American General Vaults To Top Spot In Bank Annuity Sales

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American General Life Insurance surged to first place in bank-sold annuities during the first quarter of 2001, edging out Hartford Financial Services. The Houston-based company had total sales of almost $1.2 billion in the quarter, compared to Hartfords $887 million, data released by the research firm, Kenneth Kehrer Associates, shows.

American Generals total sales rose 26% from the last quarter of 2000, the firm reports. During the same period, Hartfords total annuity sales in banks fell by 3%.

Hartford maintained its lead in variable annuities, actually increasing sales slightly over the fourth quarter of 2000, to $841 million, from $834 million.

All in all, however, fixed annuities were the story in first quarter 2001.

Investor sentiment swung to fixed-rate products due to the stock market downturn, says Kenneth Kehrer, president of the firm that conducted the study. This allowed Houston-based American General, which emphasizes fixed products, to make a strong bid for more market share. It climbed from $771 million in sales of fixed annuities in the fourth quarter of 2000 to over $1 billion in the first quarter of this year, a 33% rise.

In contrast, it sold $407 million in VAs in the quarter, well below Hartfords $841 million and a 25% drop from the $516 million American General tallied in the prior quarter.

The insurer pursued a successful strategy of joint venturing with banks, says Kehrer, in which it has allowed banks to manage customer assets in its annuity products.

“No one else does that,” explains Kehrer. “Usually, its the insurance company backing the annuity that manages the assets in the account.”

The insurer also has pursued an aggressive marketing strategy, Kehrer notes.

“Theyve been in overdrive for the past three years, getting closer and closer to first place,” he says.

American Generals parent, American General Corp., is to be acquired by American International Group, New York, in a deal that is expected to close later this year.

Banks as a whole saw strong revenue growth in annuities in the first quarter. Total premiums hit $8 billion, compared to $7.4 billion in the final quarter of last year and $7.6 billion in the first quarter a year ago, the Kehrer study finds.

Much of the increase was accounted for by fixed annuities, which surged to $4.9 billion in total sales in the first quarter, $1 billion more than the previous quarter. Meanwhile, VA sales fell to $3.1 billion, from $3.5 billion the previous quarter. This reversed a trend seen for much of last year, when VAs outsold fixed products.

The markets swing to fixed products is a “flight to safety,” Kehrer says.

In addition to American General, that trend benefited companies, such as Allstate and Aegon, that also emphasize fixed annuities. Sales by companies that specialize in VAs, such as Hartford and American Skandia, faltered in the quarter.

Carriers that sell fixed annuities also benefited from emphasizing new five-year guaranteed products, Kehrer says. These now account for more than half of fixed-annuity sales.

Another company showing dramatic growth was American Enterprise Life Insurance, a division of American Express. The company increased bank-annuity sales 27% between the end of 2000 and the first quarter of 2001, from $171 million to $218 million.

Since the first quarter of last year, American Enterprises VA sales alone rose by around 400%, to $131 million in the first quarter of 2001, from only $26 million a year before. Its fixed products grew 172% in that time, to $87 million from $50 million.

Its growth has been a combination of good products and new strategic alliances with banks, such as Fleet, First Union and Wells Fargo, says Carol Holton, president and CEO of third-party distribution for the division.

Those agreements gave the company an additional 1,500 salespeople in banks, supported by an internal staff to make sure agents in the banks get the information they need to sell the products, says Holton.

In addition to increasing the number of banking relationships it had, the company developed products offering multiple death benefits as well as dollar cost averaging. This allowed it to develop annuities with a fixed as well as a variable component.

“The products are positioned so if the market went down, people could take their money into the fixed side and dollar cost average it into variable funds,” Holton says. “We tried to take best of both worlds, and thats why we had success.”


Reproduced from National Underwriter Life & Health/Financial Services Edition, June 11, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.


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