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According to LIMRA, most new variable annuities are sold with some form of living benefit rider that assures the buyer that certain benefits will be available regardless of market performance. However, some guaranteed benefits are not paid in a cash lump sum, making it difficult for the lay investor to determine the value of the guarantee. This paper provides a methodology for determining the value of a guaranteed lifetime withdrawal benefit (GLWB) as a simple rate of return on the amount invested in the variable annuity and identifies five of the most common misperceptions about the GLWB feature. [ABSTRACT FROM AUTHOR]

This paper attempts to value the insurance provided by the Pension Benefit Guarantee Corporation (PBGC) under Title IV of ERISA (1974). The author's approach is to use an option pricing framework to develop two put option valuation models. After an introductory overview of the issues and problem, the author presents two put models in Section I of the paper: (1) One model under the assumption of voluntary termination by the firm and (2) a second model assuming bankruptcy (involuntary termination) on the part of the firm. Section II of the paper contains some empirical estimates for the value of PBGC insurance using the models from part one plus some actual pension data from a survey reported in Pensions and Investment Age (July 11, 1983). The author concludes that the actual value of PBGC insurance to a company is fairly represented by the value of the put option and is bounded by the two put option values developed under the voluntary and bankruptcy scenarios of Section I. He also concludes that simply taking the difference between the actuarially determined value of the accrued benefits (A) and the value of assets in the pension fund plus 30 percent of equity (F + 0.3E) is a very low estimate of the real value of PBGC insurance to major U.S. corporations. [ABSTRACT FROM AUTHOR]

The increasing use of financial instruments (FIs) has been one of the major innovations in European Structural and Investment (ESI) Funds in recent years. Equity, guarantee and loan instruments are more and more used instead of grants to provide public support. This article provides some background information in relation to the difficulties of implementing financial instruments in the programming period 2007-2013. It also assesses to what extent the legal framework for using these instruments in the programming period 2014-2020 may address the weaknesses identified by the European Court of Auditors (ECA or Court). [ABSTRACT FROM AUTHOR]

Compounded Increasing Whole Life Insurance Policies (CIWLIPs) have underpricing and underreserving problems, which are aggravated by mortality improvements. This paper illustrates these problems by analyzing the accumulated surplus, and subsequently, applying the Lee-Carter model to quantify the longevity risk. In order to quantify the risk of the CIWLIPs, a standard formula is proposed to calculate the risk-based capital requirements of insurance risk and estimate the associated risk factor. The findings reveal that the product incurs significant underpricing and underreserving problems whenever actuaries fail to take full account of the product characteristics, and mortality improvements further aggravate these problems. The insurance risk factor for this type of policies is significantly larger than that of traditional whole life insurance policies and the risk factor decreases when the product characteristics are appropriately considered. Therefore, it is suggested that insurance regulators should ensure that the product characteristics as well as mortality improvements are appropriately considered in pricing and reserving. [ABSTRACT FROM AUTHOR]

Strategies of passive management in portfolio selection are based on imitating the performance of a specific benchmark (that is designed in such a way that it approximates as best as possible the value of the market portfolio) with the intention of achieving minimum discrepancy between the benchmark performance and the tracking portfolio performance. In the paper attention is given to portfolio selection based on partial replication of the S&P 500 Index. In contrast to the traditional Markowitzian approach, the key criterion of portfolio selection is minimization of the quadratic tracking error variance. In the empirical exercise, out of the stocks represented in the S&P 500 Index one stock was chosen randomly by each of the 10 GICS sectors and this selection of 10 stocks were available for portfolio selection. On the scale of performance, the quadratic index tracking strategy can be seen superior to the traditional Markowitzian approach. [ABSTRACT FROM AUTHOR]

The article presents an October 2013 report from the Employee Benefit Research Institute (EBRI) regarding the changes in the account balances of 401(k) retirement plan participants within four-year period of 2007-2011 following the financial crisis. Topics discussed include individual retirement accounts (IRAs), investment returns, and guaranteed investment contracts (GICs).

