Guaranteed Living Benefit

Guaranteed living benefits (GLB) or living benefits are optional guarantees that can be embedded into variable annuity products. In the past, variable annuities could come with a guaranteed minimum death benefit (GMDB) which paid a minimum benefit upon death of the annuitant. Over the past decade, however, product development and innovation have flourished, and insurers offer income, accumulation, or withdrawal guarantees that can provide a significant measure of protection against market risk while the annuitant is alive. Some of these “living benefits” include: guaranteed minimum income benefit (GMIB); guaranteed minimum withdrawal benefit (GMWB); guaranteed lifetime withdrawal benefit (GLWB), and; guaranteed minimum accumulation benefit (GMAB). Guaranteed living benefits have proven to be incredibly popular. More than 95% of variable annuity sales in 2007 contained some form of living benefit. Guaranteed lifetime withdrawal benefits (GLWB) have proven to be one of the most popular guarantees.

Ordinary Investors Can Outsource their Hedging and Derivatives Management through Annuities

Concerned about the possibility of another market swoon?

Take a look at some of the...

Variable Annuity Hedging Programs Holding Up Well

The hedging programs used by insurance companies to support the guaranteed living benefit features in their variable annuity products have held-up well recently. Milliman reports that insurance companies supported 94% of their guarantees for the six month period ending in March 2009. The success of the hedging programs and the highly volatile capital market environment have encouraged many insurers to increase their hedging efforts. As reported in an earlier post , the increase in hedging...

Owners of Variable Annuities Shielded from Market Crash

A recent Wall Street Journal article notes that owners of variable annuities with guaranteed living benefits ( GLB ) have been largely immune to the fallout from the financial crisis. "One of the best investments of the past decade was one of the most derided: the variable annuity ." The protection offered by GLBs such as the guaranteed minimum withdrawal benefit is discussed. "Because of such guarantees, many holders of variable annuities actually saw their accounts increase 6% or more in...

A Changing Variable Annuity Landscape -- The Consumer Perspective

This is the first part of an interview with Ryan Hinchey.

Ryan is a consulting...

Large Declines in Variable Annuity Sales Seen While Fixed Annuity Sales Surge

Sales of variable annuity products in the United States cratered 27% during the first quarter of 2009. First quarter sales were $30.7 billion compared to $40.9 billion during the first three months of 2008. At the same time, sales of fixed annuities surged 74% to $35.6 billion. This is the first time since 1995 that sales of fixed annuities have exceeded sales of variable annuities for two straight quarters. This sales dynamic is not surprising and is largely a reaction to the market volatility...

Pages