Variable Annuities - Flawed product design costs Old Mutual £150m
South African insurer, Old Mutual, has had to inject £150 million into its US life subsidiary as flawed product design in its Asian variable annuity (VA) business resulted in a £107 million loss in the first half of 2008 - losses which could increase further if equity markets decrease even more.
Old Mutual's US Life subsidiary has been selling Asian consumers VAs via Hong Kong-based HSBC Insurance since the start of May in 2007. This product contained minimum return guarantees based on an
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