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E1 — The Impact of Low Interest Rates on Insurance Company

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					        Investment Symposium
             March 2012



 E1: The Impact of Low Interest Rates on
Insurance Company Financial Statements




              Jesse Kling
            Warren Manners




              Moderator
              Jason Grosse
  The Impact of Low Interest
                         p y
 Rates on Insurance Company
     Financial Statements
                              March 2012




Presenter
Warren Manners, FSA, MAAA, CFA
Director, PwC Actuarial & Insurance Management Solutions (AIMS)




                                                                  2
Agenda
• Interest Rates – Historical Perspective

• Accounting Implications
     •   GAAP
     •   Stat
     •   IFRS
     •   Long term
         L    t


• Appendix

                                            3




Interest Rates – Historical Perspective




                                            4
            Are we in the tail?
      Clearly yes, if viewed over recent history
18
                         10 Year Nominal Treasury Yields
                                         1970 2011
                                         1970 ‐
                                                                            Nominal

15                                                                          Nominal Avg

                                                                                                         No, if viewed over longer time horizon
12
                                                                                                  18
                                                                                                                                        10 Year Treasury
                                                                                                  15
                                                                                                                                             1920 ‐ 2011
 9
                                                                                                  12

                                                                     6.92                          9
 6
                                                                                                   6
                                                                                                                                     5.01
                                                                                                   3
                                                                                                                                                                         2.20
 3
                                                                                                   0

                                                                                                  ‐3
 0
     1970         1980                     1990               2000                    2010        ‐6                                                                               Nominal

                                                                                                  ‐9                                                                               Nominal Avg

                                                                                                 ‐12                                                                               Real

                                                                                                 ‐15                                                                               Real Avg


                                                                                                 ‐18
                                                                                                       1920   1930     1940      1950       1960     1970         1980      1990          2000       2010



                     Source: www.multpl.com                                                                                                                                                      5




            Been there, done that
            • 10 yr nominal rate < 4% for 34 straight years from 1924 to 1957
            • 10 year nominal rate < 3% for 22 straight years from 1934 to 1955
            • The average nominal 10 year yield from 1920 to 1960 was just 3%.

                                                                                  10 Year Treasury
                                                                                          1920 ‐ 2011
                             16

                             15

                             14

                             13

                             12

                             11

                             10

                              9

                              8

                              7

                              6
                                           <4%
                              5

                              4
                                                     <3%
                              3

                              2

                              1

                              0
                                  1920        1930     1940             1950          1960         1970         1980          1990          2000           2010
                                                                                                                                                                                                 6
Source: www.multpl.com
 Fed track record in the face of double digit inflation
     9
                                                        10 Year Treasury
                                                            1940 ‐ 1950

     6



     3
                                  2.33

     0



    ‐3                                                            ‐2.65


    ‐6
                                                            1945‐1950: switch to consumption economy
    ‐9                                                                                             Nominal
                                 9 93
                                ‐9.93
                                                                                                   Nominal Avg
   ‐12
                                                                                                   Real
                   1940‐1945: WWII
                                                                                                   Real Avg
   ‐15
                                                                                    ‐15.66


   ‐18
         1940    1941    1942      1943          1944      1945       1946   1947        1948   1949      1950

Source: www.multpl.com
                                                                                                                 7




 Are we in a Japan scenario?

                                        2.23% as of YE11




                                                                                                                 8
    Accounting Implications




                                                                                                                           9




                                                                                                           Investment
                                                                                           Yes
                                                                                                            Contract



    GAAP Flow Chart                                     Start here                                        FAS 97 Invest.
                                                                                                            Contract


                                                              Mortality or          Revenue other
Rough outline of how contract                                  Morbidity      No      than from     No
                                                                                                           Investment
                                                                                                            Contract
classification under GAAP works                               Benefits?             Investments?


