mortality of annuitants in the united states and canada

Institute and Faculty of Actuaries

MORTALITY OF ANNUITANTS IN THE UNITED STATES AND CANADAAuthor(s): ARTHUR HUNTERSource: Journal of the Institute of Actuaries (1886-1994), Vol. 68, No. 4 (NOVEMBER 1937),pp. 508-512Published by: Cambridge University Press on behalf of the Institute and Faculty of ActuariesStable URL: http://www.jstor.org/stable/41137734 .

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5o8

MORTALITY OF ANNUITANTS IN THE UNITED STATES AND CANADA

By ARTHUR HUNTER, LL.D., F.R.S.E., F.F.A., F.A.S. Corresponding Member

In 1920 the American Annuitants Select Table of Mortality was published. It covered all years of issue up to 1917 inclusive, the material being traced to the anniversaries in 191 8. The extent of the increased demand for annuities since that time is shown by the fact that annuity premiums in the principal companies were $7,200,000 in 1920, $33,900,000 in 1925, $82,900,000 in 1930, and $406,800,000 in 1935. The question of the mortality among annuitants has therefore become a major instead of a minor matter for American companies. The large sums of money received in recent years have been due to (a) the sense of security which is afforded by the life insurance companies, and (b) the difficulty of investing money at remunerative rates of interest. With regard to (a), so many persons had lost the major part of their savings in apparently sound securities and in mortgages, that they were desirous of putting their available funds into a form of investment which was next to Government bonds in point of safety and which gave a larger return. Under these conditions it was thought that the annuity mortality might be higher than in the years prior to 1930, as the self-selection against the companies was not likely to be so strong as in times when private funds could be invested remuneratively. To answer this question nineteen of the prominent companies contributed their data for the years of issue 1 931 to 1935 inclusive, carried to the anniversaries in 1936. The study was made both by number of annuities and by the annual amount thereof. On account of the large volume of material it was not deemed feasible to make an investigation by lives. The number of annuities entering into the investigations was 102,412 for an annual amount of income of $35,870,830.

The principal forms of Immediate Annuities issued during the period under review consisted of (1) those ceasing at death, (2) those with provision for returning at the death of the annuitant the single premium, less the annuity payments, and (3) those with a continua-



Mortality of Annuitants in U.S.A. and Canada 509 tion of the payments to the beneficiary after the death of the annuitant until there had been paid by the company a total amount at least equal to the single premium paid for the annuity. The material for classes (2) and (3) was combined. Joint and Survivor- ship Annuities, Deferred Annuities, Group Annuities and those issued at the same time as Single Premium Life Insurance without evidence of insurability were omitted.

A complete report from the Joint Committee on Mortality appears in the May 1937 issue of the Transactions of the Actuarial Society of America. Comparing the experience with that of the preceding one, the American Annuitants Select Table, the fol- lowing are the results by policies and by amounts of yearly income :

Table A. Annuity Mortality issues 1931-35 to 1936 anniversaries tested by American Annuitants Select Table

All Immediate Annuities Unit $1,000

By number By amounts

Ratio to Ratio to Deaths Expected Deaths Expected

% % Men 2,559 108 1,458 120 Women 3, 109 88 1,067 90

Total 5,668 96 2,525 105

Without refund Men 945 96 602 98 Women 1,242 82 456 78

Total 2,187 87 1,058 89

With cash or instalment refund Men 1,614 117 856 142 Women 1,867 92 611 101

Total 3,481 102 1,467 121

The principal features of this table are - first, the distinctly higher mortality among annuities with than without refund at the death of the annuitant ; second, the markedly lower relative mortality among women than among men; and third, the higher mortality by amounts than policies, especially among men.



5 io Mortality of Annuitants in the As the foregoing standard of measurement is not well known to

British actuaries, a test has been made of the mortality by the 1931-35 table, covering the first five years of recent British experience in the Continuous Investigation into the Mortality of Annuitants* This has been obtained through the courtesy of Mr W. Palin Elderton.

It may be observed that the British standard used in these comparisons covers issues of a somewhat different period than the American experience now presented. Thus the fifth year of duration includes issues of 1931 only in the American data, but issues of 1926 to 1930 inclusive in the British table. The first year would cover American issues of 193 1 to 1935 and British issues of 1930 to 1934. The results of the comparison are as follows:

Table B. Annuity Mortality issues 1931-35 to 1936 anniversaries tested by the British Select Rates of 1931-35

All Immediate Annuities By Number

Ratio to Deaths expected

% Men 2,455 113 Women 2,902 no

Total I 5,357 i in

Without refund Men 909 I 100 Women 1,187 102

Total j 2,096 1 01

With cash or instalment refund Men 1,546 122 Women 1,715 116

Total 3,261 119 j I I

A comparison of Table B with Table A shows that the disparity between the mortality of men and women annuitants in America during the years 1931-35 is not so great when measured by the British experience as by the older American experience (1920).

* See pp. 513-520.



United States and Canada 511 When the annuities without refund (the basis of the British

experience) are arranged by duration, the expected deaths being determined by the British 1931-35 table, the mortality for men and women together is as follows :

Men and Women Men on^ Women only

Duration Deaths Ratio to Ratio to Ratio to

expected expected expected

0/ 0/ 0/ /o /o /o 1 661 101 103 99 2 671 103 107 100 3 439 101 93 107 4 220 102 93 no 5 105 92 81 101

1-5 2,096 101 100 102

The close agreement between the experience in Britain and in America is remarkable when the data for both sexes are combined, but for men and women separately it is not so close.

By attained ages the annuities without refund for men and women together show a higher mortality below age 70 and a generally lower mortality thereafter than that of the British 1931-35 table.

. . - Men and Women I Attained

. . - Deaths Ratio tQ

aSes expected

% 55-64 363 121 65-69 463 106 70-74 453 94 75-79 469 108 80-89 I 348 83

The relative volume of annuity business may be seen by comparing the number of deaths in the first five years of duration in the British and in the American reports. These are as follows :

British American

Female I 2,218 3,109 ■ Male i,349 2,559

Total 3,567 5,668 !

AJ 33



512 Mortality of Annuitants in U.S.A. and Canada In the preliminary draft of the British report sent to the Contri-

buting Offices under date of 18 February 1937, reference was made to a necessary adjustment due to the effect under the "Census" method of an uneven distribution of entrants during 1932. This adjustment affects duration 3 and has not been made in the figures given here : it would reduce the percentages at that duration. In order to avoid misunderstanding it may be stated that the American study was made by "policy years", and accordingly no such correction is required.



mortality of annuitants in the united states and canada

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