Annuity Rates Could Be On the Rise

According to Insurance & Financial Advisor’s Jaime L. Brockway, life insurance and annuity business is improving even though there are still some challenges ahead.  In the article “U.S. life, annuity sectors improve, but face obstacles,” Brockway says that A.M. Best improved the ratings outlook for the life and annuity industry to stable from negative.  The ratings were not increased to the level from before the financial crisis because the overall economy in the U.S. has been slow to recover, unemployment is high, and the housing market is still weak.  But the improvement to stable was based on a number of positive factors.  Credit spreads, equity market performance, asset impairments, and balance sheets all saw improvements leading to the increased rating.  The overall risk management and access to capital also saw positive gains.

Fixed annuity sales are stable, while variable annuity sales are increasing as equity markets show improvement.  While traditional deferred annuities are declining in sales, the large increase in sales of income and fixed indexed annuities counteract that decline.  The rising interest rates at the end of last year will help annuity portfolios and could eventually lead to increasing annuity rates.  Life insurers will likely be affected by delinquent mortgage loans and subprime loans.  While there are some obstacles for the life and annuity market to overcome in 2011, the industries have seen enough progress to be deemed stable by A.M. Best.

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