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.

Annuities in Japan

The Japanese...

Key Phrases Autotag: 

Variable Annuity Sales in U.S. Could Reach $500 Billion per Year by 2018

A 2008 sigma study from Swiss Re suggests that U.S. variable annuity sales could reach $400 - $500 billion per year by 2018. These are gross sales projections that include exchanges of existing products. Annuity exchanges are typically a significant portion of overall or gross sales. This 2008 projection was based on compound annual growth projections of 7-9 percent. Also mentioned was the fact that variable annuity assets in Japan grew at an astounding rate between 2003 and 2008--increasing at...

Low Interest Rates Affecting Insurance Companies

The ultra-low interest rates that exist at the moment are affecting insurance company profitability and operations. On the profitability side, current policy premiums must be reinvested into bonds that have low yields and are fully priced. Investment income and underwriting profitability (which is often rare) are the main components of insurance company profitability. As large fixed income investors, insurance companies are challenged in the current interest rate environment. On the operations...
Key Phrases: 

Variable Annuity Sales Total $34 Billion During Third Quarter of 2010

Variable annuity sales in the United States increased 9.7 percent to total $34 billion during the third quarter of 2010. Variable annuity revenue figures continue to be concentrated among a handful of leading companies: Prudential Financial: $15.5 billion year to date. MetLife : $13.2 billion year to date. Jackson National Life: $10.47 billion year to date. TIAA-CREF : $10.42 billion year to date. Lincoln Financial : $6.6 billion. The total amount of variable annuity sales in the first 9 months...

Annuity Product Persistency Levels are Increasing

Annuity persistency refers to whether people hold on to their existing annuity products or exchange them--typically through a Section 1035 exchange --for new products. Higher levels of persistency suggest that annuity owners are sticking with existing products which are likely more valuable than what would be available in the current market through an exchange.

Pages