Annuity News

Record High Deficits for Defined Benefit Pension Plans

Defined benefit pension plans are the traditional and increasingly rare type of pension plans offered through employers. In contrast to defined contribution pension plans such as the 401(k), participants in defined benefit (“DB”) plans receive contractually guaranteed income and assume none of the risks (investment risk, interest rate risk , longevity risk , etc) associated with producing that lifetime income stream. The problem is that defined benefit plans are scarce, and many of...

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John Hancock Unveils an Inflation Protected Annuity

John Hancock Annuities announced the release of a new fixed annuity product that provides owners with inflation protection. The “Inflation Guard” product offers principal protection through a fixed interest rate that is guaranteed through the first year of the contract. After the first year, the interest rate is floating. This floating rate is based on a rate of inflation that is derived from the year-over-year change in the Consumer Price Index-Urban or “CPI-U.” A...

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Market Gyrations Cloud the Larger Picture

A very interesting article from Financial Times columnist David Stevenson suggests that investors are making the very common mistake of missing sight of the forest for the trees. In this case, the trees are the daily ups and downs of the stock market. Market volatility naturally draws many people into a sort of short-term obsession with undulating asset prices and portfolio values. Stevenson makes that very valid point that this short-term obsession obscures larger, longer-term and likely...

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Report Suggests Longevity Projections are Underestimated

A recent research report from Swiss Re suggests that life expectancy increases over the past several decades have been consistently underestimated. The report, titled “ A window into the future: Understanding and predicting longevity ,” examines the traditional methods of forecasting life expectancy—both of which are largely based on historical trends. For example, the “blending approach” combines historical data with assumptions about the future. A second approach...

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A Visual Representation of Longevity

There is an interesting blog that appears to be affiliated with the British pension consulting firm Redington. The “Red Blog” offers pension-related content from a group of authors who are both formally and informally associated with Redington. Not surprisingly, longevity trends and longevity risk are prominent topics on the Red Blog. The design of the blog and the visual representation of dry and fairly abstract topics are unique. For example, this graphic provides an interesting...

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How Much More Volatility Can Retail Investors Tolerate?

Retail investors in the U.S. have been exiting in droves in light of the extreme market volatility . A Bloomberg article hits the nail on the head when questioning the psyche of the average U.S. fund investor. Mutual fund flows indicate that the damage to psyches is real and lasting: 33 straight weeks of fund withdrawals after May 10 2010 totaled $98 billion. Fund redemptions total $74 billion thus far in 2011 $23.5 billion has flown from U.S. equity funds in the week ending August 10, 2011. A...

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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

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Alico Powering MetLife's International Sales

MetLife announced second quarter results yesterday that included record revenue of $11.8 billion. Operating earnings totaled $1.3 billion—an increase of 45 percent from the second quarter of 2010. U.S. annuity sales increased 48 percent to $7.3 billion for the second quarter. The Alico acquisition appears to be a factor in international sales. Total reported international sales doubled year-over-year, and were up 25 percent when compared with combined results for the same reporting period...

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DFA Retirement Income Efforts

Dimensional Fund Advisors (DFA) appears to be ramping-up its retirement income efforts. Advisor One reported on the recent DFA-sponsored retirement planning conference in Chicago. DFA's retirement income efforts appear to be largely focused on the defined contribution or 401k market. DFA's retirement income offering is named "Managed DC." The product appears to be offered exclusively in the retirement plan market. DFA has a huge presence in the asset accumulation space with $232 billion in...

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Dimensional Fund Advisors

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Understanding the Differences between RIAs and Traditional Brokers

Those interested in understanding the differences between Registered Investment Advisors ("RIA") and traditional stockbrokers should read this Bloomberg article --this is one of the clearest and best articles that I have seen on the topic. Coverage of this issue is typically slanted in favor of the RIA because they are held to a fiduciary standard. The thinking is that the RIA model will be relatively objective and free of conflicts because it is largely fee-based . The Bloomberg article does a...

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