Sympathy for the Actuary: Improving your model of FIA GLIB income commencement

The next meeting of our Behavioral Analytics Advisory Council will be:

Sympathy for the Actuary: Improving your model of FIA GLIB income commencement
We will discuss problems for annuity companies and actuaries with traditional modeling approaches, limitations of using only own-company data, and most importantly, an approach that we have developed and are using with clients that can quantifiably improve your model and risk management. Good for your company and good for you.

We look forward to your constructive feedback and an interesting discussion. You might even find this valuable for continuing education credit.  Please contact me if you have not already received an invitation with access info.

Thursday October 22 at 2:00-3:00pm Eastern

Best regards,

Tim


2021 Behavioral Analytics Plans

To aid your planning and budgeting for the rest of this year and 2021, here is a 1-page summary of our plans.

 

Thanks to so many of you who shared your ideas and suggestions at our most recent Behavioral Analytics Advisory Council call in June and in other discussions this year. We expect that our plans for 2021 will meet your needs. The inclusion of FIA and VA experience data from the 2020 crisis, the mortality study, and the other changes noted are worth discussion, so please plan to join our next call.  Please contact me if you have not already received an invitation with access info.

 

VA folks -- friendly reminder that data collection is in progress for our 2020 VA studies, with data through Q2 2020, target completion in November. Don't miss your chance!

 

Thank you for your ongoing support. Please contact me with any questions.

 

Best regards,

Tim

 

T minus 7

Hello friends of Ruark,

7 days to go!

If you have not done so already, reminder to please return your order form to us by June 30 before heading off for summer vacation. Thanks in advance, as this will help us plan for a very busy next few months. (And VA clients, prices increase 25% after June 30). We all will soon learn a lot about crisis-behavior for recent vintage products, which should mean better experience studies and better modeling.

If you still need to make your case with the budget hawks or higher-ups:

Even for large blocks, relevant industry data in a credibility-based framework has a quantifiable and compelling cost-benefit. Here is a short case study demonstrating this for GLIB/GLWB income modeling for a company that has 35% market share. If you are not using the industry data this way, why not?

And here is an even shorter one in terms of hedge breakage. We have seen that relevant industry data can consistently improve A/E results by several percentage points, which can avoid $ millions of losses due to hedge breakage.

...Data is not a budget question, it is an enterprise risk management question. Please, for your sake, our sake, and that of the actuarial profession, do the math before you decide. Let us know if we can be of any further assistance as you do. If you can find something that has better bang for the buck, we would love to hear about it.

Thanks for your ongoing support, stay safe, and have a great summer!

Kind regards,

Tim

timothyparis@ruark.co

860.866.7786


Online meeting May 20 - Highlights from 2020 FIA Industry Studies

Thanks to the many of you who joined this online meeting!

Discussion slides are here - Ruark BAAC 20200520 - 2020 FIA Industry Studies.

 

FIA folks, this one is for you.  (And yes, as shown above, GLIB income commencement is sensitive to moneyness).

We thank those of you who have already purchased our 2020 FIA industry studies of policyholder behavior. We have held online meetings with many others over the last couple months to share highlights from our 2020 FIA industry studies including our first-ever FIA mortality table. This meeting on May 20 was intended for those with whom we had not yet had a chance to meet (online). Please let me know if you would like to schedule a separate meeting to aid your purchase decisions.

Lots of data:

  • Total exposure years grew to 23 million, a 21% increase over last year's study
  • Double the exposure years for GLIB contracts past the end of the surrender charge period
  • GLIB exposure constituted 44% of exposure overall, and 49% of exposure in the last 12 study months
  • 39% increase in lifetime income withdrawals, to $5.4 billion
  • The study data comprised over 4 million policyholders from 17 participating companies spanning the 12-year period from 2007-2019, with $296 billion in account value as of the end of the period

Discussion slides are here - Ruark BAAC 20200520 - 2020 FIA Industry Studies.

Kind regards,

Tim

Timothy Paris, FSA, MAAA
Chief Executive Officer
Ruark Consulting, LLC
530 Hopmeadow Street
Simsbury, CT 06070
Mobile 860.866.7786
Email timothyparis@ruark.co
Website ruark.co
Connect with me and follow Ruark on LinkedIn®

 


Revised plans for 2020 VA industry studies

To download the discussion slides from April 24, click here.

On behalf of our team we hope that you and your families are doing well.

On April 17, we announced revised plans for our 2020 VA industry studies of policyholder behavior. We made this decision with great thought and care following discussions with most of our VA clients over the preceding few weeks. Thanks to the constructive feedback and enthusiastic support of so many, we believe that this change will not only meet your needs but provide you with far more value than what we were originally planning.

  • Our revised plan is to perform the 2020 VA studies with supplemental data through June 30 2020, target completion in November.
  • In the interim, to aid your annual assumption review process, we will make the industry-only portion of last year’s studies available now if you submit your order form for the 2020 VA studies by June 30. After that, the studies will be subject to an additional 25% charge.

We look forward to supporting you in this important work in 2020 and beyond. Please contact me with any questions - timothyparis@ruark.co.


Online meeting March 23 - Market turmoil: What does it mean for annuity policyholder behavior?

Thanks to the nearly 100 of you who participated in this online meeting!

Given the turmoil in financial markets and hearing the concerns of our annuity company clients and others in recent weeks, we expanded what would otherwise have been our Behavioral Analytics Advisory Council to an open meeting for anyone interested.  Discussion slides are here - Ruark BAAC 20200323.

