Patent ID: 7716075

Claim:
A computer-based method for pricing a tax flow-through deferred variable annuity product with a plurality of underlying investments, comprising a) generating, using a processor for a specially programmed computer, a set of yield curve scenarios consistent with valuation parameters; b) generating, using the processor, a financial market scenario for each of said yield curve scenarios, comprising said yield curve scenario and an equity market scenario consistent with said yield curve scenario and said valuation parameters; c) determining, using the processor, a terminal account value and set of pre-tax cashflows for said tax flow-through deferred variable annuity product, for each of said financial market scenarios, incorporating policyholder, investment manager, and insurance company behavioral assumptions, wherein said insurance company holds legal title to the underlying investments and an owner of the tax flow-through deferred variable annuity product is taxed as if the owner holds the underlying investments assets directly; d) developing, using the processor, a set of income tax cashflows payable by a life insurance company for each of said financial market scenarios, and corresponding after-tax cashflows; e) applying, using the processor, market discount factors to said set of pre-tax and after-tax cashflows for each of said financial market scenarios to compute discounted pre-tax and after-tax present values; and f) computing, using the processor, the average over said financial market scenarios of said discounted pre-tax and after-tax cashflows.