What is a characteristic of dividends in traditional participating life insurance?

Dividends in traditional participating life insurance are indeed characterized by their ability to fluctuate based on the performance of the insurance company. This dynamic nature means that dividends are not guaranteed and can vary each year depending on the company's profitability and other factors, such as mortality rates, investment performance, and expenses. When a participating policyholder receives dividends, they do so as a share of the overall surplus generated by the insurer's operations.

While there may be projections or estimates regarding potential dividends, actual payouts can differ significantly from year to year. This variability reflects the inherent risks and performance of the insurance company, meaning policyholders should not count on dividends being a steady income stream. Instead, they are essentially a bonus that reflects the financial health and profitability of the company in any given year.

The other options present statements that do not correspond with the nature of dividends in this context. Dividends are not guaranteed or fixed, nor are they solely determined by past performance; rather, they are influenced by real-time financial results and company operations from the current and recent years. Additionally, if a company incurs losses, it can still pay dividends if it has sufficient reserves or surplus from previous profitable years, demonstrating that the workings of dividends are more complex than a straightforward approach based