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Kehrer: Bank Annuity Sales Dropped In July

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NU Online News Service, Sept. 19, 2003, 5:31 p.m. EDT – Banks reported $4.2 billion in annuity sales for July, down 7.1% from $4.5 billion for July 2002, reports Kenneth Kehrer Associates, Princeton, N.J.

Fixed annuity sales declined to $2.4 billion in July, from $3.5 billion in the comparable month in 2002, while variable annuity sales actually increased to $1.8 billion, from $1 billion.

“As banks’ fixed annuity sales have slipped from their record highs over the past year, variable annuities have recovered and have nearly compensated for declining fixed annuities,” says Brad Powell, president of the institutional marketing group at Jackson National Life Insurance Company, Lansing, Mich., which sponsors the monthly survey.

“July’s bank VA sales were higher than in any month from January 2002 until May 2003,” Powell says.

Kenneth Kehrer, whose firm conducts the survey, notes that bank FA sales have fallen in three of the past four months.

Fixed annuity sales are being hurt by low crediting rates from carriers, Kehrer says.

The average base crediting rate on new money invested in a fixed annuity was just 2.76% in July, down from 2.94% in June.

“Most fixed annuities are now crediting rates that are below the 3% level that used to be the standard minimum in a fixed annuity contract,” Kehrer says. “While fixed annuities are still crediting 175 basis points more than one-year certificates of deposit, many investors would rather just keep their money in the bank.”

Banks sold $1.33 in fixed annuities in July for every $1 of variable annuities. A year ago, banks were selling $3.50 in fixed annuities for every $1 in variable annuities, according to Kehrer’s data.