How Do Insurance Companies Hedge Annuities? 
Annuities are written by life insurance companies . Life insurance companies also issue life insurance policies . When people live a long time , death claims are delayed and the company continues to get premiums . If those same people also have an annuity , the extension of the death claim helps finance the annuity . Since there is rarely a one to one example like this , you know that in a group of 100 people age 65 , someone is likely to die in the first year while four or five will make it to 100 . The money paid for the short benefit offsets the expense of the longer benefit . This is all actuarial science . 