Warren Buffett Bets On Annuities

annuity think tankThe last 12 months were a tough year for variable annuities.  Numerous insurance carriers who sell variable annuities were forced to sell, close shop, sell off blocks of business, buy back policies from some clients, and even give money back to some clients.  To put it mildly, it was a wild year for variable annuity carriers, employees, wholesalers, and even some clients.  Moreover, it has certainly been a time when more carriers are looking for ways out of the variable annuity business than there are looking to get into it.  With the exception of a few…


One gentleman who has made billions from buying things when no one else wants them is Warren Buffett.  He lives by the phrase, “Buy when there is blood in the streets”, and it has served him well over the years.  This week, Buffett and his conglomerate Berkshire Hathaway made a bet in the variable annuity industry.  In essence, the bet is that Buffett and Berkshire believe they can take on the longevity risks of variable annuities and outperform the exposure to mortality and longevity that so many carriers are worried about.  This was all done in a reinsurance deal worth $2.2 billion, where Berkshire will reinsure the risks associated with $4 billion of future claims for Cigna‘s variable annuity business.  Time will only tell if Buffett’s bet against longevity works out.  One, where he will certainly not be determined while he is in power at Berkshire.


To read all of the fine details of the Berkshire variable annuity deal, click here.

Warren Buffett speaking to a group of students...

Warren Buffett speaking to a group of students from the Kansas University School of Business (Photo credit: Wikipedia)

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