In this paper, we analyze traditional (ie not unit-linked) participating life insurance contracts
with a guaranteed interest rate and surplus participation. We consider three different surplus
distribution models and an asset allocation that consists of money market, bonds with
different maturities, and stocks. In this setting, we combine actuarial and financial
approaches by selecting a risk minimizing asset allocation (under the real world measure P)
and distributing terminal surplus such that the contract value (under the pricing measure Q) …