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Finance - Investments Sub-forum: Non-Actuarial Personal Finance/Investing

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  #1  
Old 11-24-2009, 10:09 AM
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Default Falling interest rates and annuities....

How does falling interest rates affect annuities? For example, Japan has been facing major deflation for about a year, thus the Central Bank of Japan drastically lowered the interest rates (~0.1%!!), yet not much improvement can be seen. I'm just wondering how Japanese annuities would be affected due to deflation and lowered interest rates.
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  #2  
Old 11-24-2009, 11:01 AM
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Japan has been facing major deflation for about a year
Japan has had 2 lost decades since the Nikkei hit a high of just under 39,000 in late December, 1989...and in spite of all manner of monetary and fiscal stimulus, they are still in a deflation...perhaps we should heed the ghost of Christmas future and examine our own stimulus policies

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Central Bank of Japan drastically lowered the interest rates (~0.1%!!), yet not much improvement can be seen.
why would you expect improvement to come from artificially lower interest rates and from erecting bridges to nowhere? Japan has had a zero interest rate policy for over a decade and they started quantitative easing in 2001...these policies have been a failure for them, and they'll be a failure for the USSA
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  #3  
Old 11-24-2009, 12:30 PM
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Generally speaking, the lower the interest rates available in the marketplace, the higher the price of annuities.
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Old 11-24-2009, 02:10 PM
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Question Obamian Typo

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...these policies have been a failure for them, and they'll be a failure for the USSA
United Socialist States of America?
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Old 11-24-2009, 06:12 PM
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Generally speaking, the lower the interest rates available in the marketplace, the higher the price of annuities.
That's exactly what I was looking for, thanks for the info!

The reason I brought up such an irrelevant topic was because I had to write an essay on any financial article.

I picked this:
http://www.economist.com/displayStor...ry_id=14943913

My prime objective is to explain how deflation and undervalued interests rates in Japan affects Japan's financial framework. Annuities was one of the things that were a bit cloudy, but glad that that's now clear.
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Old 11-25-2009, 08:32 AM
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Do you understand why lower interest leads to higher premiums?

Look at it this way. The insurance company has two sources of money to pay the annuity benefits: Premiums and investment income.
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My latest favorite quotes, updated Nov. 20, 2018.

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JMO is right
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Originally Posted by campbell View Post
I agree with JMO.
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Originally Posted by Westley View Post
And def agree w/ JMO.
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Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
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Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
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Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.

Last edited by JMO; 11-25-2009 at 09:02 AM.. Reason: repairing a very sloppy statement
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Old 11-25-2009, 08:38 AM
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Do you understand why lower interest leads to lower premiums?

Look at it this way. The insurance company has two sources of money to pay the annuity benefits: Premiums and investment income.
You mean "leads to higher premiums", I believe.
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  #8  
Old 11-25-2009, 09:02 AM
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You mean "leads to higher premiums", I believe.
Yeah, what I said originally. I'll go edit my comment.
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Pluto is no longer a planet and I am no longer an actuary. Please take my opinions as non-actuarial.


My latest favorite quotes, updated Nov. 20, 2018.

Spoiler:
I should keep these four permanently.
Quote:
Originally Posted by rekrap View Post
JMO is right
Quote:
Originally Posted by campbell View Post
I agree with JMO.
Quote:
Originally Posted by Westley View Post
And def agree w/ JMO.
Quote:
Originally Posted by MG View Post
This. And everything else JMO wrote.
And this all purpose permanent quote:
Quote:
Originally Posted by Dr T Non-Fan View Post
Yup, it is always someone else's fault.
MORE:
All purpose response for careers forum:
Quote:
Originally Posted by DoctorNo View Post
Depends upon the employer and the situation.
Quote:
Originally Posted by El Actuario View Post
Therapists should ask the right questions, not give the right answers.
Quote:
Originally Posted by Sredni Vashtar View Post
I feel like ERM is 90% buzzwords, and that the underlying agenda is to make sure at least one of your Corporate Officers is not dumb.
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