Author: db

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Grim reaper mathematics

The reporting of the corona virus outbreak makes almost no sense to Eumaeus – so he won’t comment.

But this site has some helpful statistics and explanations, and this paper published 7 February outlines the methodology for estimating case fatality rate, as well as (v important) the flaws inherent in the models used to estimate it.  See also this paper on a much earlier epidemic, which discusses many of the same problems.

One problem is to estimate the number of cases, particularly difficult when the disease may never show any symptoms. Dividing the number of deaths by the number of reported cases, i.e. those where the patient had symptoms, reported them and was correctly diagnosed, may grossly overestimate the fatality rate. General insurance actuaries may compare this to IBNR.

There is also the problem that if the disease is prolonged, there may be many cases where the outcome is not known, hence the correct method is to divide deaths by the number of cases reported days or weeks ago, where the ‘days or weeks’ is given by some estimate (again, another estimate) of the period from diagnosis to outcome.

[edit] See also the DXY site , a platform run by members of the Chinese medical community, aggregating media and government reports giving COVID-19 cumulative cases in near real-time.

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Persimmon appoint Bank of England Chief Operating Officer to their board

Persimmon confirmed that Joanna Place (Chief Operating Officer at the Bank of England for three years) will be taking a place on the Persimmon board as an independent non executive director (link).

There is some interesting stuff about Persimmon on Leaseholder Knowledge here.

Help To Buy cheat Persimmon racks up £1bn profits – and spread the plague of leasehold houses around the country

Persimmon is to make a £1 billion profit thanks to taxpayers pouring in money through Help To Buy to get young first-timers onto the property ladder. And in return, what? The company has been the main offender in spreading leasehold houses around the country, creating homes which include an investment asset for someone else. So, taxpayers have been subsidising the investments of private equity speculators in residential freeholds, who hide their beneficial ownership behind nominee directors and are often based offshore.

That was this time last year. I’m sure everything has been sorted out now.

Earlier this week David Blanchflower, a former member of the Bank’s influential monetary policy committee, called for Place to resign after a security breach that gave some speculators early access to an audio feed of market-sensitive press conferences.

It looks like the buck doesn’t stop at the top,” he said. “This needs to be fully investigated by the Treasury select committee.

All in good time.

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More sirens

This  (the Siren Call of illiquidity) refers. “Illiquidity is not costless”. But now see this teaser from Moody’s analytics.

“Constructing discount curves for IFRS 17 presents insurers with a number of challenges,” said Christophe Burckbuchler, Managing Director at Moody’s Analytics. “These include the selection of an appropriate methodology that provides stable and robust valuations of liabilities, and production of curves and necessary documentation to meet reporting timelines. Our new service addresses these challenges and enables insurers to accelerate their IFRS 17 project and production timelines.”

It’s difficult to comment without sight of the product, but it looks like a way of using the IFRS 17 provision for a matching adjustment-like illiquidity discount. Moody’s is well-placed to offer such a service with their copious data on default rates. With a suitably chosen historical period, the realised default rate will be lower, perhaps much lower, than the spread-implied default rate. So the difference between the two rates ‘must’ correspond to an illiquidity premium!

It will either end well, or it will not.

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Age Co end equity release

“Age Co are not currently providing an Equity Release Advice Service to new customers. This change came into effect on 3 February 2020.”

We reported here and elsewhere  about Age Co (a company owned by the trusted brand Age UK) referring potential borrowers to Hub Financial, who routinely recommended equity release deals from its own parent company (i.e. Just), despite the suggestion of a whole of market offering and a ‘panel’ of providers.

Neither the FCA or the Charity Commission have commented.

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Defined confusion pension

A thought experiment. You have a defined benefit pension with a company scheme that backs its pension liability to you with various assets ranging from ultra safe to ultra high yielding.  The liability is valued using the rate of return on the assets.

The company offers to buy you out, and will pay you the market value of those assets in return. (Perhaps assume it actually gives you those assets).

Continue reading “Defined confusion pension”

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The Siren call of Illiquidity

Odysseus stuffed beeswax in his crew’s ears and had them lash him to a mast

See the great piece here by Jonathan Ford, on why pension fund investors continue to pump huge allocations at private equity, given that the returns, net of fees, are no better than the return on the stock market, and given the pricing opacity and illiquidity of private equity.

An intriguing answer, suggested to him by the hedge fund manager, Cliff Asness, is that “pricing opacity and illiquidity are not actually bugs in the private equity model, but features that investors willingly pay for”.

Continue reading “The Siren call of Illiquidity”

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Co-op unloading part of £8bn pension scheme

Reported here.  Co-op is planning two separate £1bn deals with PIC and Aviva respectively.  The article implies they are buy-ins (i.e. a reinsurance arrangement where the pension liabilities remain on the scheme’s balance sheet).

“Aviva, PIC and the Co-op all declined to comment.”

 

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Boomers again

An intriguing article in the FT the other day (paywall). Over-65s, i.e. the boomer generation, account for almost half of UK housing wealth.

The generation of people born before the mid 1950s own £1.7tn of residential property by value, or 46 per cent of all housing equity held by owner-occupiers, according to an analysis of official data by Savills, the estate agents. 1

Continue reading “Boomers again”