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Performance Review Print
Version
This summary of 21st Services' 2008 actual-to-expected (A-to-E) study incorporates
all Senior Model Life Expectancy evaluations from January 1, 2001, through December
31, 2007, with mortality experience through March 31, 2008.
Our semi-annual studies are conducted with the assistance of two outside actuarial
firms. One is an internationally recognized leader in financial and actuarial disciplines,
based in New York. The other is a German actuarial consulting firm, well known within
the life settlement industry.
Based on limited sample size to date, our actuarial consultants have consistently
advised us to view the A-to-E reports as rough indicators rather than precise measurements
of performance. They have told us that with the relative immaturity of 21st Services'
underwriting portfolio, we could see volatility in the performance ratios from one
period to another.
Since it will take years to amass enough data to reduce this volatility, 21st Services
is taking steps to vastly increase the amount of data on which our mortality tables
and our underwriting system are based.
Portfolio maturity and its effect on statistical analysis
21st Services believes that no single A-to-E statistic can properly capture the
performance of LE providers. At 21st Services, our goal is to deliver excellent
A-to-E results along many dimensions: age, gender, smoker status and duration. We
show performance along two dimensions in this review. The first set of charts shows
A-to-E by the stage of the cases on their respective mortality curves.
The mortality curve in the charts corresponds to the curve that is provided to clients
with each Senior Model Life Expectancy estimate. For the purposes of the charts,
the 5th percentile is the point by which 50 out of 1,000 like insureds were expected
to have died. Similarly, the 30th percentile is the point by which 300 of 1,000
like insureds were expected to have died.
Classically, the 50th percentile represents the median in a mortality curve. As
of March 31, 2008, only 541 of 21st Services' cases had reached that point - too
small a sample to have any statistical credibility.
The A-to-E study performed in August 2007 is shown in the first chart, and, in contrast,
the study performed in March 2008 is shown in the second chart. In both charts,
the middle rows show the number of cases and the number of deaths predicted in each
percentile of the mortality curve. At the bottom is the actual-to-expected ratio
for each percentile.
| 21st Services' A-to-E Study Performed August 31, 2007 |
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Percentile
|
5th
|
10th
|
15th
|
20th
|
25th
|
30th
|
# cases that have
reached this stage
|
10,495
|
5,347
|
3,225
|
2,091
|
1,461
|
1,043
|
# deaths predicted
by this stage
|
524.8
|
534.7
|
483.8
|
418.2
|
365.3
|
312.9
|
|
Actual / Expected
|
80.6%
|
81.3%
|
87.4%
|
91.7%
|
92.9%
|
93.3%
|
| 21st Services' A-to-E Study Performed March 31, 2008 |
|
|
Percentile
|
5th
|
10th
|
15th
|
20th
|
25th
|
30th
|
35th
|
# cases that have
reached this stage
|
14,889
|
7,769
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4,798
|
3,232
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2,244
|
1,655
|
1,243
|
# deaths predicted
by this stage
|
744.5
|
776.9
|
719.7
|
646.4
|
561
|
496.5
|
435.1
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|
Actual / Expected
|
73.5%
|
75.4%
|
79.8%
|
82.5%
|
84.7%
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85.7%
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83.7%
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In the earlier chart, we show experience only through the 30th percentile of the
curve. The second chart shows experience through the 35th percentile. In percentiles
40-100, (35-100 in the earlier study) the sample size shrinks to the point where
results are not statistically significant. Random variations can radically skew
results when sample sizes are very small.
The small sample sizes reflect the fact that 21st Services' portfolio of cases has
grown very quickly in the past five to six years. Year by year, as our underwriting
portfolio matures, the percentile cells will expand, and this will cease to be a
problem. But for now, many cases are still in the 1st through 10th percentiles -
more than in all the other percentiles combined.
In February 2008 the Society of Actuaries released the 2008 Valuation Basic Tables
(VBT). These tables update the 2001 VBT, on which our proprietary mortality table
was based. Compared to the 2001 VBT, the 2008 VBT shows lower mortality rates. This
parallels 21st Service's mortality experience as seen in the charts above. After
a thorough review of the newly released VBT and of our own data, we made the appropriate
and responsible adjustments to our proprietary mortality table.
Click here to read our Chief Actuary's discussion of the 2008 VBT and our
modifications to our table.
Another look
The previous charts show the emergence of experience based on the stage of the mortality
curve. Another way to look at A-to-E is by duration - i.e., time elapsed since the
cases were underwritten. For example, in the charts below, Duration 1 includes the
performance of all cases in the study within the first year after being underwritten.
Duration 2 includes the performance of all cases in the study in their second year
after being underwritten, and so on. As expected in a growing company, the number
of cases (and both actual and expected deaths) declines as duration increases.
In the charts below, one can easily see the effect of the mortality table changes
we implemented on September 16, 2008. The first chart reflects performance measured
at the end of 2007, prior to our table changes. The second chart reflects study
results after the table changes. Actual-to-expected percentages are close to 100
for all durations in the second chart because "expected" numbers are now based on
our revised table.
Pre Changes - December 2007
|
Duration 1
|
Duration 2
|
Duration 3
|
Duration 4
|
Duration 5
|
Duration 6
|
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
547
|
744.3
|
432
|
600.1
|
265
|
391.2
|
130
|
221.1
|
71
|
112.3
|
21
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39.2
|
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73%
|
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72%
|
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68%
|
|
59%
|
|
63%
|
|
54%
|
|
Post Changes - September 2008
|
Duration 1
|
Duration 2
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Duration 3
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Duration 4
|
Duration 5
|
Duration 6
|
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
Actual
|
Expected
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
547
|
523.5
|
432
|
418.1
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265
|
257.1
|
130
|
140.1
|
71
|
65.7
|
21
|
21.6
|
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104%
|
|
103%
|
|
103%
|
|
93%
|
|
108%
|
|
97%
|
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Next steps
It is important to us to be able to render a picture of our actual-to-expected performance
that is as consistent as possible, but our chief aim is to provide estimates that
are as reliable as possible, given the information and tools that we have at any
given point. In publishing our A-to-E numbers and background information on how
they are derived, we are demonstrating our commitment to transparency.
We will continue to measure and manage an underwriting portfolio that is inherently
volatile. However, though we cannot stabilize our ratios by instantly "aging" our
portfolio, we will, by March 2009, have accelerated data accumulation 12-fold; 40-fold
by December 2009; and 200-fold by December 2013. 21st Services has announced that
we are sponsoring a study that will vastly expand our data, both in quantity and
in quality, up to 20,000,000 lives within five years. Click here
for more information about this breakthrough development, an industry first.
The detailed data and analysis from the study will be used not only to refine our
tables and underwriting system, but they will be made available to our clients though
our Data Subscription Service. The Data Subscription Service will also include exhaustive
detail on our A-to-E studies. Click here
for more information about our Data Subscription Service.
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