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Its also the economics of annuity reserves.
That 3 year old contract is funded with underlying bonds that have a much lower yield vs. the new bonds they would purchase for a new annuity contract.
Even more so if its annually renewable and not locked in for another 3 years.
Some do, some don't.Update, I was also told I could do an internal transfer at Oxford for any MYGA excepting a 4 year term(my current policy term), for the rates in effect now.
This would seem to save Oxford from paying any commission should I pick this option.
I'm doing a 1035 because I don't like the way they do business. If all annuity companies do this, I have a lot of 1035's in my future.
Yeah, gets confusing on my brain.That is kind of the point. Perhaps I see it incorrectly though.
New money locks in new Bonds at currently higher rates (regardless of the duration).
The carrier must set aside new reserves based on new money.
Old money is locked in at that old rate.
On Bonds are currently trading at a discount....
When enough old money comes off the books, they have to sell some off those old Reserves/Bonds... at a discount.
That is why I mentioned annually renewable vs. locked-in for another Term.
If locked-in, it seems they could afford the keep the rate higher.
If annually renewed, the client could jump ship and force them to sell those Reserves/Bonds at a discount.
Im sure its much more complicated than that in reality. But that is how I've always viewed it based on my limited knowledge of how insurers place Reserves.
Be careful with 1035 exchanges. Some carriers fail to report cost basis to the next carrier & if not reported, new carrier enters 0 for cost basis, meaning future withdrawals or death would report 100% as taxable gain.Update, I was also told I could do an internal transfer at Oxford for any MYGA excepting a 4 year term(my current policy term), for the rates in effect now.
This would seem to save Oxford from paying any commission should I pick this option.
I'm doing a 1035 because I don't like the way they do business. If all annuity companies do this, I have a lot of 1035's in my future.
Yeah, gets confusing on my brain.
It just seems to me that some carriers must be experiencing net losses in their MYGA holdings if both their new rate & renewal rates are not competitive for independent agents to write their new stuff and not replace the renewal stuff they have on the books. Would seem less expensive to keep some stuff on the books. I am not talking of the really old contracts from 20-40 years ago with lifetime guarantees of 3, 4, 4.5%