Mark J. Warshawsky is Director of Retirement Research at Towers Watson.

Dr. Warshawsky served as assistant secretary for economic policy at the U.S. Treasury Department from 2004-2006 and he has held senior level economic research positions at the Federal Reserve Board, the Internal Revenue Service and TIAA-CREF.

The Penn Mutual Inflation Protector variable annuity was launched in November 2010.

This variable annuity product incorporates a living benefit feature and is designed to provide owners with an income base that keeps pace with the rate of inflation.

The income base of the Penn Mutual Inflation Protector increases based upon the greater of:

Warren Buffett’s most recent shareholder letter focuses on the merits of productive assets such as equities in light of the current low interest rate environment and the potential for future inflation.

Buffett’s view is that although productive assets are variable and volatile, they are more likely to preserve future purchasing power than the fixed or currency-based alternatives.

Is there a sense of “swimming upstream” when trying to propagate goal-based investing--as described in your new book Risk Less and Prosper--among existing financial advisors? Conventional practices and economic incentives are so heavily skewed towards modern portfolio theory and growing assets under management. 

Canadian insurer Sun Life recently announced that it will exit the variable annuity and individual life insurance markets in the United States.

Continued equity market volatility has resulted in a variable annuity business that is plagued with uncertainty and higher costs.

Insurers such as Sun Life offer guarantees that are linked to the performance of underlying equity portfolios.  These guarantees are a liability for the insurance company, and equity market volatility contributes to the cost of these liabilities.

Metlife posted record variable annuity sales of $8.6 billion during the most recent quarter.  The VA sales record represents an 86 percent increase from the same period a year ago.

MetLife also announced that it will be lowering the returns offered on future variable annuity offerings in an effort to “re-price and improve the risk profile” of their product offerings.

Record low interest rates have made it difficult to sustain the richer product features contained in the current variable annuity offerings.

The 2008 financial crisis hit the Hartford Financial Services Group harder than many of its peers.

At a recent investor meeting, executives from The Hartford discussed how the company has positioned itself to avoid a repeat of 2008—largely through de-risking of its balance sheet.

The following is a high-level representation of changes in the composition of assets in The Hartford’s investment portfolio:

It is challenging to think of another sector of the U.S. economy that has the same puzzling mix of characteristics as the annuity industry.  Consider, for example, some of the following contradictory features:

The popularity of living benefit features is one thing that seems clear when looking at variable annuity sales data.  The vast majority of variable annuity sales include one of several living benefit or guaranteed living benefit features. 

National Underwriter reports that Bellevue, Washington-based Symetra will be selling a line of low cost variable annuities that do not contain any living benefit features. 

Apparently Symetra considers the GLB-free variable annuity as an underserved niche. 

An interesting article from Darla Mercado at Investment News discusses a recent report on the U.S. variable annuity industry from Cerulli Associates. 

While no secret to industry analysts, the report provides a reminder that the vast majority of variable annuity sales in the United States are exchanges of existing products.

The result is a sort of recycling of variable annuity assets rather than net inflows of new assets into the industry.