Fixed and variable annuities sold in through banks each changed course, the former rising and the latter falling in January, 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," says Janet Cappelletti, associate research director at Kehrer-Limra. "Total dollars invested in annuities at banks has remained just below $3 billion since last June, but the fixed versus variable product mix has seesawed over the course of the last year and now the two are almost even."
Financial institutions sold $2.7 billion in fixed and and variable annuities in January, 3% less than in December. Sales have risen 24% from a historic low of $2.2 billion a year earlier.
VA sales in banks weakened in January, returning to levels seen prior to the fourth-quarter surge. Financial institutions sold $1.4 billion, a 14% drop from December, and a growth rate of 28% over the prior year. This may be partly due to "a year-end push to write contracts before an anticipated pullback by insurers on some product benefits," says Cappelletti.
In January, banks sold $1.3 billion in fixed annuities, a 13% rebound from December, after FA sales fell in the fourth quarter. The improvement followed a rise in interest rates for three consecutive months, which increased the spread of FA rates over bank CD rates by 39 basis points. 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 to a level last hit in August 2009.
Mutual fund sales lost some steam in January, and bank production fell to its lowest level since May 2010. Even though sales levels of annuities also slipped in January, mutual funds only represented 62% of the sales mix (not revenue mix), the lowest level since May 2010.
Banks sold $4.4 billion in mutual funds in January, a 6% reduction from the $4.7 billion sold in December, and 11% behind sales from the previous January.