• General guidelines, not hard and fast rules                     Yes
                                                                                                             FAS 91

  Not always clear cut ‐ there are grey areas
• Not always clear cut there are grey areas
                                                             Terms Fixed             Contribution
                                                                                                           Participating
                                                                 and          Yes     Principle     Yes
Codification                                                 Guaranteed?             Dividends?
                                                                                                            Contract

On July 1, 2009 FASB launched the Codification                                                              FAS 120
Standards as the single source of authoritative U.S.                                     No                 SOP 95-1
generally accepted accounting principles (GAAP)
  • FAS 60 = Accounting Standard Codification                                          Limited               Non-
                                                                  No
    (ASC) 944 Financial Services – Insurance                                          Payment       No    Participating
                                                                                      Contract?           Contract (US)
  • FAS 97 = ASC 944
                                                                                       FAS 97
  • FAS 120 = ASC 944                                                                Limited Pay
                                                                                                             FAS 60

    SOP03‐1 = ASC 944
  • SOP03 1 ASC 944
  • SOP 95‐1 = ASC 944                                       AV good proxy
                                                                                     Embedded
                                                                                                            Additional
                                                               for Benefit    No                    No       Benefits
  • FAS133 = ASC 815 Derivatives and Hedging                   Reserve?
                                                                                     Derivative?
                                                                                                            Contract
  • FAS 91 = ASC 310 Receivables
                                                                  Yes                    Yes                SOP 03-1


                                                                                     Embedded
                                                             Universal Life
                                                                                     Derivative
                                                               Contract
                                                                                      Contract

                                                              FAS 97 UL               FAS 133                              10
     FAS 60 Loss Recognition
     Interest on assets backing reserves insufficient  Loss recognition  reduced earnings

           Initial reserve conservative                               Rates can fall far enough such that best
             relative to best estimate                                estimate exceeds conservative reserve
                                                                            leading to loss recognition
                                Locked-in Earned Rate = 6%           Locked-in Earned Rate = 6%
                                Best Estimate Earned Rate = 5%       Best Estimate Earned Rate = 3%



 Goodwill
                  Equity                                                                               Goodwill
  Other                                                                                                                 Equity
  Assets                                                                                                 Other
                                                                                                         Assets

   DAC
                                                                                                         DAC
                                                                       Loss Rec

                Prescribed                        Cushion                                                             Prescribed
               GAAP Liability                                                                                        GAAP Liability
                                                                                       Gross
Other Assets                                                                                          Other Assets
                                  Net GAAP                             Net GAAP       Premium
  backing                                                                                               backing
                                   Liability      Gross                 Liability     Valuation
  Liability                                                                                             Liability
                                                 Premium
                                                 Valuation


                                                                                                                           11




     Loss Recognition Conceptually
     Mathematical intuition
                     Net GAAP Liability                          <                  Gross Premium Valuation
                   GAAP Reserve ‐ DAC                            <           PV(Benefits) + PV(Settlement & 
                                                                          Maint Expenses) ‐ PV(Gross Premiums)
      GAAP Reserve + PV(Gross Premiums)                          <             PV(Benefits) + PV(Settlement & 
                                                                                   Maint Expenses) + DAC



     In words…
     In words
           A premium deficiency exists if the GAAP reserves plus PV of future gross 
            premiums are insufficient to cover PV of future benefits, PV of future 
                settlement and policy expenses, and the amortization of DAC


                                                                                                                           12
   FAS 60 Shadow Loss Recognition
   UCG drag on earned rate  tip reserve into loss recognition (shadow loss recognition ) 
    reduced equity (reflected in OCI)

Initial reserve conservative             Rates fall but not enough to                  Realization of UCG’s drags
  relative to best estimate               impose loss recognition                      portfolio earned rate down


Locked-in Earned Rate = 6%                Locked-in Earned Rate = 6%                  Locked-in Earned Rate = 6%
Best Estimate Earned Rate = 5%            Best Estimate Earned Rate = 4%              Best Estimate Earned Rate = 3%




                                                                                        Shadow LR
                                                                 Cushion
                     Cushion
                                                                                                           Gross
  Net GAAP                                   Net GAAP             Gross                  Net GAAP        Premium
   Liability          Gross                   Liability         Premium                   Liability      Valuation
                    Premium                                     Valuation
                    Valuation




                                                                                                                   13




   FAS 97/SOP03‐1 Reserve Increases
   Lower future interest margins and discount factors  increased reserves  reduced earnings

           As rates fall, discount factors decrease and future assessment fall;
            Consequently, reserves increase reducing earnings and equity
                     Current Earned Rate = 5%                  Current Earned Rate = 3%


                        Goodwill                                  Goodwill
                                                                                    Equity
                                          Equity
                         Other                                      Other
                         Assets                                     Assets


                          DAC                                        DAC



                                                                                    GAAP
                                          GAAP
                                                                                   Liability
                                         Liability
                      Other Assets                              Other Assets
                        backing                                   backing
                        Liability                                 Liability




