Annuity News

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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Disconnect Between Retirement Savings and Income Highlighted by JP Morgan Report

The majority of Americans are keenly interested in retirement income , but they are unable to make the connection between how their retirement savings translates to income. A recent survey and related report from JP Morgan indicates that 86 percent of 401k plan participants acknowledge that they need to know how much of their pre-retirement income they will be able to replace. At the same time, however, two thirds of the survey respondents indicate that they have no idea how much they need to...

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Structured Product Risks are a Hot Topic

Structured products are hot. U.S. sales rose 46 percent in 2010 to $49.5 billion. The appeal is understandable in the wake of the financial crisis. As folks in the indexed annuity business know, a floor of principal protection or "guaranteed" income combined with some upside potential is an easier sell in the current environment. Structured products also happen to be a hot topic with regulators. For example, FINRA just issued a warning to investors about structured products with principal...

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Risks in Reverse Mortgage Market Lead to Wells Fargo Exit

Bloomberg reports that Wells Fargo Bank is exiting the reverse mortgage market. Wells is apparently concerned about the risk of further declines in residential real estate prices. A reverse mortgage puts a bank like Wells Fargo in the role of lender with the home serving as the asset or collateral for the loan. Further declines in home values put the bank at risk since the asset base against which they are lending is shrinking while their obligation stays the same. A deflationary environment is...

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Richard Thaler on Annuities

Richard Thaler is a professor at the University of Chicago and he is a renown economist. Best known for his work in the area of behavioral finance , Thaler focuses on how human psychology affects economic decision making. Thaler recently wrote a piece on annuities which was published in the New York Times. The Times article focused on the annuity puzzle . The term annuity puzzle is used to describe the lack of annuity adoption (purchases) relative to what economists would consider rational...

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Product Changes Spur Variable Annuity Sales

U.S. variable annuity sales grew by 24 percent from the same period a year earlier. Variable annuity sales for the first quarter of 2011 totaled $38.9 billion. LIMRA reports that 16 of the top 20 variable annuity providers experienced sales growth relative to the previous year. Prudential led the industry with a 40 percent increase and $6.81 billion in variable annuity sales in the first quarter. Sales at MetLife increased 41 percent to $5.68 billion. The strong sales results are attributed in...

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Longevity Market Development Still in Infancy

A recent article in Bloomberg discusses the state of capital market solutions for the transfer of longevity risk . The reality is that the longevity market is still in its infancy and there are a number of obstacles that are affecting its development. One of the main hurdles involves the fact that longevity risk is very long-term in nature. Securities that mature over the course of 20 years are not hugely appealing to hedge fund managers who are providing quarterly performance reports to their...

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New Book Focuses on Landmark Longevity Study

Two health researchers delve into an eight decade longevity study conducted by a Stanford psychologist in the recently released book titled The Longevity Project . The Stanford longevity study follows 1,500 people over the course of their lives and chronicles each of those lives in great detail. The Longevity Project offers some findings that cut against the grain of conventional wisdom in the longevity field. An excerpt of the book ran in the New York Times recently and can be viewed by...

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VIX Futures Signal Rising Volatility

The Chicago Board Options Exchange (CBOE) Volatility Index (" VIX ") is trading at levels not seen since 2007. The VIX is 25 percent below its long-term average of 20. As discussed in a recent Wall Street Journal article, part of the recent dip is a result of a procedural quirk triggered by some investors selling contracts before the long weekend that just passed. Although current prices reflect little concern about volatility, VIX futures contracts suggest that stock market volatility could...

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Challenger Annuity Sales Double

Australia's largest annuity company, Challenger, reported record sales for the most recent quarter and increased its full year sales target by 28.5 percent. Challenger increased its forward-looking annual sales target from $1.4 billion to $1.8 billion. The company attributes part of the sales upsurge to a $5 million advertising campaign that was launchded this past February. The ad campaign focused on retail annuity sales. According to an article in The Australian: "Challenger expects life...

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