NU Online News Service, April 14, 2003, 3:45 p.m. EDT – Bank sales of annuities increased to $3.5 billion in February, up from $3.4 billion in February 2002, according to a monthly bank annuity sales survey from Kenneth Kehrer Associates, Princeton, N.J.
The researchers who conducted the survey, which was sponsored by Jackson National Life Insurance Company, Lansing, Mich., say February bank annuity sales were down from an all-time high of $4.5 billion recorded in July 2002.
But February sales were down only slightly from the January total, $3.6 billion, and Brad Powell, president of Jackson National’s institutional marketing group, points out that 2002 was a good year for bank annuity sales.
“Driven by sales of fixed annuities, bank annuity sales grew most of last year,” Powell says.
This year, the swing toward fixed annuities is reversing.
Bank sales of fixed annuities fell to $2.3 billion in February, down from $2.7 billion in February 2002.
Bank sales of variable annuities rose to $1.2 billion, up from $700 million.
Banks sold $1.92 in fixed annuities for every dollar in VA sales, down from a ratio of $3.86 in fixed annuities for every dollar in VA sales.
Kenneth Kehrer, head of the firm that bears his name, says the swing is due in part to the fact that interest rates on bank certificates of deposit are catching up with crediting rates on fixed annuities.
The average base crediting rate guaranteed for one year on new money invested in fixed annuities in mid-February was 3.17%, which was only 1.65 percentage points more than the average rate on a one-year CD.
Back in July, the average base crediting rate for new fixed annuities was 2.17 percentage points higher than the average rate on a one-year CD.
These days, “the actual crediting rates are now so low that some investors may be waiting for a better deal before they lock up their money,” Kehrer says.