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Effect of Mortality Table Selection on Annuity Valuation

Abstract

The study examines the effect of mortality table selection on annuity valuation, focusing on how the choice of mortality assumptions influences the actuarial value of annuity benefits. Mortality tables provide estimates of survival and mortality probabilities at different ages and are essential in determining the expected duration of annuity payments. The selection of an appropriate mortality table is therefore important for producing reliable annuity values and assessing the financial obligations associated with annuity contracts. The study will investigate how the use of different mortality tables affects annuity valuation. It will assess variations in actuarial present values resulting from differences in mortality assumptions across selected mortality tables. The study will also examine how differences in survival probabilities influence the expected duration and financial value of annuity payments. The analysis will focus on mortality table selection, annuity valuation, survival probabilities, mortality rates, life expectancy, actuarial present values, and annuity payments. Selected mortality tables will be applied to annuity valuation models to determine differences in calculated values. The study will consider how variations in mortality assumptions affect the expected timing and duration of future annuity payments. A quantitative research approach will be adopted for the study. Relevant mortality data and selected actuarial life tables will be analysed using standard annuity valuation techniques. Actuarial present values will be calculated under alternative mortality assumptions, while comparative and sensitivity analyses will be used to assess differences in valuation results. Statistical measures will be applied where appropriate to evaluate variations in mortality experience and their effects on annuity values. The study is expected to reveal that mortality table selection has a measurable effect on annuity valuation. Mortality tables reflecting different survival patterns may produce different actuarial present values because changes in survival probabilities affect the expected duration of annuity payments. The magnitude of the valuation differences is expected to depend on the age structure of annuitants, mortality assumptions, payment duration, and the type of annuity being valued. The findings are expected to provide useful information for actuaries and insurance companies in selecting mortality tables for annuity valuation. The study may support more appropriate mortality assumptions, improve the reliability of actuarial calculations, and strengthen the estimation of future annuity liabilities. It may also assist insurers and pension providers in evaluating the financial implications of using alternative mortality tables. The study concludes that mortality table selection is an important consideration in annuity valuation. It is therefore recommended that actuaries evaluate the suitability of available mortality tables against relevant mortality experience and apply appropriate actuarial techniques when selecting mortality assumptions for annuity valuation.

Keywords: Mortality table selection, annuity valuation, mortality assumptions, survival probabilities, mortality rates, actuarial present value, annuity payments, life expectancy, actuarial valuation, life tables, annuity liabilities, mortality experience, actuarial models, insurance valuation, pension annuities.