Financial Crisis

The financial crisis took a toll on the amount of total assets and total sales within the U.S. variable annuity industry. Both figures had significant declines relative to the same period in 2007. That said, combined net assets in variable annuities in the U.S. still exceed $1 trillion, and total sales of variable annuities in the U.S. in 2008 exceeded $150 billion. Table 2. Variable Annuity Premium Sales(1) Quarter Ended Year Ended (Dollars in Millions) 12/31/08 12/31/07 12/31/08 12/31/07...

Interest rates in many countries are at historic lows as a result of monetary policy that is intended to address the financial crisis. This low rate environment will have a profound impact on the finances of many retirees since interest rates are a key ingredient in annuity payments . "Thousands of savers who are about to retire could lose hundreds of pounds each year because leading pension firms have cut their annuity rates over the last two weeks, with Norwich Union, Standard Life and...

The Center for Retirement Research at Boston College indicates that qualified retirement savings have decreased by almost a third--to an average balance of $56,000--due to the financial crisis. "The 2007 Survey of Consumer Finances shows 401(k)/IRA balances of $78,000 for those approaching retirement, a modest improvement over 2004. However, by October 2008, the stock market collapse had reduced 401(k)/IRA balances by about 30 percent - to just $56,000." Source: Center for Retirement Research...

The cost of downside protection in the financial markets as seen through option costs on the CBOE has been skyrocketing as a result of the turmoil and volatility from the financial crisis. Contracts to protect against a decline in the Standard & Poor’s 500 Index for two years cost $15,160 on the Chicago Board Options Exchange at the end of last week, compared with $6,875 in 2007, according to price-adjusted data compiled by Bloomberg. The current level shows traders expect the...

Turmoil from the financial crisis drives record sales in fixed annuities. Uncertainty in equity markets has fueled part of the growth. The guarantee in indexed annuities is the defining difference from variable annuities, enticing customers seeking protection against further losses. Sales of indexed annuities often go up when sales of variable annuities go down or when certificate of deposit rates — a competitor for annuities — are unfavorable, Moore said. Total 2008 indexed annuity sales were...