Windsor, CT, August 10, 2011 - Sales of fixed and variable annuities through financial institutions behaved uncharacteristically with a rare summertime sales increase for both in June of 2011, according to the Kehrer-LIMRA Monthly Bank Annuity Sales Survey.
“June is traditionally not a banner month for annuity sales in the bank channel,” said Janet Cappelletti, Associate Research Director at Kehrer-LIMRA. “This is the first time we have observed growth for both fixed and variable annuity sales in the month of June since 2006.”
After two months of declines, annuities sold in financial institutions rebounded in June to $3.7 billion, a 7 percent boost. Since the start of the year, total annuity sales in banks have surged 48 percent. Compared to June of last year, sales are 31 percent higher. (Figure 1).
Variable Annuity Sales
Variable annuities had a particularly stellar month, reaching $2.1 billion — the highest level since November 2007. VA sales through financial institutions have leapt 69 percent since the beginning of 2011 and were 52 percent higher than in June 2010.
“VA sales have been on a slow and steady upward trajectory for the last 18 months,” said Cappelletti. “Although there have been short-term peaks and valleys, over the long term bank-sold VAs have performed well.”
Fixed Annuity Sales Steady
Fixed annuity sales inched up nearly 3 percent in June following two months of double-digit declines. Although the monthly growth rate was anemic, year-to-date fixed sales were up 28 percent. The year-over-year comparison was also favorable, registering a 12 percent advance.
Sales were up despite further deterioration in the average effective yield of five year products in June, 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 13 basis points in May to negative 9 basis points in June. This is the first time the rate spread has been negative since September of 2010.
“Although we did not see an impact on fixed annuity sales in June, the negative effects of the spread will most likely be felt in July’s sales results,” said Scott Stathis, Managing Director of Kehrer-LIMRA. “Although the average rate spread was negative in June, there are still products being sold that are competitive, especially the rate for term and rate for comp products.”
Mutual Fund Sales
Mutual funds enjoyed an upsurge in June following several months of declines interspersed with stagnant growth. Bank-sold mutual funds reached $4.8 billion, a level not seen in seven months. For the month, mutual funds were up 42 percent; however year-to-year they were down 5 percent. Since January, mutual fund sales have only increased 10 percent, an amount that pales in comparison to the growth attained by annuities.
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.