Filed Under:Annuities, Sales Strategies

Are annuities too risky for insurance companies?

Photo credit: Idea go
Photo credit: Idea go

Are annuities too tough a business for insurance companies to be involved in?

The question naturally arises from Canadian life insurer Sun Life Financial’s decision to unload its U.S. annuity business through a $1.35 billion sale to Guggenheim Partners’ Delaware Life Holdings unit.

Moody’s put Sun Life’s Canada-based holding company on review for upgrade, saying the proposed transaction “is positive to the credit profile of SLF as it will eliminate the group’s exposure to the chronically poor earnings performance of the U.S. subsidiary, possibility of future charges associated with the U.S. subsidiary’s business, as well as the equity market and interest rate sensitivity of the run-off businesses.”

Mike Henkel of Achaean Financial, a developer of retirement advice software, agreed with Cooperstein that variable annuities are especially challenging to hedge.

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Nichole Morford

Nichole Morford
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