Disintermediation: the hidden danger of the annuity market

Article Abstract:

Life insurance companies must minimize the risk of disintermediation, which occurs when annuity holders withdraw funds prematurely, often during periods of increased interest rates. Interest rate increases hurt the value of companies' fixed income investments, such as long-term bonds, putting companies at substantial risk due to disintermediation. Rate increases have the biggest impact on companies selling large numbers of deferred annuities and similar products. Companies can protect themselves by avoiding imprudent long-term investments, matching liabilities to assets, and by selling both low-risk and high-risk products.

Economic aspects, Insurance industry, Investments, Life insurance industry, Annuities

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Demographic and financial characteristics of small business owners

Article Abstract:

Most small business owners are more educated and wealthier than the average American, according to a survey of 1,006 businesses with less than 100 full-time employees by LIMRA International. The home ownership rate was 92% and 44% had investments of $100,000 or more. Small business owners are generally better insured than most Americans, with 88% carrying individual life insurance policies. They also used many other financial products, making them a good market for insurance agents. Women small business owners make up 21% of owners and are less likely to already have life insurance.

Small Business, Statistics, Surveys, Women-owned business enterprises, Women-owned businesses, LIMRA International Inc.

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The taxation of equity split dollar plans

Article Abstract:

The IRS ruled in Technical Advice Memorandum 96-04001 that equity split dollar life insurance arrangements are taxable to the employee on a year-to-year basis. Under equity split dollar arrangements, all growth in equity values belongs to the employee, once the time is reached that cash values exceed the amount needed to reimburse the employer for premiums. Comparison of possible tax treatments shows that the year-by-year method is the least favorable, but equity split dollar plans will still hold some appeal as a means of compensating and insuring executives.

Taxation, Compensation and benefits, Executives, Executive compensation, Split-dollar life insurance, Split dollar life insurance

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