Annuity News

Swiss Re to Issue First Longevity-Linked Cat Bond

Swiss Re is preparing to issue the first catastrophe bond linked to longevity risk . Catastrophe bonds ("cat bonds") are insurance linked securities that pass along risks to capital markets participants rather than an insurance company balance sheet. Cat bonds are more commonly structured for natural disasters such as earthquakes or hurricanes. The Swiss Re security is an eight year bond that will be based on the difference between the annualized mortality improvement in a UK-based age group...
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Policy Group Proposes Significant Changes to Social Security

A Democratic-leaning policy group known as Third Way has released a proposal that offers recommendations for trimming the U.S. federal budget deficit. Among the set of recommendations are proposed modifications to Social Security : Eliminate Social Security benefits entirely for individuals earning $200,000 or more in outside income and couples earning $400,000 or more. Begin to reduce Social Security benefits for individual incomes starting at $150,000 and couples with income of $250,000...
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Rising Longevity Driving Increases in UK Pension Liabilities

Reuters reports that corporate pension obligations in the UK are increasing as a result of improving life expectancies. According to consultancy Aon Hewitt, there has been a "huge amount of improvement in terms of life expectancy assumptions" over the past 10 years. The flipside of this increasingly longevity is the risk that it presents to those who must finance greater longevity. For example, it is estimated that rising rates of longevity contributed 5 billion pounds to British corporate...

Retirees Suffer in Current Low Interest Rate Environment

Financial Times personal finance columnist Matthew Vincent discusses the challenges that retirees face in the current economic environment. The gist of the story is that these are brutal times for savers who need to generate interest income to fund current spending needs. In other words, these are brutally difficult times for many retirees.
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GlaxoSmithKline Purchases Bulk Annuity Contract for Pension Plan

The Trustees of the GlaxoSmithKline pension plan have entered into a bulk annuity purchase agreement with Prudential UK. GlaxoSmithKline ("Glaxo") will purchase bulk annuities from Prudential to cover approximately 15 percent of its UK defined benefit pension plan. The total value of the transaction is estimated to be approximately 900 million pounds Sterling.

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.

MetLife Puts a Stop to New Long Term Care Sales

MetLife is reportedly discontinuing the sale of long term care insurance beginning January 1, 2011. The largest U.S. life insurance company cites "financial challenges" facing the industry in the current environment. According to a recent Bloomberg article:

ING Preparing for IPO of U.S. Insurance Business

The Dutch financial services company ING Groep is preparing for an initial public offering (IPO) of its U.S. based insurance business. The company agreed to split its banking and insurance businesses when it gained approval from the European Commission to receive government funds during the financial crisis. ING has spent considerable time and resources addressing issues related to its U.S. variable annuity business, and the company feels that these efforts are almost complete with the business...

Operation Twist and the Yield Curve

There is a great op-ed in Bloomberg by Caroline Baum that discusses the implications of QE2 and other recent asset purchases made by the Fed. Operation Twist refers to the last time the Fed tried (and failed) to manipulate the yield curve (the spread between the Fed's overnight rate and long term rates that are determined by the market) in 1961.