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The Markets September 30, 2007
Morningstar Alters Variable Annuities Ranking and Rating Methods
Morningstar, Inc., is revising the way it rates and ranks group variable annuities by comparing group variable annuities to open-end mutual funds rather than individual variable annuities.
Reported by Adrien Martin
According to the company, individual variable annuities tend to be structured differently than group annuities from a benefit and cost standpoint. Morningstar said it is not making any other changes to the basic structure or methodology of its individual variable annuity ratings and rankings.
“Even though group variable annuities are insurance offerings as opposed to investment offerings, they are similar to and typically offered alongside open-end mutual funds in defined contribution retirement plans,” explained John Rekenthaler, in a press release. “Given their similar structure and use, group variable annuities should be evaluated against open-end mutual funds to provide investors, advisors, plan sponsors, and consultants with a better way to assess a retirement plan’s investment options.”
Morningstar will display the new group annuity ratings and rankings in the October 2007 release of Morningstar Principia, its CD-based investment research and planning software. The new ratings will appear in other offerings in early 2008.
An overview of the group annuity rating and ranking methodology is available here.