Money used to purchase fixed and indexed annuities are primarily invested in bond. There is a small amount of investments placed in other assets like commercial real estate, mortgages, and stocks.
Indexed annuities also invest in a small amount of index derivatives put and call options. This makes up less than 10% of the total holdings.
An annuity is a contract with an insurance company. The company invests the funds it receives in a variety of ways. The annuitant, you, can choose how that money is to be invested or you can rely upon the company to invest the funds. If you chose to have the company invest the funds, the company will provide you with guarantees in the contract. If you select the investments, the results are not guaranteed.
Agent Owner, Gilmore Insurance Services, Marysville, Washington State
What do annuities invest in? Well the easiest way to find out is to review the insurance company's financial statements. This will give you a good idea of where they look to gain returns from. Usually insurance companies are risk adverse with their investment choices and tend to look for long term investments. This is also a reason they have attached such a long surrender window on annuities. The idea is to invest long term for annuities, rather than short term.
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Indexed annuities also invest in a small amount of index derivatives put and call options. This makes up less than 10% of the total holdings.