By

Total bank annuity sales increased 10.5% in May to almost $4.8 billion, according to a survey by Kenneth Kehrer Associates, sponsored by Jackson National Life Insurance Company, Lansing Michigan.

“All bank fixed annuity sales surpassed the previous record of $4.3 billion, set just in April,” says Brad Powell, president of Jackson Nationals institutional marketing group. “In May, bank fixed annuity premium from all insurance companies was 65% above year-ago levels.”

Kenneth Kehrer, whose Princeton, N.J. research firm conducts the survey, notes that the May survey found an odd result: simultaneous strong growth in both fixed and variable products.

“Its unusual for both VAs and fixed to go up in the same month,” Kehrer says. “Usually, you see offsetting trends between the two types of products. This suggests theres a strong potential for another record annuity year.”

Industry-wide bank VA sales were up 12%, to $1.1 billion in May. Bank VA sales have now increased in two of the past three months, notes Powell, and Mays total was 21% above year-ago levels.

“While banks sold $3.19 in fixed annuities for every dollar of VA, variable annuities are slowly closing the gap,” he says.

Bank sales of fixed products were up 10% to $3.6 billion, 86% above the same month a year ago, the survey reports.

Fixed annuity sales continue to benefit from their wide rate advantage over short-term certificates of deposit, Powell notes. The average base crediting rate on fixed annuities was 4.6% in May, 236 basis points higher than the average one-year CD, while the average fixed annuity with a first-year bonus was crediting 342 basis points more than one-year CDs, the Kehrer Monthly Bank Fixed Annuity RateWatch reports.

Spreads between the two products fell by seven to eight basis points in June, but they still remain high by historical standards, notes Kehrer. An investor can still earn more than twice the yield in a fixed annuity than in a one-year CD, not even counting the tax advantages of an annuity, he notes.

The Kehrer-Jackson National Monthly Bank Annuity Survey monitors annuity sales from a national sample of 24 banks, S&Ls and credit unions.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 15, 2002. Copyright 2002 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.