What Is an Ultimate Mortality Table?

An Ultimate Mortality Table is a type of actuarial life table that provides the probability of death for individuals at each age, assuming they have already survived a certain initial period following the issuance of a life insurance policy. It reflects long-term mortality expectations and is used primarily in the valuation of life insurance reserves, pricing of insurance products, and financial forecasting in life insurance and pension industries.

Unlike a select mortality table, which accounts for the fact that recently underwritten individuals generally experience lower mortality for a few years after policy issuance due to medical screening, an ultimate mortality table applies once that selection effect has worn off — typically after the third to fifth year. At that point, mortality rates stabilize and reflect the average expected mortality for people at each age, regardless of when their policy began.

Structure and Function

The key function of an ultimate mortality table is to provide a consistent basis for estimating life expectancy and death probabilities after the “select” period has ended. These tables are constructed using historical data that includes large populations and extensive timeframes, which helps ensure their reliability.

Each row in the table typically corresponds to a specific age, starting from infancy to very advanced ages, often up to 100 or more. For each age, the table shows:

• The probability of dying within one year (qx)
• The number of individuals surviving to that age (lx)
• The number dying during the year (dx)
• The total number of person-years lived between that age and the next (Lx)
• The remaining life expectancy (ex)

The values in the table are based on empirical data from policyholders or population studies. In some cases, adjustments may be made to smooth anomalies or reflect expected future changes in mortality trends.

Comparison to Other Mortality Tables

To fully understand the use of an ultimate mortality table, it's helpful to contrast it with other types of mortality tables, such as select-and-ultimate tables and aggregate mortality tables.

A select-and-ultimate table combines select mortality rates for newly underwritten policyholders with ultimate mortality rates that take over after a few years. It captures the beneficial mortality experience of new policyholders due to initial underwriting and how that advantage fades over time.

An aggregate mortality table, on the other hand, reflects the mortality rates of a mixed population without distinguishing between newly underwritten and long-standing policies. Aggregate tables are simpler but less precise for detailed actuarial work.

In contrast, an ultimate mortality table focuses exclusively on individuals who have passed the select period. This makes it particularly suitable for long-term projections and reserve calculations, where the transient effect of underwriting selection is no longer relevant.

Applications in Insurance and Pensions

Ultimate mortality tables are critical tools in actuarial science and are used in various financial and regulatory contexts. In life insurance, they serve as a basis for:

• Calculating policy reserves for long-duration contracts
• Pricing products with long-term guarantees, such as whole life insurance
• Analyzing mortality experience for portfolio management

In the pension and retirement space, ultimate mortality tables help determine life expectancies used in:

• Calculating pension liabilities
• Estimating annuity payments
• Setting funding requirements for defined benefit plans

Because these tables represent a stable view of mortality after selection effects are no longer present, they allow insurers and pension plans to make consistent and long-term financial projections.

Regulatory and Industry Use

Regulatory bodies and industry groups often publish standardized ultimate mortality tables to ensure consistency in financial reporting and solvency assessment. For example, in the United States, organizations like the Society of Actuaries (SOA) and the National Association of Insurance Commissioners (NAIC) release commonly adopted tables such as the 2017 Commissioners Standard Ordinary (CSO) Mortality Table.

These tables become the default assumptions for many statutory calculations. Insurers may also use their own company-specific experience to develop internal ultimate mortality tables, subject to regulatory approval in some jurisdictions.

Limitations and Adjustments

While ultimate mortality tables offer a reliable baseline, they are not immune to change. Mortality trends can shift due to medical advances, lifestyle changes, pandemics, and other societal factors. As a result, actuaries periodically update or adjust these tables to reflect current and expected future conditions.

In some cases, companies apply mortality improvement factors to ultimate tables to anticipate how mortality may improve over time. For instance, if mortality rates are expected to decline, insurers may adjust the ultimate table downward for future projections.

Additionally, different tables may apply for different populations, such as smokers vs. non-smokers, males vs. females, or by underwriting class (e.g., preferred vs. standard).

The Bottom Line

An ultimate mortality table is a foundational tool in actuarial analysis, representing the expected rate of death for individuals who have been insured for several years. By removing the temporary effects of initial underwriting, it provides a consistent, long-term view of mortality risk. This makes it indispensable in the pricing and reserving of life insurance and annuity products, as well as in the management of pension obligations. Though based on historical data, these tables are regularly reviewed and adjusted to remain relevant in a changing demographic and medical landscape.