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Total bank annuity sales rose 4.9% in July over the previous month, spurred by an 11% increase in variable annuity sales, according to the Kenneth Kehrer-Jackson National monthly bank annuity sales survey. Total bank annuity sales were more than $4.4 billion in July, 44% higher than a year ago, the study finds. Total sales reached about $4.2 billion the previous month.

VA sales in banks were up for the third straight month and for the fourth time in the past five months, notes Brad Powell, president of Jackson National Life Insurance Companys institutional marketing group, sponsor of the survey. Those sales were up 20% over year-ago levels, he adds.

Despite shaky equity markets, people who invest where they bank are being drawn to new VAs that cut the risks of investing by using a pool of securities that are similar to mutual funds, Powell explains. At the same time, insurers are selling VAs with modular designs that let the investor choose only the features they want.

“Products like these seem to be attracting the most assets in this environment because they allow customers to custom-build an annuity to meet their particular investment needs,” says Powell.

Bank sales of fixed annuities in July were up 3% to nearly $3.4 billion, recovering from an 8% fall in June. May saw the all-time high for monthly fixed annuity sales, when banks sold more than $3.5 billion before falling to about $3.3 billion in June, the study reports.

Bank sales of fixed annuities in July were 54% over the same month a year ago, and July was the second highest month ever for fixed annuities, the study reports.

In July, banks sold $3.11 in fixed annuities for every dollar of VA, but VAs are slowly narrowing the gap. Powell notes that the sales ratio was $3.36 to $1 in June.”

Fixed annuity sales continue to benefit from their wide rate advantage over short-term certificates of deposit. Kenneth Kehrer, head of the Princeton, N.J. consulting firm that conducts the monthly study, reports that the average base crediting rate on fixed annuities was 4.3% in mid-July, 217 basis points higher than that offered by the average one-year CD, while the average fixed annuity with a first-year bonus was crediting 324 basis points more than one-year CDs.

While this rate advantage has shrunk in recent months, the rate advantage remains high by historical standards, notes Kehrer.


Reproduced from National Underwriter Life & Health/Financial Services Edition, October 7, 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.