Magazine article American Banker

Fixed Annuity SlideContinues

Magazine article American Banker

Fixed Annuity SlideContinues

Article excerpt

Byline: Howard Stock

Banks' fixed annuity sales fell 16% in the fourth quarter from the previous quarter and 43% year over year, according to Beacon Research's Fixed Annuity Premium Study. That followed a 13% drop from the second to the third quarter.

Beacon's figures are based on a snapshot of 10 major banks, representing 86% of total sales. Those banks sold $285.6 million in fixed annuities in the fourth quarter, versus $292.4 million in the third quarter. Only three of the 10-Wells Fargo, SunTrust and M&T Bank - managed to eke out single-digit, quarter-over-quarter growth.

"It's almost all a question of rates right now," said Judith Alexander, director of sales and marketing at Beacon. "The demand for corporate bonds is now easing off, but most recent net flows have been toward bond funds, which drove down yield. Fixed annuities are primarily backed by corporate bonds, and as the spread between corporate bonds and Treasuries kept narrowing, fixed annuity rates narrowed too."

CD rates, fixed annuities' primary competition, are based on Treasury rates, so they suffered too. "At one point in 2008 Treasuries went negative and there was still a stampede to buy them," Alexander said. "But in 2009, many people just got sick of no returns." Variable annuity sales started to pick up in the fourth quarter to fill the gap, and indexed annuities did well all year, doubling sales from $1 billion in 2008 to $2.1 billion in 2009. …

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