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Old 09-26-2002, 12:07 PM
Wile E. Coyote Wile E. Coyote is offline
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Default Appropriate Mortality Table

Hi,

Former actuarial student a little removed from the world is wondering what would be the most appropriate table to value a portfolio of lives (ages 20-90) for short term (1-3 years) mortality impacts.

When I was working we used GAM83 but with a black box adjustment, if there is an adjustment can it be done with a simple formula.

Thanks.
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Old 09-26-2002, 12:11 PM
Obi-Wan Kenobi Obi-Wan Kenobi is offline
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With a username like that, I'd be wary of black boxes (especially from Acme).

(Sorry, I'm a P&C'er and can't address the actual question.)
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Old 09-26-2002, 12:35 PM
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Gandalf Gandalf is offline
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1. Do you know anything about the lives? For example, are they all either employed or retired? If so, a table like GAM83 might be a reasonable starting point.

2. For most purposes, if you were using a table from around 1983 you would want to reflect mortality improvements since 1983.

3. Valuation mortality tables (I think GAM83 is a valuation table) include margins for conservatism. As an annuity table, its adjustments for conservatism would include a lowering of mortality, somewhat offsetting the effects of mortality improvements (for many tables you can get the corresponding Basic table instead of the Valuation table).
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Old 09-26-2002, 02:50 PM
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One of the subjects we learned in the 1980's syllabus was Sources and Characteristics. We learned that all mortality tables are not created equally.

The mortality of your group will vary based on whether these are insured lives, pensioners, disabled lives, employees, self-selecting individual annuitants, or general population. If insured lives, you need to determine if any underwriting was applied, in which case you would use a Select and Ultimate ("S&U") mortality table. Perhaps the insured group was all non-smokers. Do you have male/female, smoker/nonsmoker, or issue age/duration information?

The selected mortality table will give you an approximate slope for the mortality rates. Then you can apply a factor representing recent trends. For example, you might use 50% of the 1975-80 select and ultimate table.

As noted by an earlier poster, valuation mortality tables have an explicit load built in over and above the basic experience table. Depending on the intended purpose of the table, this load will be either positive or negative.

The SOA has an excellent mortality table database, which allows you to import the tables into Excel and read descriptions about construction of the table and intended usage. Visit www.soa.org, and look for the Table Manager program.
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Old 09-26-2002, 02:50 PM
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Quote:
Originally Posted by Gandalf
3. Valuation mortality tables (I think GAM83 is a valuation table) include margins for conservatism. As an annuity table, its adjustments for conservatism would include a lowering of mortality, somewhat offsetting the effects of mortality improvements (for many tables you can get the corresponding Basic table instead of the Valuation table).
Actually, both factors (mortality improvements and conservatism for annuity purposes) _lower_ mortality rates, so they would compound rather than offset each other.
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Old 09-26-2002, 03:04 PM
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Agreed, Asynchronous. My intent, poorly stated, was that for his purposes he is not likely to want both. The conservatism in the table somewhat offsets the need for reflecting mortality improvements.
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Old 09-26-2002, 04:44 PM
Wile E. Coyote Wile E. Coyote is offline
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Default Just regular population

Thanks for all your help. As I began to realize actuarial stuff may not be for me I stayed away from classes like demography and stuck with stuff like time series (or a similar subject with broader appeal).

Anyway, as far as I can tell my population is just a regular subset of Canada. It is a diverse individual lending portfolio. I don't think there would be any odd selection involved.
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Old 09-26-2002, 04:55 PM
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Within the tables available in Table Manager (see Numbers Nerd's post above) are 1991 Canadian population mortality tables, separately for males and females.

Depending on how accurate you need to be, and whether you want to include margins for conservatism (those tables would have no margins in 1991), they might be good choices. You could consider adjusting further for mortality improvements since 1991.
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Old 09-26-2002, 05:04 PM
Wile E. Coyote Wile E. Coyote is offline
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What would be a simple way to adjust for 11 years of mortality improvements? (How significant are the changes?)
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Old 09-26-2002, 05:57 PM
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From your brief description, it sounds like a group life table might be more appropriate than a population table. As for mortality improvements, a rough (and still slightly conservative) estimate would be 1% improvement per year in the Qs. This can be applied as Q*(1-.01)^(# years of improvement).
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