Annuity sales via US banks dived in the closing months of 2009 to record sales below $3bn in November and December for the first time since February 2007, reports bancassurance consultancy Kehrer-LIMRA.
“There have been only two times in the last five years where we have seen bank channel total annuity sales this low,” said Janet Cappelletti, associate research director at Kehrer-LIMRA.
Specifically, banks sold $2.7bn of fixed and variable annuities in November, a reduction of 23% month-to-month, and 37% year-on-year.
In December, banks sold $2.8bn, about half of the $5.4bn in sales recorded in December 2008.
Bank sales of fixed annuities were particularly hard-hit, totalling $1.7bn in November, a 32% fall compared with the previous month and 47% down on sales in November 2008.
The deterioration continued in December 2009, with bank fixed annuity sales at $1.6bn – down 6% from November and 63% below the record of $4.3bn set in December 2008.
Bank sales impacted
Banks sales were much more heavily impacted than sales of fixed annuities in general, new data from independent research consultancy Beacon Research indicates.
According to the annuity market specialist, total fixed annuity market sales for the fourth quarter of 2009 were $20.4bn, down 8% from $22.1bn in the previous quarter.
Total sales for 2009 were down 1.5% compared with 2008 to $105.1bn.
Commenting on the decline in bank fixed annuity sales, Kehrer-LIMRA managing director Scott Stathis said that since the all-time high in December 2008, fixed annuity sales have declined consistently through 2009, and variable annuity sales have not stepped up to take their place as they normally would.
“Instead mutual funds sales – which are less profitable to banks – have ramped up,” he said.
Stathis added that fixed annuities have also been “rate-challenged,” with the average effective rate on five-year fixed annuities eroded by 45% since December 2008 compared with a 34% fall in the five-year certificate of deposit rates percent in the same period.