                                                                                                                   14
            FAS 97/SOP03‐1 DAC Unlocking
                   PVEGP’s drop  Accelerated DAC Amortization  reduced earnings
 Goodwill


                                              A fall in rates can reduce future earnings (EGP’s)
                Equity
  Other
  Assets


   DAC
                                              causing DAC to be amortized off faster than
               Liability
               Li bili                        originally anticipated
Other Assets
  backing
  Liability




                 Current Earned Rate = 5%             Current Earned Rate = 3%              Unlocking Impact
                 k-factor = 80%                       k-factor = 95%




                                  PV EGP's
                                                                      PV EGP's
                      DAC Asset                        DAC Asset                       Expected DAC
                                                                                           Asset      Actual DAC
                                                                                                         Asset




                                                                                                                   15




            FAS 97/SOP03‐1 DAC Loss Recognition
                   PVEGP’s insufficient  DAC loss recognition  reduced earnings
 Goodwill
                Equity
  Other
  Assets


   DAC




               Li bili
               Liability
                                   Current Earned Rate = 5%                         Current Earned Rate = 3%
Other Assets
  backing
  Liability




A fall in rates
can reduce
future
earnings
(EGP’s) to
(       )                                                   EGP s
                                                         PV EGP's                       Loss
such a degree                                                                        Recognition
that they are                         DAC Asset
insufficient to
support the
                                                                                     DAC Asset          PV EGP's
full DAC asset

                                                                                                                   16
       FAS 60/FAS 97/SOP03‐1 Goodwill Impairment
       Lower future earnings  lower Goodwill fair value  Goodwill impairment
 Goodwill
                   Equity
  Other
  Assets


   DAC



                                      Current Earned Rate = 5%                  Current Earned Rate = 3%
                  Liability
                  Li bili
Other Assets
  backing
  Liability




A drop in
interest rates
will reduce
future earnings                                      Goodwill Fair
and potentially                                         Value
                                                                                  Step 1 Test
                                                                                    Failure
  d     the fair
reduce th f i                           Goodwill
value of                               Book Value
goodwill below
book value.                                                                        Goodwill       Goodwill Fair
                                                                                  Book Value         Value
Step 2 requires
a full BS fair
value exercise.
                                                                                                                  17




            FAS 133 Reserve Increase
            Lower risk‐free rates used to value embedded derivatives  higher reserves  reduced earnings
                                                                                        i = 2%
      The optionality in the embedded
      g                       g      g
      guarantees creates a high degree
      of convexity in the liability value
                                                                     i = 3%
    Goodwill
                      Equity
      Other
      Assets


      DAC




                     Liability
                                                    i = 4%                           Embedded
   Other Assets
     backing
                                                                                     Guarantee
     Liability
                                   i = 5%                                             Liability
                                                                  Embedded
                                                                  Guarantee
                                                 Embedded          Liability
                                 Embedded        Guarantee
                                 Guarantee        Liability
                                  Liability



                                                                                                                  18
   Other Near Term GAAP Implications for Insurers

Spread compression  NII performance expected to be well below targets
 reduced earnings




Policyholder “stickyness” for ITM policies now in the tail
 increased future claims  higher reserves needed  reduced earnings
                                                                                        19




   Stat Implications for Insurers
• Regulatory capital – Requirements being re‐engineered globally with an eye towards more 
  market consistent valuation


• Asset Adequacy – Need to model reserve requirements into the future assuming rates 
  remain low.  


• AG43 VA – Reserves for GMxB’s beginning to see large increases where the stochastic CTE 
  valuation is starting to dominate the Standard Scenario Amount


• AG38 ULSG – Insurancenewsnet.com 2/23/12: “Increasing concerns over potential tail risk 
  that may emerge given the prolonged and significant decline in interest rates amidst 
  aggressive pricing by some ULSG carriers over the past decade.  … As the low interest rate 
  landscape enhances the value of a secondary guarantee for policyholders there is 
  continued exposure to policyholder rationality.”

                                                                                        20
IFRS
   Current IFRS allows insurers to follow local GAAP which
   means discount rates can, for example, be based on either:
                         date,
      Rates as of issue date or
      Assets portfolio returns
   This can dampen the impact of persisting low rates.


