SCHAUMBURG, Jan. 25, 1999 -- Three researchers have been named winners of the David Garrick Halmstad Prize for a study showing that the two lives covered by a two-person joint and last-survivor annuity, when considered as dependent rather than independent, have a significant impact on the annuity's value. The innovative research used a mathematical function that has more recently been applied in biomedical research. Using a specific type of this function with a specific set of data, researchers found annuity values declined about 5 percent.
The Halmstad Prize is given annually by the Actuarial Education and Research Fund (AERF). Nominations are made by the Halmstad Prize committee of the Society of Actuaries' Education and Research Section. The Society is North America's largest actuarial education and research organization.
The winning entry, "Annuity Valuation with Dependent Mortality," was published in a June 1996 issue of The Journal of Risk and Insurance. The researchers were Edward W. Frees, professor of business, University of Wisconsin School of Business, Madison, Wis.; Jacques Carriere, associate professor, Department of Mathematical Sciences, University of Alberta, Edmonton, Alberta, Canada; and Emiliano Valdez, senior lecturer, Nanyang Business School, Nanyang Technological University, Singapore.
Like other annuities, joint annuities promise to pay a consistent amount
at regular intervals. Adequate premiums and reserves are important to assure
that enough funds will be available to make the promised payments. Premiums and
reserves are based on factors including the probable length of survival of those
covered by the annuity. The length of one or both lives will indicate the number
of required payments and the amount of funds needed to cover those payments.
In the article, the researchers noted that joint survival has typically been
estimated assuming independence of the lives covered -- that is, the death of one
Contact: Jacqueline Bitowt
Society of Actuaries