Windsor, CT, April 15, 2011- Total annuity sales through banks registered a 27 percent increase in February of 2011 to hit a high not seen since October of 2009. According to the Kehrer-LIMRA Monthly Bank Annuity Sales Survey, both fixed and variable annuities registered double-digit growth, a feat not achieved since last August.
Financial institutions sold 27 percent more annuities in February than they did in January. Total sales of fixed and variable annuities surpassed the $3 billion mark for the first time since last spring. February’s $3.4 billion total was an impressive 33 percent higher than in February 2010.
“After roughly six months of stagnation, total annuities have gotten a much needed boost,” said Janet Cappelletti, Associate Research Director at Kehrer-LIMRA. “For the first time in over a year, we saw decisive bank channel growth in both fixed and variable annuities.”
Variable Annuity Sales
Variable annuities hit a nearly three-year high in February, posting 1.68 billion in sales. Sales through financial institutions were 24 percent higher month-to-month and 41 percent above the prior February. Despite the impressive growth, the amount of variable annuities sold fell slightly below that of fixed annuities for the first time since September.
“The sales environment was very favorable in February. The Dow Jones hit and surpassed 12,000, consumer confidence reached its highest level in 3 years, and the unemployment rate dipped below 9 percent for the first time since 2009,” said Jennifer Parmelee Witt, Associate Research Director at Kehrer-LIMRA. “February was the calm before the storm. Since February the global economy has taken a couple of hits which have put pressure on gas prices and taken a toll on consumer confidence. While we are encouraged with February’s results, we are waiting to see if these factors hinder the boost we usually expect from March production.”
Fixed Annuity Sales
Fixed annuities reclaimed crucial lost ground in February. At $1.71 billion, fixed sales were 29 percent higher than the previous month and 17 percent higher than in February 2010. Fixed annuity sales have only reached this level of sales once in the past 16 months.
Success with fixed annuities came as the interest rate corridor between fixed annuities and bank CDs expanded in February. The spread between the yield on five-year CDs and the average effective yield offered by fixed annuities guaranteed for five years reached a nadir in the summer of 2010, according to the Kehrer-LIMRA Bank Fixed Annuity RateWatch. Increases in the average fixed annuity interest rates were larger than that of bank CD rates, producing a gap of 43 basis points in annuities’ favor by mid February.
Mutual Fund Sales
Mutual fund sales showed a scant 3 percent improvement from January to February. Banks sold $4.5 billion of mutual funds, a 3 percent dip versus the previous February.
Because of robust annuity sales, mutual funds comprised just 57 percent of the month’s bank sales. This was the lowest proportion of mutual funds sold through financial institutions since August 2009.
Kehrer-LIMRA is the premier provider of research and consulting services on banks as financial services stores. The Kehrer-LIMRA Monthly Bank Annuity Sales Survey is based on a national sample of banks that have a minimum of $4 billion in assets. The participating institutions account for about one-third of all bank annuity sales.
Scott Stathis, Managing Director
300 Day Hill Road
Windsor, CT 06095