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Old 11-10-2014, 05:28 PM   #61
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Tomorrow doesn't matter because they would receive your SPIA premium today and have to invest it today so the pricing of today's SPIAs reflect today's interest rate environment.

I agree they don't think in terms of individuals, they think in terms of cohorts or PYA (plan, year of issue, age) blocks of business. My earlier point was that if one person lives to 120 then that is no big deal, as long as the cohort mortality is consistent with mortality pricing assumptions which means that over lives in the cohort would need to die earlier than expected.
I don't think we are in disagreement here......actuarial calculations have been working since the 17th century and I predict they will continue to work...
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Old 11-10-2014, 06:09 PM   #62
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Ok I can see what you are saying. The annuity is priced based on what the insurance company invests in (bonds).

I guess I thought insurance companies would want to make more money by investing in stocks but maybe not. Thanks for education!


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Old 11-10-2014, 06:26 PM   #63
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Ok I can see what you are saying. The annuity is priced based on what the insurance company invests in (bonds).

I guess I thought insurance companies would want to make more money by investing in stocks but maybe not. Thanks for education!


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The advantage of my state defined benefit plan buy in is that the state pension fund doesn't limit itself to bonds and, of course, it has the back up of taxation. Last year the MA state pension plan had an investment return of 17%...so maybe an interest rate of 7% on their pension when I do the annuity calculation is a bit mean.
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Old 11-10-2014, 06:31 PM   #64
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I wish there was more of that meanness to go around!

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Old 11-10-2014, 08:37 PM   #65
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.........I guess I thought insurance companies would want to make more money by investing in stocks ...
Since equities are so much more volatile they have a capital requirement that is probably 15 times or more than the capital required for investment grade corporate bonds so insurers have significantly dialed back their general account equity holdings.
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Old 11-10-2014, 10:26 PM   #66
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Op here.

All. Thank you for taking the time to reply and discuss this topic. Really nice to engage in this discussion and learn from you all. My humble appreciation.
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