   New evolving IFRS draft on insurance contract exposure (July
   2010) gives more weight to current market rates
      Increase liability sensitivity to interest rates and P&L
       volatility
      New IFRS 4 insurance standard expected to carry this
       forward


                                                                                                       21




Long Term Implications for Insurers
Financial
• Further compression – Rule of thumb: Every year 10 yr treasury < 2%, drag on NII will double 
  from 5% in 2012 to 10% in 2013 to 20% in 2014
  Cutbacks – Budgets already under pressure, most likely source for expense savings will be 
• Cutbacks Budgets already under pressure most likely source for expense savings will be
  work force reduction only exacerbating US unemployment
• Claims paying ability – Deteriorating ability to pay claims leading to increasing insurer failures
• Betting the farm – the temptation will be there to find yield wherever possible

Knowing the impact of sustained low rates ahead of time will help to guide long term 
                                strategic decisions

Strategic
• Product suite – Weight portfolio towards less interest sensitive products as well as those that 
  allow more risk to be transferred to PH’s
• Pricing – Reflect current environment in pricing models to meet return hurdles – trade off 
  with production targets
• Risk management – ORSA, Solvency II and SMI present an opportunity to incorporate risk 
  management into the organizations DNA
• Opportunistic M&A – seek expense savings through synergies
                                                                                                       22
    Appendix




                                                                                                                             23




                                                                                                             Investment
                                                                                             Yes
                                                                                                              Contract



    GAAP Flow Chart                                       Start here                                        FAS 97 Invest.
                                                                                                              Contract



• FAS 60 (1982) ‐ Primary authoritative standard for            Mortality or          Revenue other
                                                                                                             Investment
                                                                 Morbidity      No      than from     No
  guidance on GAAP for insurance companies                      Benefits?             Investments?
                                                                                                              Contract

• FAS  91 (1986) – Standard for products sold by 
  LIC’s that do not have significant insurance risk                 Yes
                                                                                                               FAS 91

  FAS 97 IC – Extends FAS 91 when additional 
• FAS 97 IC Extends FAS 91 when additional
  revenues exist
                                                               Terms Fixed             Contribution
                                                                                                             Participating
• FAS 97 UL (1987) – Introduced to address                         and          Yes     Principle     Yes
                                                                                                              Contract
  universal life‐type contracts (contract                      Guaranteed?             Dividends?

  assessments and/or benefit payments are neither                                                             FAS 120
  fixed nor guaranteed)                                                                    No                 SOP 95-1

• FAS 97 LP (1987) – Introduced to address 
  contracts paying premiums up front but receiving                                       Limited               Non-
                                                                    No
  benefits over an extended time                                                        Payment       No    Participating
                                                                                        Contract?           Contract (US)
• FAS 120 (1995)  ‐ Standard defining GAAP for 
  Mutual LIC’s – SOP 95‐1 is specific to participating                                   FAS 97
                                                                                                               FAS 60
                                                                                       Limited Pay
  policies
• FAS 133 (1998) – Introduced to address the                   AV good proxy                                  Additional
                                                                                       Embedded
  capital‐market‐like embedded derivatives in                    for Benefit    No
                                                                                       Derivative?
                                                                                                      No       Benefits
  certain insurance and annuity products – FAS 157               Reserve?                                     Contract

  (2011) extended FAS 133 to address a company 
                                                                                                              SOP 03-1
  own credit risk (i.e. non‐performance risk)                       Yes                    Yes

• SOP 03‐1 (2003) – Introduced to address 
                                                                                       Embedded
  contracts for which the account value was a poor             Universal Life
                                                                                       Derivative
                                                                 Contract
  proxy for future liabilities (those with back‐end                                     Contract
  losses or persistency bonuses or extra benefits 
  over and above the account value)                             FAS 97 UL               FAS 133                              24
 Application of GAAP

 FAS60                         FAS97                            SOP03‐1                         FAS120/                          FAS133/
                                                                                                SOP95 1
                                                                                                SOP95‐1                          FAS157

 nonPar Trad                   UL                               UL/ULSG                         Par Trad                         VA‐GMAB
 Insurance                                                                                      Insurance
 Term Life                     VUL                              VUL w/GMDB                                                       VA‐GMWB


 A&H                           SPDA / FPDA                      VA‐GMDB                                                          EIA

 Credit Life
 C dit Lif                     SPIA                             VA‐GMIB
                                                                VA GMIB                                                          EIUL

