Magazine article American Banker

Separate Negatives Conspire to Damp Bank Annuity Sales

Magazine article American Banker

Separate Negatives Conspire to Damp Bank Annuity Sales

Article excerpt

Higher CD rates and the negative publicity from regulatory probes of variable annuity sales practices have converged to hamper bank sales of the products, as shown in a bank-annuity sales report of a third straight decline in overall sales during January.

Good conditions for variable annuities have typically meant weaker sales of the fixed product and vice versa, but negative factors separately affecting the two product categories have combined to hobble them both.

The Kehrer-Jackson National sales report, co-sponsored by Kenneth Kehrer Associates and the Jackson National Life Insurance Co. unit of Britain's Prudential PLC, said bank-annuity sales fell 7% in January from December and were about 6% below the year-earlier total.

"The fixed annuity slide has been going on for several months, and we think that has to do with the compression of [the spread between] fixed annuity rates and CD rates," said Kenneth Kehrer, the president of the Kehrer firm in Princeton, N.J. "Fixed annuity sales in banks have fallen for three consecutive months and five of the past seven months," he said.

"January's fixed annuity sales were 15% below last January's total," he added, and bank sales of fixed annuities dropped 7%, to $1.8 billion in January.

"The average one-year guaranteed crediting rate on new money invested in fixed annuities was only 2.74% in mid-January," said Brad Powell, the president of Jackson National's international marketing group. "The spread between fixed annuity crediting rates and interest rates on one-year certificates of deposit was only 62 basis points in January," compared with 108 in October, "which was the last time we saw an increase in bank fixed annuity sales. …

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