4 Facts to Know About Your Annuity Issuer

By Compuquotes Team on March 27th, 2008

You have decided that you will go for an annuity retirement option. You have identified your financial advisor. Then you should also be able to identify by this time your annuity issuer. Your annuity issuer has the paramount responsibility to ensure that you get what you expect in the future and that your long-term needs are met by the benefits you stipulated to be paid out to you when you retire. Your annuity issuer must ensure your security and protection at all times.

What should you know about your annuity issuer? Let us look at 4 facts that you need to know about the company that will make or break your retirement years.

1. Financial soundness and strength is a paramount consideration.

Your annuity issuer will be able to meet its promises to you if it is financially sound and stable. Its financial resources and management capabilities will allow for meeting its obligations in the near and long term. Assets, diversified portfolios, sound receivables, capital position and build-up, these are just some of the financial indicators that will have to be looked into in your choice of the annuity issuer that you will trust with your money.

Insurance and investment companies are continually evaluated by rating agencies for their soundness and capabilities. Look out for acceptable, if not above par, ratings of your annuity issuer from reputable rating agencies which include, but need not be limited to Standard and Poor's, Moody's, and Fitch.

2. Surplus redounds to sustainability and stability

Another indicator of the kind of security that your issuer offers is its ability to meet present and maturing obligations at a surplus. Liquidity and solvency indicators are very important. Looking at the bottom line, your annuity issuing company's total surplus or profits year-on-year provide factual information to you on how you can be assured that your expectations will be met in the future.

Surpluses are further buttressed by the kind of reserves that your issuer maintains. These determine rates of returns on assets and equities, not to mention accounting for surplus-to-asset ratios that need to adhere to industry standards. Look also at the debt-equity ratio or the ability to meet maturing obligations as another indicator of your issuing company's strength and stability.

3. Discipline and prudence in investment management

While your annuity issuer may be good at managing its own financials, it is also crucial that it is good at managing the financial wealth of others', particularly your wealth. Look at their investment portfolio diversity and stability. Your annuity issuer must be able to make sound investment decisions coupled with conservatism and prudence. Look at expense management as another proof of sound financial management that will ensure value for your money.

4. Putting your interests in the lead

The client is king - this must be the credo that your annuity issuer must live up to. The issuing company must ensure at all times that your protection, your requirements, your satisfaction are assured. This is a service relationship premised on mutual trust and confidence and the annuity issuer must exert all efforts to maintain the level of trust that you as the annuity holder has over the issuer.

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