Continuing a comeback after a difficult 2010, annuity sales through banks topped $4 billion in March to reach their highest level since exactly two years earlier, according to research firm Kehrer-LIMRA.
“February was a banner month and we had been anticipating an additional boost in March,” Janet Cappelletti, associate research director at Kehrer-LIMRA, said in a statement. “Annuity sales have been relatively stagnant for the last year and we finally got the lift everyone was hoping for.”
March’s results helped turn the first quarter into a winner for annuities sold in financial institutions. Total annuity sales climbed 22%, to $10 billion, in the quarter—the highest quarterly increase since the second quarter of 1999, according to Kehrer-LIMRA.
March’s increase in both fixed- and variable annuities, determined by Kehrer-LIMRA’s monthly bank annuity sales survey, was the second in a row. Financial institutions sold 31% more annuities in March than they did in February, a month that itself had marked an increase of 26% over January.
And combined fixed- and variable-annuity sales in March were 27% higher than the $3.3 billion sold in the same month of 2010.
The annuity sales rally at banks and credit unions comes on the heels of a forgettable 2010. Last year, total annuity sales through banks declined 25% from 2009’s levels—and 2009 itself was an 18% drop-off from 2008, according to Kehrer-LIMRA.
Last year’s total annuity sales through financial institutions--$33.2 billion—was the smallest figure since the $31 billion sold in 2000. (Interestingly, fee-based sales models seemed to shelter the industry’s revenues from a major hit: Annuity income at banks fell just 1.8%, according to the Michael White-ABIA Bank Annuity Fee Income Report.
Meanwhile, Kehrer-LIMRA’s March study found that both variable- and fixed annuities had a similarly strong month. Variable annuity sales hit a three-year peak in March, reaching $2 billion in the bank channel. That figure represents a 29% month-to-month increase and a jump of 36% over March of 2010. Yet variable annuity sales lagged behind fixed sales for the third consecutive month.
Fixed annuity sales, meanwhile, climbed 32% month-to-month, to $2.2 billion. Fixed sales for March were 21% higher than they were in March of 2010. Monthly sales of fixed annuities in financial institutions had not exceeded $2 billion since October of 2009, when Kehrer-LIMRA reported $2.5 billion in sales.
Sales of fixed annuities continue to grow even as the average effective yield remained level and CD rates rose. The spread between the yield on five-year CDs and the average effective yield offered by fixed annuities guaranteed for five years reached a 19-month high in mid-February of 43 basis points, but by March the spread had slipped to 33 basis points.
Meanwhile, March’s results helped to overcome a traditionally slow January. In that money, total annuity sales through financial institutions fell to $2.5 billion from $2.8 billion in December, according to Kehrer-LIMRA.
The monthly survey also found that mutual fund sales through the financial institution channel grew 4% from February to March. But the $4.7 billion of mutual funds sold by banks was 14% less than in the previous March. The reason appears to be the strong annuity sales: Mutual funds’ share of the packaged-product sales mix was 53% in March, the smallest share since July of 2009.