NU Online News Service, July 9, 3:23 p.m. – Total bank annuity sales increased to $4.8 billion in May, up almost 10.5% from April, according to a survey by Kenneth Kehrer Associates, Princeton, N.J.
The May survey, which was sponsored by Jackson National Life Insurance Company, Lansing, Mich., found an odd result: simultaneous strong growth in both fixed and variable products.
“It’s unusual for both VAs and fixed to go up in the same month,” says Kenneth Kehrer, president of the firm that bears his name. “Usually, you see offsetting trends between the two types of products. This suggests there’s a strong potential for another record annuity year.”
Bank sales of fixed annuities amounted to $3.6 billion, up 10% from April, and up 86% from May 2001, according to the Kenneth Kehrer Associates survey.
That compares with a May total of $1.1 billion for bank sales of variable annuities. Bank VA sales were up 12% from April, and up 21% from May 2001. Bank VA sales have now increased in two of the past three months.
“While banks sold $3.19 in fixed annuities for every dollar of VA, variable annuities are slowly closing the gap,” says Brad Powell, president of Jackson National’s institutional marketing group.
But fixed annuity sales continued to benefit from their wide rate advantage over short-term bank certificates of deposit, Powell notes.
The average base crediting rate on fixed annuities was 4.6% in May, 2.36 percentage points higher than the average rate on a 1-year CD.
For the average fixed annuity with a first-year bonus, the gap was 3.42 percentage points.
The differences between typical fixed annuity rates and CD rates shrank by about 0.07 percentage points in June, but the differences still remain high by historical standards, Kehrer says.
Kehrer’s firm bases its bank annuity sales data on survey results from 24 banks, thrifts and credit unions.