Lower Expenses for Lifetime Income Guarantees Do Not Guarantee a Better Retirement Annuity

July 12, 2018

Hedgeness, Inc. today released its first Expense to Benefit Ratio analysis of seven variable annuities ranked by retirement income distribution benefits.As the rankings show, lower expenses do not necessarily correlate to the value of a variable annuity. The analysis was performed using their patent-pending analytics software product Variable Annuity I.Q.

Unlike traditional ways of evaluating variable annuities, which often focus on singular features such as expenses, Variable Annuity I.Q. creates a holistic assessment of each variable annuity by generating a Benefit number that incorporates income guarantee rate, time of guarantee, asset allocation requirements, step-ups, cost of derivatives, and insurer’s credit rating. The calculation of the Benefit number is in large part derived by hypothetically recreating the annuity with its income benefits and evaluating the hedging costs for said income benefits in current and historical market scenarios.

The Benefit number is then compared to the actual total expenses of the variable annuity to derive an Expense to Benefit Ratio. The higher the Expense to Benefit Ratio, the more valuable is the interplay between expenses and benefits.*

The analytics support financial advisors in decision-making by analyzing and ranking variable annuities based on their income benefits and their suitability to retiree client goals. The analysis was performed with one hypothetical client scenario of a retiree couple electing a guaranteed lifetime withdrawal rider and taking income withdrawals after one year. As different client scenarios can have different results, Hedgeness customizes the analytics to an advisor’s clients’ specific circumstances such as age of withdrawal, desired income rate guarantee, and customized asset allocation among others, for a new purchase or 1035 exchange.

“This differentiated, data-driven platform creates an open discussion between advisor and client for selection of variable annuities,” said Kevin Porter, CRO at Hedgeness. “Our analytics bring transparency and simplicity to the complex VA marketplace, and creates a repeatable, efficient and robust sales process in line with fiduciary trends”.

The enriched-data analytics help insurance carriers gain multi-departmental insights into their products for internal efficiency and competitive advantage beyond raw data comparisons. These include income investment returns analysis with withdrawals, sequence of return scenarios and benefit hedging analytics among others. The analytics are done across the product’s matrix of different guaranteed rates as per annuitant’s age. 

“The variable annuity market has been lacking a standardized platform not only from the advisor’s perspective, but from the insurance carrier’s perspective too. Variable Annuity I.Q. addresses the VA market from manufacturing to distribution and seeks to align both processes with the needs of retiree clients,” said Jay Singh, CEO of Hedgeness.

*For summary report with methodology, data and disclosure, please go to

About Hedgeness

Hedgeness offers SaaS applications that provide analytics and solutions exclusively for investment portfolios focused on retirement income distributions. Enriched-data analytics, rule-based algorithms, and configurable technology provide powerful decision-making tools. Their offerings bring clarity to the critical stage of retirement income withdrawal on a secure, cloud-based platform powered by its proprietary Hedgeness Income Engine™ that incorporates the derivatives market. For more information about Hedgeness, visit

Hedgeness Inc. is a software company and not authorized to sell any investment advice. The information contained herein does not constitute investment advice offered by Hedgeness; is provided solely for informational purposes; does not constitute an offer to buy or sell a security; and is not warranted to be correct, complete or accurate.

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