Magazine article American Banker

Rates Boost Allstate Unit's Bank Annuity Sales

Magazine article American Banker

Rates Boost Allstate Unit's Bank Annuity Sales

Article excerpt

Glenbrook Life and Annuity Co. said that its sales of fixed annuities through banks jumped in the second quarter as a result of competitive interest rates.

The Allstate Insurance Co. unit's fixed sales through banks rose 75% from the first quarter and 10% from a year earlier, according to Rob Shore, a senior vice president in Allstate's financial institutions division. Variable annuity sales increased 12% from the second quarter last year but stayed flat from the first quarter.

The strong bank results contributed to what observers said was a good second quarter for Allstate, which last week reported an earnings increase for the first time in over a year. The Northbrook, Ill., company said its net income more than doubled from a year earlier, to $344 million. The strong results persuaded Merrill Lynch & Co. to raise its midterm rating on Allstate to "buy" from "neutral."

Allstate's fixed annuity sales through all channels climbed 47% from a year earlier, while variable annuity sales fell 22%.

The company does not give bank sales totals, but according to Kenneth Kehrer Associates' latest report on sales through financial institutions, it was the seventh-largest annuity provider through banks in the first quarter, with $435 million of sales, including Glenbrook's. Allstate had $2.1 billion of annuity sales through the channel last year and ranked sixth in that category, the report said.

Kenneth Kehrer, the Princeton, N.J., consulting firm's president, said that second-quarter results are not yet available for the industry or for Allstate.

Glenbrook's fixed bonus annuity, Performance, had an interest rate of 6% in the second quarter, versus the industry average of 5.66% for such products.

About half of the annuities sold through banks are bonus products, which offer a higher interest rate in the first year, Mr. Kehrer said. "Essentially, interest rates are a key driver when you're selling fixed annuities, particularly through platform bankers."

Because rates attract checking account customers and sell certificates of deposit, bankers are comfortable with investment products -- such as fixed annuities -- that generated a profit based on interest rates, he said. For banks, "the interest rates get their attention, since they're used to selling CDs, which are almost exclusively based on rate, so they get more excited about a fixed annuity with a good rate. …

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