The guide to the profession on this subject first appeared in the Faculty Year Book for 1975-76 and it was discussed at our sessional meeting in February 1976 (and at the Institute's sessional meeting in January 1976). In the time since these meetings there have been changes in the guide and additions to it. No doubt future changes in business conditions in the years ahead will bring forth further amendments. The reasons for devoting another sessional meeting to it at this time are, firstly, to review the manner of its production and to consider what weight it carries, and, secondly, to give members the opportunity of considering the detailed wording of the guide, as distinct from its general intention. The analogy that comes to mind is with an Act of Parliament. The Bill is prepared in a department of government, is drawn up with care and professional skill by parliamentary draftsmen, and receives two readings before the House of Commons when its general aims and intentions are approved: it then moves into the committee stage where, if time permits, every clause is gone over individually to see that it expresses clearly and unambiguously the intention of parliament. It then has its third reading and, if approved, may be expected to go on to become law. The sessional meetings here and in London in 1976 correspond in this analogy to the first two readings of the Bill, and they showed that the intention of the guide and its general terms had the approval of the profession.

Generations of actuarial students have been confronted at an early stage of their careers with Woolhouse's formula, important for its well-known application to annuities payable several times per year. However, it is probably fair to say that most of the derivations of the formula presented to students have been in some respects unsatisfactory, since they have usually relied on “ the separation of symbols ”, manipulations of the finite difference operators D, Δ, Σ and Σ(m), and have involved arguments somewhat lacking in rigour. This is not a severe criticism of the relevant textbooks, which were after all written from a practical actuarial viewpoint and which understandably enough wished to avoid the relatively difficult analysis required to derive Woolhouse's formula in its complete generality.

The paper is the result of work carried out by the authors as members of the Bonus Research Group of the Faculty of Actuaries. The authors designed a computer model of a life office in order to examine the emergence of reversionary bonus under differing conditions. The use of a computer model enabled a dynamic study to be made over many years. The investigations quantified the extent to which the reversionary bonus emerging was affected by the valuation basis, the rate of expansion of the office, the rate of return on the fund, the extent of investment in equities and the office's experience in respect of expenses, withdrawals and mortality. The authors also examined in quantitative terms the extent to which policies would, on the assumptions made, receive more or less than the full share of surplus to which they were entitled as well as examining the size of the valuation estate under differing conditions.

The Authors apply their experience, as former life assurance managers, to develop new methods of investment analysis of life assurance shares.

Monitoring the profitability, per unit of with profit premiums, shows how improving investment performance mitigates the adverse effect on bonuses and shareholders' earnings of the heavy new business needed to maintain the business in times of inflation. Studies of likely investment performance are made, in an attempt to forecast bonuses and dividends over the next 3 years. These methods are demonstrated practically, using the figures from the published accounts of five U.K. life offices from 1976 to 1978.

If more time and space had been available, the Authors would have liked to apply these methods to the analysis of Accounts and D.O.T. Returns of all significant U.K. life offices, proprietary, mutual and composite, that publish annual valuations. Life office managers would then be able to compare their own profitability, investment performance and bonus prospects with those of their principal competitors. In addition insurance brokers would be enabled to assess likely future results for prospective policyholders from competing life offices in a more reliable and rigorous way than is done at present, using merely historical bonus records.

The Authors have to admit that application of their techniques, although achieving considerable success with these varied objectives, is handicapped by the poor quality of life assurance Accounts and Returns. At present offices with a large group pensions component cannot be analysed, because the format of the D.O.T. Returns for this class of business is out of date and inadequate. They would like to see life office accounting methods improved, and they make some specific suggestions to this effect. In addition, detailed comments on the standard of presentation of the D.O.T. Returns are given in the Appendix, together with suggestions for improving these Returns.

The first section of the paper describes the National Health Service in Scotland with particular reference to its administrative system, its operational system and the capital and revenue expenditure of a specific year allocated to the various types of health service.

Allocation of finance to health services in the United Kingdom is determined on a United Kingdom Basis. Some international and UK comparative figures are given. The paper proceeds to describe how the allocation made to the National Health Service in Scotland is subdivided. Capital and revenue are separately referred to, including the problems of assessing the investment merits of capital and revenue expenditures. A brief description is included of the Scottish Health Authorities Revenue Equalisation report (commonly known as S.H.A.R.E.) with specific reference to the use made of Standard Mortality Ratios as a measure of morbidity. A section is included on Multiple Deprivation referring to the correlation between multiple deprivation and mortality.

The demographic aspects of the National Health Service in Scotland are enumerated and subdivided into the three main population age-groups. The birth-rate projections are discussed.

Various measurements of the health of a population are selected and some international comparisons are given. The difficulty of measuring morbidity is highlighted.

The various statistical activity measures available in the Scottish National Health Service are described. A description is given of the uses made of this information, together with health service professionals' views and demographic factors, for health service planning for the future in relation to the service as a whole, to its various specific activities and to its manpower.

A selection is given of the various scientific or theoretical bases suggested for allocating priorities in the future planning, and the practical method adopted in the Scottish Health Authorities Priorities for the Eighties (S.H.A.P.E.) is briefly described.

The paper concludes with comments by the author on certain controversial aspects of the problems.

The majority of the paper is devoted to a comparison of the three principal methods which are used in Europe for the funding of private pension plans, namely: the pay-as-you-go system, book reserves and segregated pre-funding. In the commentary which follows the description of these methods, the author suggests that the book reserve system, when tied to solvency insurance, has several advantages over the other two funding methods.

The paper is also concerned with three other aspects of the provision of retirement pensions in continental European countries. These are : the size of the retirement pensions ; the age at which these retirement pensions commence ; and the methods of removing the adverse effects of inflation on such pensions. In describing the very different pension practices in each of the various European countries, the paper highlights those aspects of a country's pension provision which merit further investigation. The paper then concludes with the view that we, in the U.K., have a considerable amount to gain from a study of pension practices in Europe and that this may eventually help us to solve some of our problems.