What has the most effect on the current interest rate used in a fixed annuity?

The most significant factor influencing the current interest rate used in a fixed annuity is primarily the earnings of the insurance company. Fixed annuities are contracts between the insurer and the policyholder, where the insurer guarantees a fixed rate of return on the premiums paid. The interest rate that the company can offer is closely tied to its overall earnings, which stem from its investment portfolio, administrative efficiencies, and other operational revenues.

When an insurance company performs well and generates higher earnings, it is typically able to offer more competitive rates on its fixed annuities to attract customers. Conversely, if the company is underperforming or if its investment returns are low, it might have to lower the interest rates it offers on annuities to manage its financial health. Therefore, the company’s earnings directly correlate with its capacity to provide attractive interest rates on fixed annuities, making it a key determinant.

While aspects like benchmark interest rates, inflation, and total premiums collected can also influence rates, they do so in ways that are generally secondary to the insurer's ability to generate and sustain earnings effectively.