Magazine article American Banker

Shift from Annuities to CDs Seen in Second Quarter

Magazine article American Banker

Shift from Annuities to CDs Seen in Second Quarter

Article excerpt

Annuity sales at banks and thrifts fell during the second quarter as many investors flocked to federally insured certificates of deposit, a consultant said.

According to data compiled by Bank Insurance Market Research Group, banks and thrifts sold $3.63 billion of annuities for the quarter ending June 30, a 7% decline from the previous quarter. Andrew Singer, managing director with the research group, attributed the falloff to an interest rate environment that has made longer-term fixed annuities look less attractive that CDs. "Whenever the short-term CD rate gets close to the annuity rate the customer goes for CDs, which are more liquid and FDIC insured," he said.

The most dramatic decline during the second quarter among bank holding companies was at Wells Fargo & Co. The $52.2 billion-asset San Francisco institution saw its sales of all annuities drop 39% during the period, to $125.3 million.

Wells Fargo is the fourth largest bank seller of annuities, trailing BankAmerica Corp., Citicorp, and Chemical Banking Corp. Elizabeth Evans, an executive vice president with Wells Fargo's savings and investments group, agreed that the bank had been stung by narrowing interest rate spreads, which made short term CDs more attractive.

But she emphasized that "Wells Fargo's sales have shifted around as we offer more and more product."

She said several investment products the bank introduced in the first quarter - such as an asset allocation program and unit investment trust drew assets away from annuities. …

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