Variable Annuity

In contrast to a fixed annuity, the key features of a variable annuity can fluctuate (they are “variable”) during the accumulation period and during the payout phase. Also in contrast to a fixed annuity, the variable annuity contract holder assumes much of the investment risk. With a variable annuity, the insurance company provides the contract holder with the ability to determine how his or her premiums are invested. One investment option is a variable account which typically consists of equity, bond or money market mutual funds. The other option is the general account of a variable annuity which provides a guaranteed return. The contract holder decides how much risk or variability they want to tolerate by allocating premium payments among the general and variable accounts. The amount of money accumulated and the amount of income during the payout phase are determined by the returns of these accounts. With a variable annuity: 1) the money can go in as a single premium payment or a series of payments; 2) the money is invested at a variable or non guaranteed rate; 3) payments are variable and can begin immediately or at some future date.

Lack of Yield Results in Variable Annuity Product Revamp at MetLife

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...
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The Hartford Seeks to Avoid Repeat of 2008

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: Reduced holdings of commercial mortgage-backed securities Reduced subordinated...
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Demand for Annuities is Strong Despite Low Consumer Awareness

It is challenging to think of another sector of the U.S. economy that has the same puzzling mix of characteristics as the...

Variable Annuities without Living Benefits

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. The...
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Variable Annuity Industry is Running to Stand Still

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. Also surprising is the fact that gross sales of variable...
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