NU Online News Service, April 19, 2004, 6:02 p.m. EDT – U.S. bank annuity sales fell to $3.6 billion in February, down 5% from the total for February 2003.[@@]
But combined bank sales for fixed and variable annuities increased from $3.3 billion in January, according to the Kehrer-Jackson National Monthly Bank Annuity Sales Survey.
“February was a very positive month for bank sales, considering there were 2 fewer business days than [in] January,” says Brad Powell, president of the institutional marketing group at Jackson National Life Insurance Company, Lansing, Mich., which sponsors the monthly survey.
Kenneth Kehrer, whose Princeton, N.J., research firm conducts the monthly survey, says a sprightlier stock market helped sales of variable annuities.
U.S. bank sales of fixed annuities fell 15% from February 2003, to $2.2 billion, while bank sales of variable annuities increased 14%, to $1.4 billion.
FA sales were up 8% from the total for January, even though crediting rates for new money invested in fixed annuities were down slightly.
Bank fixed annuity sales usually are influenced by the spread between the crediting rates offered by annuity carriers and the interest rates banks offer on short-term certificates of deposit.
Kehrer says the spread between fixed annuities and 1-year CDs shriveled to 1.63 percentage points, or 163 basis points, in mid-February, from 1.8 percentage points, or 180 basis points, in mid-January.
“Moreover, in mid-February fixed annuities were crediting average base new money rates of 2.77, down 18 basis points from January and 23 basis points below the 3% level, which used to be the standard minimum in a fixed annuity contract,” Kehrer says.
Powell says the fixed annuity sales growth was “perplexing” and suggests that many investors might be resigned to the belief that interest rates are going to be low for some time, despite the fact that rates actually rose slightly in February.
The recent federal income tax cut might have helped bank customers rebound from a post-holiday slump, Powell says.
“There’s a general feel good nature in a reduction in taxes,” Powell says. “People think they have more to invest and probably do.”