Compare Variable Annuities With Non-Guaranteed Portfolios: Idea File

The company is using a variety of data streams, including streams reflecting the performance of the options contracts used inside variable annuities, to model the performance of the annuities preloaded into the system, and of other real and hypothetical products and portfolios.

Hedgeness says the system can handle comparisons involving factors such as income guarantee rates, total expenses, asset-allocation requirements and step-up frequency; the interaction of annuity holder age and withdrawal rates; and the annuity holder's level of risk tolerance.

Some insurers are beta testing the system now. A typical advisor might have a version of the system that shows about 60 different products, and about three different share classes for each of those products, Singh said.

Singh said he thinks Hedgeness has done a good job of bringing together data streams, performance modeling systems, and techniques for quantifying the value of annuity benefits guarantees.

"That's how we can get an apples-to-apples comparison," Singh said. "What should it cost to have these benefits?"

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