LIMRA: Bank Annuity Sales Slump

By Trevor Thomas

February 17, 2010 at 07:00 PM

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Annuity sales at U.S. banks totaled $2.8 billion in December 2009, down sharply from $5.4 billion in December 2008, according to the Kehrer-LIMRA Monthly Bank Annuity Sales Survey.

"There have been only 2 times in the last 5 years where we have seen bank channel total annuity sales this low," says Janet Cappelletti, associate research director at Kehrer-LIMRA, part of LIMRA, Windsor, Conn.

Fixed annuities accounted for most of banks' drop in annuity sales revenue.

Bank sales of variable annuities increased to $1.2 billion in December 2009, up 9% from $1.1 billion in December 2008.

Sales of fixed annuities fell 63% over that same period, to $1.6 billion. That figure was down from the record high of $4.3 billion set in December 2008.

The average effective interest rate on 5-year fixed annuities has dropped by 45% percent since December 2008; the average rate on 5-year certificates of deposit has slipped just 34% during the same period, Kehrer-LIMRA reports.

"Fixed annuities have been rate-challenged, and variable annuities have increased in cost while the value of their benefits has decreased," says Scott Stathis, managing director of Kehrer-LIMRA. "This makes for a very challenging annuity sales environment."

Mutual fund sales in banks benefited somewhat from the shift away from annuity sales: Bank mutual fund sales rose to $5.1 billion in December 2009, from $2.1 billion in January 2009. But fund sales are less profitable for banks than annuity sales are, Kehrer-LIMRA says.

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