NU Online News Service, Aug. 7, 2003, 12:45 p.m. EDT – Executives at AEGON N.V., The Hague, Netherlands, got tough on annuity buyers during the first half.
The recent low rates have helped the stock market and products linked to the stock market. But the low rates have hurt operations that sell long term disability insurance, long term care insurance, whole life insurance and other products that guarantee minimum levels of benefits for long periods.
The low rates have done the most obvious damage to fixed annuity operations, by cutting insurers’ spreads, or the gaps between the average rates that insurers pay to annuity holders and the average yields that the insurers earn on their own investments.
AEGON says it coped with the drop on its investment yields by cutting fixed annuity crediting rates enough to increase its average spread 0.03 percentage points, to 1.63 percentage points.
Net deposits for variable annuities amounted to $4 billion, up 47% from the second quarter of 2002, but net deposits for fixed annuities fell 51%, to $1.2 billion, AEGON says.
AEGON notes that it also got tough on the guarantees included with variable annuities.