The competition to offer rich new variable annuity guarantees might be forcing some midsize U.S. VA players off the field.[@@]
Andrew Henckler, an analyst at Moody’s Investors Service, New York, comes to that conclusion in a review of the VA market.
For VA issuers, profit margins tend to be low and distribution costs tend to be high, Henckler writes.
“The recovery of the [sales] commissions paid and the ultimate profitability of VA blocks typically is contingent on assumptions that asset values and asset-based fees will increase 7% to 10% annually and that the policies will remain in force for several years,” Henckler writes.