Magazine article American Banker

Fixed-Rates Led Bank Annuity Sales to a 14% Gain

Magazine article American Banker

Fixed-Rates Led Bank Annuity Sales to a 14% Gain

Article excerpt

Fueled by a resurgence of fixed annuities, bank sales of all annuities rose 14% in the second quarter.

After seeing their fixed-annuity sales decline or remain flat for a year, banks sold $3.1 billion of the product from April to June, an increase of 19% from the previous quarter, according to a survey by Kenneth Kehrer Associates, in Princeton, N.J.

Mr. Kehrer, the consulting firm's principal, attributed the rise in fixed- annuity sales to the fact that their interest rates jumped in May by 19 basis points, pushing the yield to 5.82%, a hefty 60 basis points higher than those on one-year certificates of deposit.

But he noted that fixed-annuity rates had dipped in September to 5.34%, while one-year CDs held steady at 5.17%.

"These tight spreads can be expected to have a strangling effect on bank fixed-annuity sales," said Mr. Kehrer.

Variable-annuity sales grew 7%, to almost $2.4 billion. Variable annuities account for 43% of annuities sold through financial institutions.

Bank and thrift sales of variable annuities lag sales through other distribution channels. According to Limra, a research association for the life insurance industry, variable annuities outsell fixed annuities among broker-dealers 7-to-1. …

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