Fasano Associates has responded to market concerns that other LE underwriters may follow 21st Services recent LE extension. View video.

Mike Fasano, President of Fasano Associates, made it clear that Fasano Associates would not be extending their life expectancy estimates.  Said Fasano: “Frankly, if after almost 12 years in this business, we saw the need to extend our LE estimates 20% or more, I would be tempted to pull the shades down and close our business.”

Fasano said that their LE estimates have been longer and more accurate than the competition, and that they have never shocked the market with large LE extensions. Fasano added: “Our maximum LE extension ever was less than 10%, and since 2008, our LE changes have been imperceptible.”

He stressed that Fasano Associates was not investor owned (Fasano is the sole owner of Fasano Associates).  “Our continuity in ownership and management has allowed us to serve our clients better – keeping a long term focus and not getting distracted by short term profit or transactional objectives, or frequent changes in management.  We also have assembled a strong internal medical team, which has allowed us to identify the major variables affecting life expectancies and not get distracted with secondary issues.”

Fasano pointed out that they adjusted their life expectancies for the significant improvement in cardiovascular mortality in June 2007 – almost 6 years before the competition. He also explained that Fasano has not needed to shock the market with large LE extensions because of the consistency in their life expectancies over the years, and that this consistency has improved the quality of their database and their ability to identify the primary relationships affecting the mortality function.

He called for underwriters to publish their Actual to Expected performance based on the actual LE estimates given to clients, rather than adjusted, “current basis” estimates, which he argued could be misleading in the case of an underwriter who has made multiple changes in underwriting methodology and mortality tables over the years and made multiple, large LE extensions.

A copy of Fasano’s presentation can be viewed here.

If you are unable to view this link, please contact Nicole Flint at nflint@fasanoassociates.com or 202-457-8188.

A recent analysis performed by MapleLife Analytics showed AVS LE extensions resulting in a convergence of AVS and Fasano LEs while 21st LEs are, on average, 30 months shorter than Fasano and AVS.

The Report concludes that LEs reflect “meaningful and consistent differences” across long time periods and age bands and points out that “investors who base their purchase and retention decisions on LE reports without awareness of the differences in the underlying patterns will not achieve the results they expect”.

Click here to view the complete Analysis and here to view the attachments.

Fasano Associates announces their 10th Annual Life Settlement & Longevity Conference to be held on October 28, 2013.
The conference will take place at Fasano's headquarters: NAHB Building, 1201 15th Street, NW, Washington, DC 20005.

Groundbreaking Original Research Presented at Fasano Conference: Fasano Accuracy Evaluated Drs. Jochen Russ and Daniel Bauer presented groundbreaking original research on the measurement of Actual to Expected accuracy to investors and industry participants attending the 9th Annual Fasano Life Settlement & Longevity Conference. Russ and Bauer’s new methodology provides an unbiased measure of the average difference between the number of Actual versus Expected months of survival to date. Their methodology (Difference in Curtate Life Expectancy, or DCLE) was tested against the Fasano Associates database of over 50,000 unique lives and generated a difference between Actual and Expected of only 0.76 months for the entire Fasano database. The results of the Russ/Bauer analysis are summarized below: Difference in Curtate Life Expectancy (DCLE) for Fasano Associates Database A complete copy of Dr. Russ and Dr. Bauer's article was recently published in the Fasano LifeSelect Newsletter (November 2012). To view the entire article, click on the button below. DVDs of the 2012 Fasano Conference are available for $395. To purchase the Conference DVD, click on the button below:

At the Spring 2012 LISA (Life Insurance Settlement Association) Meeting, Mike Fasano, President of Fasano Associates, proposed that Life Expectancy underwriters agree to publish their post 2008 Actual to Expected performance on an unadjusted basis – based on actual life expectancy estimates given to clients and based on the mortality tables used in developing their estimates.

In his presentation on a panel of the 4 major life expectancy underwriters, Fasano argued that adjusted or “current basis” Actual to Expected results were inherently misleading and did not reconcile with the large life expectancy spreads that still exist in the market. He noted that the last major changes in life expectancy mortality tables and methodologies were implemented in 2008, almost four years ago, and that therefore there was no need to perform any kind of adjusted A to E analysis for the period subsequent to 2008.

Fasano also proposed that life expectancy underwriters share all their mortality ratings and life expectancy estimates with an independent third party for the purpose of publishing the spreads in life expectancy that exist in the market.

Said Fasano: “These two actions would bring more transparency to the market than any of the proposals that have been put forth thus far.”

Fasano presented Fasano Associates’ Actual to Expected results for the period July 1, 2008 through March 31, 2012, assuming no IBNR (incurred but not reported deaths) and based on a 7% IBNR assumption:

In his campaign speech to LISA members, Fasano called for honest debate in addressing the issues facing the life settlement industry. Said Fasano: "I don't think we should try to impose unanimity in our thinking or even in our statements. What's important is that we try to work with those with whom we disagree, that we be honest and civil with each other, and that we move on after the debate is over."

Fasano was reelected to another two-year term, as was Nate Evans of Maple Life Financial. In addition, Alan Buerger of Coventry First, Paul Siegert of GWG Growth, Phil Loy of AVS Underwriting and Vince Granieri of 21st Services were elected to serve two-year terms.

Fasano Associates has just released the latest independent actuarial analysis of its Actual to Expected (A to E) performance, including an Actual to Expected ratio of 99% for the 2005 through 2010 time period, based on the ACTUAL life expectancy estimates given to its clients.

To provide more granularity in the results presented, we have developed splits of Fasano's Actual to Expected experience based on gender, smoking status, and LE durational band. These detailed splits have been provided based on the assumptions that we consider to be representative of the current life settlement market yet with sufficient observations to be statistically credible. We have provided detailed results for the 2005 to 2010 period (last 6 years), based on the Fasano 2008 Mortality Tables and IBNR developed by Dr. Bruce D. Spencer, Chair of the Statistics Department of Northwestern University (Spencer IBNR). For more information about the study, please click here and fill out the 'General Inquiries' form.

Rajiv Rebello, a fellow of the Society of Actuaries, a member of the Academy and a Chartered Enterprise Risk Analyst, has written an article titled "Poor Underwriting Practices Spark Life Settlement Losses". He is a principal of Colva Insurance Services in San Diego. His email address appears at the conclusion of the article. Mr. Rebello's comment "Discounting historical results in favor of better expectations of future mortality offer life settlement investors a false sense of confidence in the accuracy of the underwriting", captures the essence of today's industry discussion. Click here to read entire article.

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