                               VA‐Base                          VA‐GLWB*

  * Guidance for GLWB has been under review over 2011 and there is currently no standard way of accounting for this guarantee.
  Some companies value it under the SOP 03-1 standard, some under the FAS 157 standard and some use a blend of standards




                                                                                                                                                                         25




The Impact of Low Interest Rates 
on Annuities
SOA Investment Symposium
SOA Investment Symposium
Jesse Kling
Allianz Life Insurance Company of North America (“Allianz”)
March 26, 2012




   The views expressed above reflect the views of Allianz Life Insurance Company of North America (or other entity name, as applicable) on as of the date referenced. 
   These views may change as market or other conditions change. This report is not intended and should not be used to provide financial advice and does not address 
       or account for an individual’s circumstances. Past performance does not guarantee future results and no forecast should be considered a guarantee either

           Products issued by and guarantees backed by the financial strength and claims‐paying ability of Allianz Life Insurance Company of North America.
  What Role will Annuity 
  Writers Play?
  More than ever, insurance 
   companies serve a critical role in 
   retirement
  39% of people believe they are more likely 
   to be struck by lightning than to receive 
   to be struck by lightning than to receive
      their full‐due from Social Security

Source: Allianz Reclaiming the Future Study, 2010




     Current Reactions and Long‐term 
     Implications
      Investment yields have fallen
              – Credited rates and benefits have followed
      How will business issued today behave as the 
       interest rate environment changes?
      Wh                     ’    i ?
       What are management’s options?
Current Reactions to the Low 
Rate Environment




How are Fixed Index Annuity 
Writers Reacting?
                          Average 
                             il bl
                          available new 
                          business 
                          credited rates 
                          have decreased 
                          nearly 50%




                         As of 12/31/11
                         Sources:
                         Caps/Fixed Rates: http://www.annuityadvantage.com
                         10‐year Treasury: http://www.treasury.gov

                         S&P 500 is an index of 500 stocks representing major US 
                         industrial sectors and is a trademark of Standard and Poor’s 
                         Financial LLC
Balancing Guarantees and 
Upside Potential
 Low issues rates ‐> Less management room
 Encountering guaranteed minimum rates
 Shifting contract holder behavior




Changes to the Annuity Marketplace
Fixed Indexed Annuities
 Bonuses, Guaranteed Minimum Withdrawal
  Bonuses, Guaranteed Minimum Withdrawal 
  Benefit (GMWB) Rollups, GMWB Payments

Variable Annuities
 Fees, GMWB Rollups, GMWB Payments
 Managed volatility funds




                     Optional riders are available at an additional cost.
How will business issued today impact 
companies in the future?




 Modeling Dynamic Contract Holder 
 Behavior
  We expect lapse rates to be influenced by the
   We expect lapse rates to be influenced by the 
   movement of market interest rates

   – New business rates may be more or less 
     attractive, depending on available investments

   – Contract holders will choose to either lapse or 
     persist based on available alternative investments 
     and relative attractiveness
                                               Illustrative Example
                                                Bonus FIA with GMWB rollup
                                                10‐year surrender charge schedule
                                                25% shock lapse assumed at end of surrender 
                                                 charge
                                                Sensitivity to interest rate sensitive lapses




                                               Illustrative Example: Base Pricing Lapses
                                               Base Scenario
                                               Cash flows are driven by shock lapse at year 11, with remaining contract 
                                               holders electing GMWB payments for some amount of time 
                                                              g        p y
                                               180k
           efit Cash Flow (per 100k premium)




                                               160k

                                               140k

                                               120k

                                               100k

                                                80k
Monthly Benef




                                                60k

                                                40k

                                                20k

                                                  k
                                                  1

                                                      3

                                                          5

                                                              7

                                                                  9
                                                                      11

                                                                           13

                                                                                15

                                                                                     17

                                                                                          19

                                                                                                21

                                                                                                     23

                                                                                                          25

                                                                                                               27

                                                                                                                    29

                                                                                                                         31

                                                                                                                              33

                                                                                                                                   35

                                                                                                                                        37

                                                                                                                                             39




                                                                                          Policy Month
                                                Illustrative Example: Low Rates ‐> Low Lapses
                                                       Low Lapse Scenario
                                                       Fewer contract holder lapse at end of surrender charge period as attractive 
                                                       alternative investments are not available; More contract holders persist and 
                                                       receive GMWB payments 
                                                       receive GMWB payments
                                                       180k
             it Cash Flow (per 100k premium)




