadequacies of statutory accounting, US insurers were required by the securities exchange commission in the early 1970's to begin to report earnings to shareholders on a generally accepted principles (GAAP) basis.

          The major advantages of GAAP accounting is that it does attempt to produce earnings that reflect how well or how badly the insurance company had performed in a form, which is useful to management. With GAAP, generally an increase in sales will not depress GAAP earnings to the same degree, as it would statutory earnings.

          Unfortunately, because 100% of acquisition costs are deferred, increased sales will still depress GAAP earnings to some extent. Additionally, margins for conservation are normally introduced into the assumption, and GAAP might suffer from the lock-in principle. Once assumptions are set for a particulars generation or branch of business, the assumptions cannot be changed unless future losses are life. Another major disadvantage to GAAP is that GAAP earnings may very significantly between two identical companies depending on the objectiveness of management in establishing assumption. Therefore, overall, GAAP is not a good prognostication for how well a company is doing.

          During the period of fluctuation in interest rates, which occurred in the US during the mid-1970s and early 1080s some US corps began to look at cash flows as a measure of "how well" their companies were doing.



The following are the problems which has been existing that initiated my zeal to research on the above topic.

1. Life assurance valuation has not impacted adequately on the economy.

2. Good valuation model improves the profitability of life assurance form.

3. The principle of large numbers significantly impact on the assurance valuation.

4. inadequate impact of life assurance valuation on the development of the economy.


The aim of this research work is to examine the impact of large numbers approach to the valuation of life assurance business with particular reference to IGI life Enugu Office. The specific objectives of this research work are as follows:

1. To determine the impact of life assurance valuation on economic development of Nigeria.

2. To determine the impact of this methods on the profitability of life assurance business

3. To know if the principle of large numbers has any significant impact on life assurance valuation.

4. To evaluate the various approaches of valuations and their importance.



Based on the statement of problems and objective of the studies, the following are my research questions:

1. Do you think that life assurance valuation has impacted adequately on the economy?

2. Does the method of valuation improve profitability of a life assurance firm?

3. Can the principle of large number matter in life assurance valuation

4. Is there any importance of the valuation model?




The following are the academic guess made by the researcher to guide on this research work.

Ho:   Life assurance valuation has not impacted adequately  on the economy.

Hi:     Life Assurance valuation has impacted adequately on the economy

Ho:   Good valuation model does not improves the profitability of a life assurance firm

Hi:    Good valuation model improves the profitability of a life assurance firm.

Ho: The principle of large numbers has not significantly impacted on life assurance valuation.

Hi:    The principle of large numbers has significantly impacted on life assurance valuation



Based on intention of the researcher, the research topic will be significant in the following ways;

1. To Students: This topic will help student of insurance to know how valuation approach will impact on life assurance form. It is also important to student because it is part of my partial fulfillment for the graduation.

2. The Policy Holders: The research work will educate policyholders on how to use of large numbers approach can improve policyholders' relationship with their life assurance firm. The more the people in a portfolio, the easier claims can be off-set.

3. To insurance Managers: A study into the impact of large number approach to the managers that the more they improves the pool, the more the valuation will be easier and the easier claims can be calculated.

4. The Economy: Adequate valuation will create more pool which improves the insurance companies' profitability margins this is reciprocated to tax revenue generation.






The scope of the study is the area of operation of the research which comes from my study. Based on this, the scope of the study is industrial General Insurance in Nigeria. It is from this insurance company that generalization will be extended to other insurance companies for students with the intentions of further research.

However, the following are my limitations


1. Time: The time for this research work was very small because of the final year exam that was fast approaching. So i couldn't carryout detailed research work expected because of the exam fever.

2. Fund: Every research requires money. The money too finance the intent materials is not available. Sometimes intents will require subscription which is charge becoming another limitation

3. Inadequate Material: Materials on life assurance valuation is very small. Some of the material to be used is what is sourced in Canada where large number principle is used as a BSc topic in one of the Canadian University under Nigerian content, it is very scanty.

4. Response of the respondents: The staff of IGI visited mostly does not know in details about valuation of life assurance busyness. Most of the staff used are temporal staff used for marketing and they do not know actually the story about my topic. The only person that gives me reasonable answers was the Enugu Branch Manager: Mr. Anthony Elumelu of Ogui Office in Enugu.



1. Insurance: This is the pool of risk and share of loss or the process of the fortunate paying to the unfortunates.

2. Life Assurance: This is an investment plan meant to protect one's life at the event of old age or at the time of incapacitation

3. Term Assurance: This is the type of assurance that promises to pay sum assured only when life dies within the terms but when life survives the term, nothing will be paid

4.Whole life Policy: This is a policy where a policy holder contributes an amount of money through his life so that at the event of death, the money will be surrendered t the beneficiary.

5. Examination: This is the process of carrying out a study by checking the actual from the expected result within the intentions of making findings.

6. Large number Principle: This is a principle in insurance otherwise called pooling arrangement. The more the people in insurance, the lesser the premium they pays.

7. Approach: This is the systematic method of mapping out strategy to achieve a common

8. Valuation: This is the process of carrying out statistical and mathematical analysis decision.

9. Insurance Policy: This is a document containing all the insurance agreement. It is detailed in a form called a policy form.

10. Shareholders: This is the owners of the insurance companies who contributed capital and sells shares and stocks. they records dividends.

11. Regulation: this is a regulation process of making sure that standard practice is adequately carried out

12. Fluctuation: This is the dynamic changes that affects life assurance fund after valuation like the meet down of 2008.

13. Insurance companies: These are companies registered under company and allied matter Decree of 1990 with the interaction of transaction of the various types of insurance business.

14. Insured: this is the person that covers himself with insurance cover. They are otherwise called policy holder or life assurance

15. Model: This is the best method of carrying out statistical evaluation with the intention of making inferential judgment about a research.

16. Insurance fraud: These are people who are not registered as insurance companies they claim and undermines normal insurance business e.g. cooperative insurance companies.

17. Principle: These are the various ethnics guiding the sound practice of insurance in relation on how to invest their funds


Collins, S. A (1997). "Counting the wrong Bean" The Actuarial Digest Volume 16,No 1

Collins, S. A. and Keller D. J., on 2nd November (1993) Analysis of life Assurance Company Financial Performance" presented to staple inn Actuarial Society: London

lgan, C. (1991) Profit recognition, reporting and analysis in life Assurance," presented to staple Inn Actuanal Society: London

Gardner, A. M. (1980). Accounting for life Assurance Office" Transitions of the 21st International congress of Actuaries vol. 4


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Examination Of The Impact Of Large Numbers Approach In The Valuation Of Life Assurance Business