The article focuses on the reforms in the Italian Bankruptcy Law (IBL) which provide major deviation from rules of the corporate law. It mentions that the corporate capital which is the core of the Italian Corporate law has various functions including a general guarantee for the creditors, a fixed investment and a system to inform the creditors about the wealth of the company. It states that the Section 182-sexiesof the IBL reflects on the duty of the directors during corporate restructuring.

Equity ownership by public pension funds (PPFs) is widely used in the literature (see, e.g., Cremers and Nair ; Dittmar and Mahrt-Smith ) as a measure of the strength of shareholder monitoring/governance. This paper raises caution on such practices by illustrating an inverted- U shape relationship between PPF ownership and firms' future performance, measured by stock returns and operating performance: during 1985-2005, future performance first increases, then declines in aggregate equity ownership by PPFs. Our results suggest that PPFs' presence is consistent with shareholder value maximization when they have moderate influence on firm management, whereas excessive PPF ownership may facilitate PPF managers' pursuits of political interests and destroy shareholder value. Therefore, it is important to impose an upper bound to PPF ownership when measuring the strength of shareholder monitoring/governance. [ABSTRACT FROM AUTHOR]

This study compares the properties of the Global Industry Classification Standard (GICS) with three alternatives: Standard Industrial Classification, North American Industry Classification System, and Fama-French classification. First, we demonstrate that GICS results in more reliable industry groupings for financial analysis and research; in particular, we find that estimations of performance-adjusted discretionary accruals (PADA) based on GICS significantly outperform estimates derived using each of the three alternative classifications systems in capturing discretionary accruals. Second, we show that the difference between GICS and the other systems can provide significantly different results, and hence different inferences, in empirical studies that rely on industry classification. Specifically, we revisit findings by Teoh et al. (J Financ 53[6]:1935-1970, ) and assess the conclusion that initial public offering (IPO) issuers with high abnormal accruals during the IPO year experience subsequent poorer long-term stock performance than issuers with low discretionary accruals do. We find that this result disappears when PADA estimates are based on GICS. Our results call for serious consideration of using GICS classifications in research, either in the primary analysis or as a necessary corroboration. [ABSTRACT FROM AUTHOR]

Previous research has examined the demand for life insurance policy loans using aggregate policy loan data. In contrast, we use a detailed household survey data set containing life insurance and policy loan information to alternatively, and in some cases more directly, examine the four hypotheses traditionally associated with policy loan demand. Our research provides the first U.S. evidence (in the post–World War II period) in support of the policy loan emergency fund hypothesis. In particular, we find that the more detailed emergency fund proxies used here reveal a significantly positive relation between loan demand and recent expense or income shocks. [ABSTRACT FROM AUTHOR]

We investigate the relationship between pension fund governance and investment performance. For this purpose, we develop the Swiss Pension Fund Governance Index (SPGI) which is a standard metric for the governance quality of Swiss pension funds. The empirical analysis is based on a sample of 96 pension funds with total assets of more than CHF 190 billion. We find evidence for governance issues in the area organization and target setting. Our results support the widespread hypothesis of a positive relationship between pension fund governance and investment performance. [ABSTRACT FROM AUTHOR]

This contribution aims at enriching the debate on the priority of unfunded pension rights in the case of a sponsoring firm's bankruptcy. Starting from the idea that pension promises in DB schemes are part of a financial contract between a sponsor and participants to a sponsored pension plan, we argue that plan participants are not ordinary creditors and should be given the same priority as other claimants in the event of underfunding and a sponsoring firm's bankruptcy. We build up a model consistent with this view, which gives room for more participants' involvement in pension fund management. We assume that the sponsoring firm chooses the optimal share of a pension fund deficit that it commits to cover in case of underfunding, while participants choose the contribution rates that maximize their expected utility. We show that two regimes govern the pattern of the relationship between the optimal level of funding chosen by the sponsor and the optimal contribution rates chosen by the plan participants. Allowing plan participants to determine their desired contribution rates gives the entrepreneur the proper incentive for funding the pension plan. In a certain way, our pension contract resembles a cash-balance contract and our model suggests that more security can be given to plan participants in their pension savings by offering them a cash-balance plan which states a priority of unfunded pension rights in case of a firm's bankruptcy. [ABSTRACT FROM AUTHOR]

