Magazine article American Banker

Insurance: Market Turmoil Blocked Rise of Bank Annuity Sales

Magazine article American Banker

Insurance: Market Turmoil Blocked Rise of Bank Annuity Sales

Article excerpt

Bank annuity sales stalled in 1998 because of volatility in the stock market late in the year.

Banks sold $19.5 billion in fixed and variable annuities last year, which was just 1% higher than 1997 sales, according to Kenneth Kehrer Associates of Princeton, N.J.

"On the face of it you'd say they didn't do well, because the sales were flat," Mr. Kehrer said. But "the variable annuity sales would have been gangbusters if it hadn't been for the stock market volatility in the third quarter."

Banks had been on pace to increase sales by 35% for the year when the market gyrations spooked investors, he said.

Variable annuity sales reached $11.1 billion in 1998-the first full year in which bank sales of variables outpaced those of fixed annuities. That was 19% higher than 1997 sales of $9.3 billion, despite the 8% decline in the fourth quarter.

Though variable annuities lost some luster, investors showed renewed interest in fixed annuities, where sales jumped 14% during the fourth quarter.

"Fixed annuities showed some strength in the fourth quarter, suggesting that maybe they can curtail their drop and grow a little bit," Mr. Kehrer said.

Earlier in the year a flat yield curve had CDs paying more than fixed annuities, Mr. Kehrer said. That helped suppress 1998 sales to $8.4 billion, 16% lower than 1997 sales of $9.3 billion.

But investor interest in fixed-rate products was buoyed in the fourth quarter by several insurers who offered bonus rate promotions, Mr. …

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