The process of paying a known price in the form of an insurance premium to protect against the risk of a large loss.

Annuities Versus Bonds

This discussion topic was originally posted in the form of a comment.

The general topic is how annuities compare to bonds.  It is a natural question since both annuities and bonds provide owners with fixed payments.

We moved the comment here so that it can surface to a larger audience and hopefully generate further discussion and comments.

As noted below, the conceptual basis for this content is based on a great paper written a few years ago by Jason Scott--the Director of Retiree Research at Financial Engines.

The original post is as follows:

Insurance Company Hedging

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Annuity Digest Buying Guide: Insurance Company Hedging

Insurance companies take in huge amounts of money from policyholders.  Part of the purpose of an insurance company is to invest the massive amount of policyholder funds.

Much of the money is invested in bonds or fixed income, some can be invested in stocks or equities, and portions can be invested in real estate, hedge funds, venture capital, etc.

Longevity Risk and Portfolio Protection Without a Variable Annuity

Two of the most daunting risks faced by the majority of retirees are:

Calculating the Value of a Longevity Annuity

A longevity annuity is arguably the most efficient way to insure...

Bulk Purchase Annuity Market Booming as Pension Deficits Swell

The UK pension market is in tough shape post financial crisis. According to a Bloomberg article, "about 87 percent of the U.K.’s 7,400 final salary pension plans are in deficit following the financial crisis." This crisis offers an unprecendented opportunity for companies that insure the pension liabilities of private corporations through bulk purchase annuities. “The bulk-purchase annuity market is going to continue to be a good market because companies want to get their pension...
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