2. 2
Introduction to LTC Termination Study
Process flow overview
A/E Ratio and Adjustment Factors
Q&A
Agenda
3. Experience Study
• An experience study is used to validate
existing assumptions and develop new
assumptions for each business unit.
• LTC Experience Study includes LTC
Termination Study and LTC Morbidity Study.
4. 4
Introduction to LTC Termination Study
3-year LTC Termination
Study
Mortality Study Lapse Study
Total Life Total LifeHealthy Life Healthy Life
Fortis
GLTC
JH Retail
Fortis
GLTC
JH Retail
Fortis
GLTC
JH Retail
Fortis
GLTC
JH Retail
5. 5
Process Flow Chart
Death Scrub Data Gathering Study Input
Correctly
identify the
reason for
terminations,
separating
mortality from
lapses
Gather data
from different
admin systems
and transform
them into a
uniform
format.
Calculate all the
expected
parameters used
in the study and
derive the
expected
amounts and
counts for both
death and lapse
6. 6
Key Index
• Actual to Expected (A/E) ratios are calculated
for each study and summarized by different
geographic traits such as issue age, duration,
inflation and etc.
• Based on those A/E ratios, Mortality and
Lapse assumptions are then adjusted to best
fit the experience.
7. Summary Mortality Experience
Refitting Approach
Mortality is lower than
expected
Later durations 16+
has a lower A/E ratio;
while early durations
1-5 has a higher A/E
ratio
8. 2010 Assumptions vs. 2013 Assumptions
• Expected Count = (Exposure Count) * (Expected factor)
• Expected Amount = (Exposure Amount) * (Expected factor)
• Highlights show where factors are lower than 2010 assumptions.
• A/E =
𝑨𝒄𝒕𝒖𝒂𝒍
𝑬𝒙𝒑𝒆𝒄𝒕𝒆𝒅
10. Adjustment Factors
• Selection Factor
• Risk Class Adjustment
• Underwritten Adjustment
• Gender and Marital Adjustments
• Product Adjustment
• Final Adjustments tables where all the factors are
multiplied together.
