Thursday, May 20, 2010

In the News: Equity Indexed Annuities

Forbes published an article on equity-indexed annuities (EIAs). It describes the history of and market for EIAs, compares EIAs with other fixed and variable annuities, and briefly weighs the advantages and disadvantages of EIAs.

An annuity makes periodic payments to the holder of the annuity. There are fixed annuities that make fixed payments and variable annuities that make variable payments. EIAs are similar to both fixed and variable annuities in that they pay an interest rate linked to an equity index and guarantee a minimum interest rate. EIAs are especially marketed to retirees by the insurance industry. EIAs are complex contracts whose true risks and costs are often obscured and the lack of SEC oversight and regulation have resulted in ‘unscrupulous’ sales practices of equity-indexed annuities issuers.

For more in-depth analysis, SLCG has written a paper on equity-indexed annuities. Investors can visit our dedicated website for related papers and notes.

No comments:

Post a Comment

Please keep comments appropriate. Malicious comments or solicitations will be removed.