Determinants of the crediting rate for immediate annuities

We examine the sharing rule of investment performance between insurers and policyholders for the immediate annuities of the life insurance company. Using the panel regression model based on the life insurance data, including the crediting rates of immediate annuities, we investigate the impact of excess returns and other variables such as benchmark return, new business ratio, security investment ratio, and total assets on the insurer's share. Our empirical analysis results suggest the appropriate strategy for sharing investment performance. We confirm that excess returns, an indicator of insurers’ efforts to operate immediate annuities, are a major factor in explaining insurers' shares. This result indicates that insurers can demand a high share as a fraction of investment returns corresponding to their efforts if excess returns increase. On the other hand, benchmark returns and new business ratios negatively correlate with the insurer’s share. In addition, the higher the security ratio, the more improved the insurance company’s bargaining power, which has a favorable impact on the insurer’s share.