Windsor, CT, July 11, 2011- Annuities sold in financial institutions retreated from March’s highs in both April and May, according to the Kehrer-LIMRA Monthly Bank Annuity Sales Survey. From March to April, total annuity sales slipped 14 percent to $3.6 billion. They fell a further 5 percent to $3.5 billion in May. On a positive note, total annuity sales were up 57 percent since the beginning of 2011. When compared to May of 2010, annuities sold through banks posted a 10 percent increase (Figure 1).
Fixed Annuity SalesWhile there have been sales declines in both fixed and variable product lines, the fall off in fixed annuities was particularly acute. Following a tax season rush, April experienced an 18 percent reduction in sales. Sales were further diminished in May as fixed annuities dropped an additional 10 percent. Year-to-date, however, fixed sales have risen 24 percent. Compared to the prior May, bank-sold fixed sales were stable with just a 2 percent rise.
“March was a tough act to follow, and you generally see a pullback in April and May for fixed annuities,” said Janet Cappelletti, Associate Research Director at Kehrer-LIMRA, “The rate spread between CDs and fixed annuities narrowed about the same time the rush for IRAs died down, consequently the sales of fixed annuities slackened.”
Through April and May the average effective yield deteriorated, according to the Kehrer-LIMRA 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 fell from 33 basis points in March to 19 basis points in April and 13 basis points in May.
“The average CD rates being offered in April and May held steady, however the rates being credited for fixed annuities have been worsening,” said Cappelletti. “We expect fixed annuity sales to continue to be impacted in the short-term by the declining spread.”
Variable Annuity SalesVariable annuity sales through financial institutions flirted with the $2.0 billion mark in both April and May after reaching that level in March. VA sales declined 10 percent to $1.8 from March to April before picking up. May’s VA sales increased 6 percent to $1.9 billion. Year-to-date figures were more impressive. From January through May, sales of VAs have surged 54 percent. Compared to May 2010, bank-sold variable annuities were 25 percent higher in May 2011.
Mutual Fund Sales
Spring 2011 has been a challenging time to sell mutual funds through financial institutions. In general, mutual fund sales exceed that of annuities sales in any given month. However, in May, mutual fund sales equaled that of total annuity sales for the first time since the summer of 2009. Through the month of May, mutual fund sales decreased 23 percent. The year-to-date decline was aided by an 11 percent monthly decline in April and a 19 percent monthly decline in May.
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.
Contact:
Scott Stathis, Managing Director
scott.stathis@kehrerlimra.com
978.448.0198
300 Day Hill Road
Windsor, CT 06095
