Fixed and variable annuities each changed course, the former rising and the latter falling in January of this year, according to the Kehrer-Jackson Monthly Bank Annuity Sales Survey.
When added together however overall sales of both kinds of annuities were slightly lower than they had been in December.
“Total annuity sales have been pretty stable for the past six months, despite the shift in popularity of fixed versus variable products,” said Janet Cappelletti, Associate Research Director at Kehrer-LIMRA. “Total dollars invested in annuities at banks has remained just under the $3 billion mark since last June, but the fixed vs. variable product mix has see-sawed over the course of the last year and now the two are almost even.”
Financial institutions sold $2.7 billion in fixed and variable annuities in January, 3% less than in December. Sales have inflated 24% percent since the previous January’s historic low of $2.2 billion.
Variable Annuity Sales
Variable sales in the bank channel weakened in January, returning to levels seen prior to the fourth-quarter surge. Financial institutions sold $1.4 billion in VAs, which represents a 14% drop from December’s performance and a growth rate of 28% over the previous January.
This may be in part due to “a year-end push to write contracts before an anticipated pull-back by insurers on some product benefits,” according to Janet Cappelletti. Ashe added that some of the variable products aren’t as attractive as they had been in the past and fee are higher.
Fixed Annuity Sales
In January, banks sold $1.3 billion of fixed annuities, representing a 13% rebound from December after fixed sales shrank in the fourth quarter. The improvement followed a rise in interest rates for three consecutive months, which put some space between fixed annuity rates and bank CD rates.
According to the Kehrer-LIMRA Bank Fixed Annuity RateWatch, the spread between the yield on five-year CDs and the average effective yield offered by fixed annuities guaranteed for five years hit rock bottom in 2010 and has bounced back somewhat as of January. Interest rates have growing faster on FAs than on bank CDs and as of mid-month, FAs were paying 39 basis points more. The gap between the two has not been this high since August of 2009.
Mutual Fund Sales
Meanwhile mutual fund sales lost some steam in January, and bank production fell to its lowest level since May of 2010. Even though sales levels of annuities also slipped in January, mutual funds only represented 62 percent of the sales mix (not to be confused with revenue mix), the lowest level since May of 2010.
Banks sold $4.4 billion in mutual funds in January, a 6 percent reduction from the $4.7 sold in December and 11 percent behind sales from the previous January.