A.1 Immediate Annuities

Question 1

NAIC definition of immediate annuity

Answer 1

immediate annuity = an insurance contract that provides payments at regular intervals for a specified period

• first payment ,must be paid <= 13 months from annuity issue date
• succeeding payments are paid annually for at least 5 years
• each payment must be <= 115% of prior years payment

Question 2

Types of immediate annuities

Answer 2

• Life annuity
• certain annuity
• life with a certain period
• refund annuity - a life annuity that gts total payments >= purchase price

can result from:

• structured settlements
• DB opting for annuity than lump sum

Question 3

Variable immediate annuities

Answer 3

• variable immediate annuity = payments are not fixed. vary with investment performance of the SA
• payment = prior payment * (1 + i actual) / (1 + i AIR)
• AIR = assumed investment return

Question 4

Valuation steps and assumptions for immediate annuities

Answer 4

1. PV the future annuity benefits using the valuation mortality table and IR
2. if CSV = 0 then reserve = step 1
3. otherwise; do CARVM on projected CSVs and hold the greatest PV of CSV if higher than step 1

Assumptions
- use generational mortality table that accounts for mortality improvement