Copyright of Ciencia e Ingenieria Neogranadina is the property of Ciencia e Ingenieria Neogranadina and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Coming out of the perfect storm of a bear market in equities, poor credit markets, and low interest rates, the U.S. insurance industry faced a number of new realities based on changing consumer demand and expectations. Consumers wanted new guarantees in their investments, choice and flexibility in distribution, and simplicity in their financial products. The baby boomers echo this new consumer demand through their desire for retirement security. The life insurance industry is well positioned to deliver to this population. No other financial services industry can help individuals accumulate wealth, protect its value, convert the wealth into lifetime income, and transfer it to future generations like the life insurance industry can. There are risks ahead for the U.S. life industry; however, it can take advantage of opportunities in the future if it can continue to put consumer needs first.The Geneva Papers (2007) 32, 58–61. doi:10.1057/palgrave.gpp.2510113 [ABSTRACT FROM AUTHOR]

Copyright of Canadian Tax Journal / Revue Fiscale Canadienne is the property of Canadian Tax Foundation and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

The article focuses on issues related to investment protection in Germany. Topics discussed include occurrence of investor-state dispute settlements (ISDS) based on Transatlantic Trade and Investment Partnership (TTIP) or the Comprehensive Economic Trade Agreement (CETA). Topics discussed include bilateral investment treaties of the German government, transfer of Foreign Direct Investment (FDI) control to the European Union (EU) and effects of changes in investment treaties on the government.

Analyzes the relevance of loan guarantees to the evaluation of financial contracts. Forms of private and vulnerable loan guarantees; Analysis of the guarantee by numerical-integration techniques; Inadequacy of the sum of lognormal variables for pricing private guarantees.

When a portion of a qualified plan participant's plan balance is invested in life insurance, the insurance becomes a plan asset subject to the overall qualified plan provisions. Qualified plan operational rules and regulations not generally applicable to life insurance policies thus come into play when life insurance is used as a plan investment. Certainly, life insurance professionals who have a general understanding of these requirements have an advantage in the market, as they are better able to relate to the issues which employers, advisers and participants face regarding life insurance in a qualified plan. [ABSTRACT FROM AUTHOR]

Presents information on guaranteed investment contracts (GICs) owned by corporate employees of the United States. Information about 401(k) savings plan which allows employees to choose among various equity and fixed-income investments; Why GICs can be risky; Comparison between GICs and BICs; Information on the nature of GICs and BICs; Warning to buyers of GICs; Conclusion.

The article focuses on the development of bond portfolio management in pension funds to promote risk reduction. In creating a balance between equity and fixed-income securities, guaranteed investment contracts and management strategies related to immunization are not advisable since they start at high level of riskiness and then lessen eventually. It is suggested that the right approach is to choose an asset mix and a degree of risk for the fixed-income portion which is proportional to the total portfolio.

This article presents the author's views on pension funds. The increase in self-insured or non-insured pension trusts can be attributed largely to contentions by investment men and individual pension consultants pretty generally that the pension trust method is cheaper than the insurance company plans. Unfortunately, the cost of any pension plan will only be known when all the facts have actually occurred. Consequently, the funding of any pension plan is an estimate that must be based on theoretical assumptions as to what future mortality, interest and expense may be. An anticipated future withdrawal rate may also be assumed if it is expected that there will be little, if any, future vesting in the plan.

El artículo discute cómo iniciar una cuenta de inversión con un enfoque en el establecimiento de un contrato en los mercados financieros, políticas y estrategias de inversión, derechos y obligaciones de los firmantes, jurisdicción que incluye temas relacionados con el número de identificación del cliente, ciudadanía, información financiera, derechos de propiedad del cliente y administración de activos financieros.

Analyzes the investment opportunities presented by guaranteed investment contracts (GIC). Plans offered by GIC; Critical features of GIC; Reasons for the market's reevaluation of the financial stability of insurance companies behind GIC.

Reprints the article `GICs: A Solid Choice for Pension Plans,' which appeared in the February 1992 issue of `Management.'