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It was a year of strong growth in fixed annuities in banks last year, but a tough market for variable products.
Banks racked up total annuity sales of $37.8 billion in 2001, up 27% from $29.8 billion in 2000, reports Kenneth Kehrer, head of a Princeton, N.J., research and consulting firm that monitors the bank insurance marketplace.
While total VA premiums dropped to $10.9 billion, from $14.7 billion the year before, fixed annuities surged 79%, from $15 billion in 2000 to $26.9 billion last year, Kehrer found.
As the stock market headed south, the perceived safety of fixed annuities helped them capture market share not just from VAs but also from mutual funds, observes Kehrer.
At the same time, bank customers turned away from certificates of deposits and toward fixed annuities, whose rates dwarfed CD returns.
Leading the way for the first time in total sales through banks, American International Group Inc., New York, began reaping the benefits of its acquisition of American General, Houston.
In 2000, American General had been ranked second behind Hartford in annuity sales through banks, while AIG, which sells annuities under its SunAmerica brand, was ranked 11th.
AIG/SunAmerica racked up total annuity sales in banks of almost $6.6 billion in 2001.
AIG shrugged off a 12% decline in VA sales in banks during the period as its fixed annuities soared by 58%.
Kehrer ascribes much of that spike to a new SunAmerica fixed product that featured a three-year surrender penalty, compared to five or six years for most annuities. The product was especially well received among reps and customers of Washington Mutual Bank, one of biggest bank annuity producers, Kehrer observes.
The most impressive gain by far for the year was by Lincoln National Corp., Philadelphia, which increased bank annuity sales by 879%, from $129 million in 2000 to $1.3 billion last year.
Early in the year, Lincoln introduced a fixed annuity with a step-up feature, meaning that its interest rate increases every year. That feature, along with attractive pricing, gave a swift kick to Lincoln sales, Kehrer says. Support for the product from major banks such as Wells Fargo helped Lincoln take some business away from other annuity providers.
Companies like Lincoln that sell only fixed annuities benefited from the conservative investment environment last year, while those that emphasize VAs were hurt.
For example, as Lincoln climbed to 10th place from 24th the year before, American Skandia, which sells variable products only, plunged from 9th to 24th as its sales in banks slumped by 66%.
