TITLE

Real-World Index Annuity Returns

AUTHOR(S)
VanderPal, Geoffrey; Marrion, Jack; Babbel, David F.
PUB. DATE
March 2011
SOURCE
Journal of Financial Planning;Mar2011, Vol. 24 Issue 3, p50
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper offers the first empirical exploration of fixed indexed annuity (FIA) returns based on actual contracts that were sold and actual interest that was credited. FIA5 are designed to have limited downside returns associated with declining markets, and achieve respectable returns in more robust equity markets. Studies that have criticized FIAs are usually based on hypothesized crediting rate formulae, constant participation rates and caps, and unrealistic simulations of stock market and interest rate behavior. When actual policy data are used, the conclusions change. The returns of real-world index annuities analyzed in this paper outperformed the S&P 500 Index over 67 percent of the time, and outperformed a 50/50 mix of one-year Treasury bills and the S&P 500 79 percent of the time. Our study is exploratory, because although it is based on actual contracts and actual crediting rates, our policy data set is neither randomly selected nor comprehensive based upon data provided by 15 FIA carriers.
ACCESSION #
59539437

 

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