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AIG SunAmerica Asset Management Corp., New York, led all carriers in annuity sales in banks in the 2nd quarter of 2004, according to data compiled by Kenneth Kehrer Associates, Princeton, N.J.

AIG sold more than $2.8 billion worth of annuities in banks in the quarter, up 30% from around $2.2 billion in the 2nd quarter of 2003.

The strongest growth in the bank channel was registered by Lincoln National Life Insurance Company, Fort Wayne, Ind., which increased annuity sales 279% from year-earlier levels, to $91 million from $24 million.

Robust bank growth also was reported by the following companies:

–New York Life, up 171% from $249 million to $676 million;

–Massachusetts Mutual Life Insurance Co., Springfield, Mass., up 223% from $79 million to $255 million;

–Prudential Financial Inc., Newark, N.J., up 123% from $120 million to $267 million; and

–Principal Financial Group Inc., Des Moines, Iowa, up 131% from $80 million to $185 million.

Most of the growth was in fixed annuities, according to Kenneth Kehrer, head of the research firm.

“It was a bad quarter for variable annuities,” he says.

Although half of carriers were able to increase VA sales by expanding into more banks, 11 of the top 22 bank VA vendors saw sales plummet. For instance, American Express Financial Group, Minneapolis, reported $199 million in VA sales in banks in the 2nd quarter, down from $495 million in the same period last year, while New York Life saw these sales drop from $67 million to $19 million.

Fixed annuity sales, on the other hand, showed strong growth for a number of carriers. Between the 2nd quarter of 2003 and the same period this year, for instance, New York Life saw FA bank sales climb from $182 million to $661 million, while MetLife Investors, the annuity unit of MetLife Inc., New York, saw these sales rise from $301 million to $541 million.

The key to this growth was a wider spread between interest rates these carriers paid on their fixed annuities and the rates paid by bank certificates of deposit, says Kehrer.

“New York Life and MetLife offered very competitive interest rates in the quarter,” Kehrer says.

More recent data also shows a rise in bank annuity sales.

Kehrer reports these sales rose in August to $4.1 billion from $4 billion a month earlier. However, sales were down 5% from around $4.2 million a year earlier.

Kehrer reports that monthly VA sales in banks stood at $1.5 billion in August, down from $1.6 billion a year earlier.

Fixed annuity sales of $2.6 billion for the month were up 4% from July and about even with August of last year.

“Banks have increased their fixed annuity sales in 5 of the last 7 months, and Augusts sales were higher than 6 of the past 9 months,” notes Brad Powell, president of Jackson National Life Insurance Companys institutional marketing group, which sponsors the monthly survey.

Powell notes that the increase occurred despite an interest rate drop from 3.18% in mid-July to 3.04% in mid-August. At the same time, the spread between fixed annuity crediting rates and interest paid on 1-year certificates of deposit shrank from 1.65% to 1.43%. Yet the shrinkage apparently did not hurt banks fixed annuity sales, Powell points out.


Reproduced from National Underwriter Edition, November 11, 2004. Copyright 2004 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.