Our primary focus was the brief report "Market turmoil: What does it mean for annuity policyholder behavior?" published last week (link here) by our COO Eric Halpern. Here we have real FIA and VA data and insights from past times of crisis - monthly policyholder behavior and mortality data going back to 2007 covering about 70% of the market with over $1 trillion of current account values.

With all of this great data, we are uniquely positioned to help you better manage risks, especially now.  Our insights from this data allow us to build more accurate models of policyholder behavior, with potentially less hedge breakage for VA and FIA -- how much is 1% A/E improvement worth to you?  Our predictive analytics techniques use company- and industry-level data to help you improve your pricing, valuation, and risk management models. Our approach is rigorous, transparent, and tailored to each company, allowing for quick implementation and quantification of improvement in financial risk profile from what you can do if limited to your own data.

Links to a brief case study and highlights from our recent work are below:

Let me know if you would like to arrange a call or online meeting to discuss our work products and modeling services.

Please stay tuned as we are planning other ways to keep in touch by phone and online meeting over the next few months.  Let me know if you would like us to add you to our email distribution list.  And you can continue to find updates here on our website, LinkedIn, or social media pages using the links below.

Thanks for your continued support, and we hope that you and yours stay well.

Tim

Timothy Paris, FSA, MAAA
Chief Executive Officer
Ruark Consulting, LLC
530 Hopmeadow Street
Simsbury, CT 06070
Mobile 860.866.7786
Email timothyparis@ruark.co
Website ruark.co
Connect with me and follow Ruark on LinkedIn®


Stat and GAAP: raising the bar for data analysis and policyholder behavior modeling

Whether VM-21 for variable annuities, GAAP LDTI, or the prospect of VM-23 for fixed indexed annuities, regulatory changes are raising the bar for data analysis, use of relevant industry data, and policyholder behavior model development.  Let's discuss how our industry studies, benchmarking, and customized model development services can help you.

Contact:

Timothy Paris

timothyparis@ruark.co

860.866.7786


How much is 1% A/E improvement worth to you?

For deferred annuities, minimizing hedge breakage is a key risk management objective.  Here is a simple example showing how a seemingly modest 1% improvement in actual-to-expected ratios can dramatically reduce hedge breakage, even for small- to medium-sized blocks.  How to do it?  By expanding on your own company's experience data to use relevant industry data and credibility theory to improve policyholder behavior models.

This is what we do.  Our work is not an expense, it is an investment in risk management with quantifiable benefits.  Let's discuss exactly how this can work for you.

Contact:

Timothy Paris

timothyparis@ruark.co

860.866.7786


Case study - modeling FIA GLIB income commencement

Download the case study here:  Ruark - case study - FIA income commencement using credibility theory and PA

Quantifying the benefits of using your company data, industry data, and credibility theory in a predictive analytics context.  This case study is focused on FIA GLIB income commencement but the approach works similarly well for other products, riders, and policyholder behaviors.  Our experience is that the financial benefits can be 1000x greater than the costs.  Let’s discuss exactly how this can work for you.

Contact:

Timothy Paris

timothyparis@ruark.co

860.866.7786


New VA and FIA mortality tables, splits for benefit type and durational anti-selection

I am very pleased to announce that we have released new industry mortality tables for variable annuity (VA) and fixed indexed annuity (FIA) products. Building on the industry studies and tables that we have produced since 2007, the new tables are derived from our 2018 studies of VA and FIA mortality and are an expansion of this work for specific VA rider types and for FIA. They include a table for VA contracts with lifetime withdrawal benefits (“RVAM-LB”); a table for VA contracts without living benefits (“RVAM-DB”); and a table for FIA (“RFIAM”) in aggregate. All are single-life mortality tables.

• The RVAM-LB table incorporates 34 million exposure years and 320,000 deaths on VA contracts with guaranteed lifetime withdrawal benefits (GLWB) or hybrid GMIB. The table is calibrated to experience in contract durations 3 and later, with select factors for the earlier durations. This reflects key findings from our 2018 study - GLWB and hybrid GMIB mortality is lower than average at issue and rises to an ultimate level over time.

• The RVAM-DB table incorporates 29 million exposure years and 523,000 deaths on VA contracts without living benefits. The table is a select-and-ultimate table with a 5-year select period. This reflects key findings from our 2018 study - VA contracts without living benefits, primarily with death benefit (DB) only, have higher mortality than average at issue and the magnitude of anti-selection varies by issue age.

• The RFIAM table incorporates 16 million exposure years and 265,000 deaths on FIA contracts, both with and without lifetime income riders. Similar to RVAM-LB, the RFIAM table is calibrated to experience in contract durations 3 and later, with select factors for the earlier durations reflecting lower mortality consistent with findings from our 2018 study.

These new tables are purpose-built for deferred annuities, and are demonstrably better than standard industry tables for VA and FIA valuation -- they reflect not only the effects of age and gender, but also differences by product type and contract duration which are important components of mortality anti-selection.

We are making the new tables immediately available, free of charge, to clients who have already purchased our respective 2018 VA and FIA mortality studies. New purchasers of the these studies will also receive the tables.

Detailed study results, including company-level analytics, benchmarking, and customized behavioral assumption models calibrated to the study data, are available for purchase by participating companies.

Please contact us if you would like to learn more.