No Relief for Depressed Bank Annuity Sales
December 14, 2010 by N/A
Windsor, CT, December 10, 2010 – Total annuity sales through the bank channel declined in October 2010 according to the Kehrer-Jackson Monthly Bank Annuity Sales Survey. Total sales were at their lowest level since January, dragged down by the persistent low interest rate environment.
Financial institutions sold $2.5 billion of fixed and variable annuities in October, which was a 5 percent decrease from September, but a sharp 29 percent fall from sales levels reached October a year ago when total annuity sales were at $3.5 billion.
“Total annuity production in the third quarter was at a ten-year low at banks. The numbers we’re seeing for October fell short of the monthly average from last quarter, which doesn’t bode well for the fourth quarter”, said Janet Cappelletti, Associate Research Director for Kehrer-LIMRA. “We’re not seeing indications that sales in November and December will make up for the slack.”
Fixed Annuity Sales
Fixed annuity sales at financial institutions experienced another setback in October, falling even further behind variable annuities. Fixed production at banks dropped 9 percent to $1.1 billion, a historic low first reached in January of this year. October sales were less than half of the $2.5 billion sold in October of 2009.
The disappointing fixed annuity numbers masked the success of indexed rate annuities which have become increasingly popular at financial institutions in 2010 and accounted for one in five dollars invested in fixed products in the third quarter.
“Clients who are looking for guaranteed products continue to be frustrated with the low rates on fixed annuities”, said Scott Stathis, Managing Director of Kehrer-LIMRA. “The indexed annuities are gaining popularity with conservative bank investors because while they have that rate guarantee, they also have the potential to benefit from a recovering market”.
According to the Kehrer-LIMRA Bank Fixed Annuity RateWatch, the spread between the yield on five-year CDs and the average effective yield offered by fixed annuities guaranteed for five years has disappeared. The difference between the two products fell from 33 basis points in October 2009 into negative numbers in May of 2010. The spread remained in negative territory until October 15th when rates met at 1.63 percent and produced a rate spread of zero.
Variable Annuity Sales
In October of 2010 banks sold $1.4 billion in variable annuities for the third month in a row. Although monthly growth is stagnant, this month’s figure is a 30 percent increase over October 2009.
Banks sold $1.21 in variable annuities for every dollar of fixed annuities in October. Banks sold more VAs than fixed annuities in September 2010 for the first time since January 2008. In October of 2009 the ratio was $2.31 of fixed sales for every dollar of VA sales.
Mutual Fund Sales
Sales of mutual funds at financial institutions dipped 4 percent in October. Banks sold $5.1 billion in mutual funds, slightly less than $5.3 in September and on par with the same month in 2009.
Kehrer-LIMRA is the premier provider of research and consulting services on banks as financial services stores. The Kehrer-JacksonSM Monthly Bank Annuity Sales Survey is based on a national sample of banks that have a minimum of $4 billion in assets. The participating institutions account for about one-third of all bank annuity sales.
Note to editors – we are required to include the following information with our articles:
Annuities and life insurance are issued by Jackson National Life Insurance Company (Home Office: Lansing, Michigan). Variable products are distributed by Jackson National Life Distributors LLC. May not be available in all states and state variations may apply. These products have limitations and restrictions. Contact the Company for more information.
The opinions and forecasts expressed may not actually come to pass. This information is subject to change at any time, based on market and other conditions and should not be construed as a recommendation.
