Banks are doing a roaring trade and
increasing their significance in the US fixed annuity market,
reveals data compiled by independent research organisation Beacon
Research. Indicative of consumers’ quest for certainty in the
current economic climate, fixed annuity sales via banks in the
second quarter of 2008 soared 81.1 percent compared with the second
quarter of 2007 to $7 billion, or almost a third of total sales of
$24.6 billion.

Second-quarter bank channel
sales, which were 25.8 percent up compared with the first quarter,
brought total sales via banks during the first half of 2008 to
$12.6 billion, up 79.9 percent compared with the first half of
2007.

Sales via the bank channel during the first half of 2008 accounted
for 28.9 percent of total fixed annuity sales which increased by
47.3 percent compared with the first half of 2007 to $43.5 billion,
the highest level in six years. Bank channel sales accounted for
about 24 percent of total sales in the first quarter of 2007.

Commenting on the strong performance of fixed annuities, Beacon CEO
Jeremy Alexander said: “Rates rose over the quarter, and fixed
annuity credited rates at or above the important 5 percent
threshold were available.”

Clearly indicating the swing to fixed annuities, net sales of
variable annuities totalling $7.22 billion in the first quarter of
2008 were 12.3 percent above sales in the first quarter of 2007,
according to the National Association of Variable Annuities.
Accounting for sales via banks of $6 billion in the second quarter,
book value annuities dominated sales via this channel according to
Beacon. Second-quarter sales were up 86 percent compared with the
second quarter of 2007 and 19.1 percent above first-quarter sales.
Book value annuities pay a constant rate of interest during a
contract’s life.

Sales of market value-adjusted (MVA) annuities via banks totalled
$552 million in the second quarter, indexed annuities for $323
million and immediate annuities $156 million. With MVA, annuities
interest rates are adjusted in line with market trends and permit
the holder to withdraw assets before the end of the contract term
penalty-free.

American International Group’s unit AIG Annuity Insurance Company
(AIG Annuity) was the biggest product seller in the bank channel
for the seventh consecutive quarter, noted Beacon. In volume terms
the insurer chalked up sales of 1.97 million policies, almost a
third of sales by the top-ten carriers. AIG was followed by New
York Life (NYL) and Aegon/Transamerica, with sales of 1.35 million
and 1.17 million policies respectively.

However, in the total fixed annuity market NYL claimed overall
sales leadership among the 50 life insurers covered by Beacon’s
second quarter study. NYL chalked up sales of $2.2 billion to give
it a market share of 8.9 percent. NYL’s Enhanced and Preferred book
value fixed annuities were also the two best sellers overall.

NYL was followed by AIG Annuity with sales of $2.09 billion (8.5
percent market share), AVIVA USA with sales of $1.67 billion (6.8
percent) and Aegon/Transamerica and Allianz Life, both with sales
of $1.31 billion (5.3 percent). The insurers in Beacon’s study
account for almost 90 percent of fixed annuity sales.

As in the bank channel book value annuities dominated, accounting
for $12 billion, or 48 percent, of total sales of $24.6 billion in
the second quarter of 2008. This was represented an increase of
93.9 percent compared with the second quarter of 2007. Sales of MVA
annuities increased 89.2 percent to $3.6 billion and sales of
immediate annuities increased 29.5 percent to $2.1 billion.

Alexander remains positive on the outlook for fixed sales in the
third quarter though he anticipates that “increases are likely to
be more modest”.