NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Accounting and Actuarial Smoothing of Retirement Payouts in Participating Life Annuities

Raimond Maurer, Olivia S. Mitchell, Ralph Rogalla, Ivonne Siegelin

NBER Working Paper No. 20124
Issued in May 2014
NBER Program(s):   AG

Life insurers use accounting and actuarial techniques to smooth reporting of firm assets and liabilities, seeking to transfer surpluses in good years to cover benefit payouts in bad years. Nevertheless, these techniques been criticized as they make it difficult to assess insurers' true financial status. We develop stylized and realistically-calibrated models of participating lifetime annuities, an insurance product that pays retirees guaranteed lifelong benefits along with variable non-guaranteed surplus. Our goal is to illustrate how accounting and actuarial techniques for this type of financial contract shape policyholder wellbeing, along with insurer profitability and stability. Smoothing adds value to both the annuitant and the insurer, so curtailing smoothing could undermine the market for long-term retirement payout products.

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Document Object Identifier (DOI): 10.3386/w20124

Published: Maurer, Raimond & Mitchell, Olivia S. & Rogalla, Ralph & Siegelin, Ivonne, 2016. "Accounting and actuarial smoothing of retirement payouts in participating life annuities," Insurance: Mathematics and Economics, Elsevier, vol. 71(C), pages 268-283. citation courtesy of

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