Bank Annuity Sales Hit $12.5 Billion In 1st Quarter

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Banks sold $12.5 billion in total annuities in the first quarter, up from $11.4 billion in the same period of 2002, reports Kenneth Kehrer Associates, Princeton, N.J.

The increase for first-quarter 2003 was fueled by a rebound by variable annuities, as fixed annuities sales slumped slightly, from $8.9 billion in the first three months of last year to $8.6 billion in the same period this year, Kehrers research found.

VAs accounted for $3.9 billion of sales in banks in the first three months of 2003, up from $2.5 billion in the same period last year.

[Kehrers analysis of May 2003 data from banks, the latest available, showed that fixed annuity sales recovered slightly from their recent decline, rising to $2.7 billion from $2.6 billion in April. They were still well down, however, from the $3.1 billion in sales reported by banks for fixed annunities in March. VAs, meanwhile, continued to inch up, to $1.8 billion from $1.7 billion in April and $1.6 billion the month before.]

The leading carrier in the bank annuity market during the first quarter 2003 was AIG/SunAmerica, New York, with around $2.6 billion in total sales, up 31% from just over $2 billion in the first three months of last year.

Transamerica Financial Institutions, Minneapolis, a division of Aegon N.V., the Netherlands, was second, with $1.4 billion, down 12% from $1.7 billion in the fourth quarter 2002. Nationwide Financial Services, Columbus, Ohio, was third, with more than $1 billion, up 27% over $818 million a year earlier.

Kenneth Kehrer, head of the research firm, says fixed annuity sales are being restrained by the reduced spread between crediting rates on new money invested in fixed annuities and yields on short-term cetificates of deposit. As of mid-April, this rate averaged 3.05% for FAs, just 179 basis points more than the average one-year CD, Kehrer notes.

“The spread between fixed annuities and one-year CDs last May [2002], when banks set the monthly fixed annuity sales record, was 236 basis points,” he says.


Reproduced from National Underwriter Life & Health/Financial Services Edition, July 28, 2003. Copyright 2003 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.