Bank sales of total annuities regressed slightly in January, according to the latest Kehrer-Jackson Monthly Bank Annuity Sales Survey, but overall investor interest still remains much higher for both than it was at this time last year.
Banks sold more than $2.7 billion worth of fixed and variable annuities, down 3 percent from December. However, that figure represented a 24 percent improvement from January 2010 when total annuity sales cratered at $2.2 billion.
"Total annuity sales have been pretty stable for the past six months, despite the shift in popularity of fixed versus variable products," Janet Cappelletti, an associate research director at Kehrer-LIMRA, said in the report. "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."
While financial advisors and organizations including the Insured Retirement Institute have consistently argued that annuities represent one of the best investment options for middle-class Americans and Baby Boomers looking to supplement their retirement income, paltry returns in the past year have scared off many potential annuity clients.
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 plummeted to record-low levels in 2010 but began to recover a bit in January and February.
Since November, the average fixed annuity interest rates have risen at a faster clip than bank CD rates and as of mid-January, the difference between the two products was 39 basis points -- the widest gap between the two since August 2009.
The Kerher-Jackson survey found that banks sold only $1.4 billion in variable annuities in January, down 14% from December but a 28% increase from January 2010.
"Variable sales climbed in the fourth quarter, which may have been partially due to a year-end push to write contracts before an anticipated pull-back by insurers on some product benefits," Cappelletti added. "The slowdown last month may have been because some of the variable products aren’t as attractive as they had been in the past. Additionally, fee hikes in January could have been a drag on sales."
Earlier this month, a comprehensive Beacon Research report found that total annual indexed annuity sales http://www.onwallstreet.com/news/annuity-beacon-2671976-1.html">rose 6% in 2010 to more than $31.4 billion while income annuity sales inched up 2% to more than $8 billion. Also, both retirement income investment products claimed their highest share of investment sales in the study's eight-year history at 48% percent and 11%, respectively.
Cappelletti said banks sold a total of $1.3 billion worth of fixed annuities in January, up 13% from December.
Finally, banks' mutual funds sales tumbled to $4.4 billion, down from $4.7 billion in December, and off 11% from January 2010.
The survey reported that even though sales levels of annuities also slipped in January, mutual funds only represented 62% of the total investment products sales mix, the lowest level since May of 2010.