As the equity release market matures competitive pressures will reduce margins and will require a greater understanding of business written.
In the growing areas of Lifetime Mortgages and Home Reversion providers are increasingly aware that there are many issues and assumptions that can impact heavily on profitability. As such actuarial support is necessary to fully understand the dynamics of the business models.
Redmayne can offer services in the following areas.
Recommend and justify maximum LTV rates and interaction with the “No Negative Equity Guarantee (NNEG)”
Recommend rate tables for use to discount property prices to allow for lifetime tenancy reverting on vacation
In connection with the above we can:
• examine the latest population mortality and nursing home entry data and adjust it to reflect the known characteristics of the portfolio
• suggest appropriate mortality improvements and quantify how these will impact on the base table over time
• advise on how to differentiate the above to allow for known characteristics (health, location and lifestyle) of the borrowers
• advise on keeping pricing dynamic and technically correct in respect of changes to mortality & nursing home entry experience
On an ongoing basis, determining the value, and likely timing of returns from existing portfolios
In relation to the ongoing valuation and return from the portfolio we undertake the following:
• determine a reasonable statistical distribution and associated parameters to model Exits from a book of Lifetime Mortgages
• calculate expected numbers of exits both by death and entry to nursing homes in each yearly period and quinquennium.
• calculate suitable confidence intervals around the results to enable you to make more accurate financial business plans
• Quantify the expected cost and range of the No Negative Equity Guarantee
In addition Redmayne can offer general advice and technical support on the Equity Release market, including the respective attractiveness of Lifetime Mortgages and Reversions and quantifying the issues for consideration.