LIMRA: Bank Annuity Sales Slump

Sales of fixed annuities fell 63% over that same period, to $1.6 billion. That figure was down from the record high of $4.3 billion set in December 2008.

The average effective interest rate on 5-year fixed annuities has dropped by 45% percent since December 2008; the average rate on 5-year certificates of deposit has slipped just 34% during the same period, Kehrer-LIMRA reports.

“Fixed annuities have been rate-challenged, and variable annuities have increased in cost while the value of their benefits has decreased,” says Scott Stathis, managing director of Kehrer-LIMRA. “This makes for a very challenging annuity sales environment.”

Mutual fund sales in banks benefited somewhat from the shift away from annuity sales: Bank mutual fund sales rose to $5.1 billion in December 2009, from $2.1 billion in January 2009. But fund sales are less profitable for banks than annuity sales are, Kehrer-LIMRA says.