By Kenneth Kehrer
Total bank sales of individual annuities (fixed and variable) inched up 2% to a new sales record of $50.1 billion in 2003.
While fixed annuities continued to outsell variable annuities by a wide margin, fixed annuity sales were off 13%, while VAs soared to a new sales record. Banks sold $18.1 billion of VAs in 2003, up 44% from $12.5 billion the previous year. The 2003 VA sales were 16% better than the previous high water mark of $15.6 billion set in 2000, at the beginning of the bear market.
Banks began 2003 by continuing the gradual improvement in VA sales that they had experienced since the first quarter of 2002. Bank VA sales jumped 36% in the second quarter as VAs attracted a flood of deposits into their fixed subaccounts, because they were crediting higher rates than FAs and paying full commissions on those deposits. (Many fixed annuity underwriters had reduced commissions while they were refiling their products with lower guaranteed minimums.)
By the third quarter, VA underwriters were limiting deposits into the fixed subaccounts, or suspending them entirely, and VA sales slipped 11%. This trend continued into the fourth quarter, with bank VA sales deteriorating another 13% to $4.1 billion. Nonetheless, thanks to the big jump during the second quarter, fourth-quarter sales were 11% better than the fourth quarter of 2002.
Fixed annuities still outsold VAs $1.77 to $1 in banks in 2003, and the $32 billion in FA premium was the second best year ever. Banks fixed annuity sales began 2003 on an up note, reversing a downward trend since the record sales of the second quarter of 2002.
Then sales dipped 7% in the second quarter and were flat in the third before edging down another 6% in the fourth quarter. The fourth-quarter fixed annuity premium of $7.5 billion was the lowest since the third quarter of 2001and 25% below the second quarter of 2002.
For underwriters of bank-sold annuities, the rich got richer in 2003. AIG and Hartford Life increased their dominance of bank distribution of fixed and variable annuities respectively, together accounting for one-third of all bank annuity sales.
AIG sold almost $11.3 billion of FAs and VAs during the year, up 20% from 2002. AIG Annuity grew its fixed business through banks by 21%, while sister company AIG SunAmerica increased its smaller VA production by 9%. During the year, AIG Annuity was able to gain shelf space at some major banks selling FAs, including Bank One, Bank of America and AmSouth. AIGs total individual annuity sales through banks were more than double that of the second place underwriter.