                                                       160k

                                                       140k

                                                       120k

                                                       100k

                                                        80k
Monthly Benefi




                                                        60k

                                                        40k

                                                        20k

                                                          k
                                                          1

                                                              3

                                                                  5

                                                                      7

                                                                          9
                                                                              11

                                                                                   13

                                                                                        15

                                                                                             17

                                                                                                  19

                                                                                                        21

                                                                                                             23

                                                                                                                  25

                                                                                                                       27

                                                                                                                            29

                                                                                                                                 31

                                                                                                                                      33

                                                                                                                                           35

                                                                                                                                                37

                                                                                                                                                     39
                                                                                                  Policy Month




                                                Illustrative Example: Rate Spike ‐> High Lapses
                                                       High Lapse Scenario
                                                       Available competitor/alternative investment rates are significantly higher; More 
                                                          t t h ld            d i f         f th     lt    ti i      t    t
                                                       contract holders surrender in favor of these alternative investments
                                                       180k
                        Cash Flow (per 100k premium)




                                                       160k

                                                       140k

                                                       120k

                                                       100k

                                                        80k
        Monthly Benefit C




                                                        60k

                                                        40k

                                                        20k

                                                          k


                                                                                                  Policy Month
 Illustrative Example: Comparison
% Payments Made               Base                 50% Lapse           200% Lapse
     GMWB                     27%                     47%                   10%
   Surrender                  69%                     47%                   89%
     Death                     3%                      6%                   2%


Modified Duration             10.9 180k               15.3                  7.5

                                    180k
                                    160k
                                    140k
                                    120k
                                    100k
                                     80k
                                     60k
                                     40k
                                     20k
                                       k




 What will happen to lapse rates?
  We don’t know!
                              10‐Year Constant Maturity Treasury Yield
                              10 Year Constant Maturity Treasury Yield

      10%
       8%
       6%
       4%
       2%
       0%
         90

                 92


                         94

                                  96

                                              98

                                                      00


                                                              02

                                                                      04

                                                                              06

                                                                                      08

                                                                                              10
      19

              19


                      19

                               19

                                           19

                                                   20


                                                           20

                                                                   20

                                                                           20

                                                                                   20

                                                                                           20




                                                           Year
 Emerging Trends in Contract Holder 
 Behavior
Lower lapse rates on FIA
Lower lapse rates on FIA
 Fixed Indexed Annuity Owners Keep Holding On:
  Between 2006 and 2010, full surrender rates dropped by 40 
  percent
   http://www.lifehealthpro.com/2012/01/23/fixed‐indexed‐annuity‐holders‐keep‐holding‐on


           g
VA unlocking
 Contract holders Getting Smarter, Leading to Charges for VA 
  Products, Says Moody’s
   http://www.lifehealthpro.com/2012/01/04/contract holders‐getting‐smarter‐leading‐to‐
  charges




 What actions can be taken to 
 help counter low interest rates?
 Reducing available new issue benefits
    d i       il bl      i     b   fi

 Reducing profit targets

 Reducing distribution compensation
         g                 p
Prudent Pricing
 Need for Stochastic Analysis
     Must model dynamic contract holder 
   – Must model dynamic contract holder
     behavior
   – Must have interactive Asset‐Liability  Investment
                                             Decisions
                                                                 Cap/Rate Setting
                                                                    Decisions
     modeling

 Manageable Products                                Contract Holder 
                                                        Behavior


 Balancing Reinvestment Risk vs. 
  Disintermediation Risk
   – High rates ‐> Higher lapses ‐> Shorter 
     liability duration
   – Low rates ‐> Lower lapses ‐> Longer liability 
     d      i




Alternative Options
   Asset Allocation
   R       l    / t               t t t i
    Renewal cap/rate management strategies
   Product mix and diversification
   Hedging
   Reinsurance
           p            p g
    Inforce preservation programs
Take‐aways
 Annuities will remain critical to the 
  retirement space
  – Need for pooling of both financial and longevity risks


 Low interest rates today are leading to 
  product changes

 There is no “silver bullet”
  – Insurance companies face both reinvestment and 
    disintermediation risk
  – Prudent pricing and analysis over a broad range of scenarios

				
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