Bank sales of annuities hit record low in January

Bank sales of fixed and variable annuities continued their slide in January, hitting record lows, according to data from Kehrer-LIMRA. Monthly sales of bank annuities have been declining steadily since climbing to a 2009 high last March. Back then, total sales hit a high of $5 billion, according to the Kehrer-Jackson Monthly Bank Annuity Sales Survey. Since then, total sales have experienced a precipitous drop, falling to $2.4 billion in January, compared to $4.2 billion a year earlier. Fixed annuities, which helped bump up total sales last year, have also taken a steep dive, down to $1.3 billion, compared to $3.5 billion in January 2009. Fixed annuities tend to fare well when they can offer yields competitive with those of certificates of deposit. However, over the course of 2009, the fixed annuities lost some of that competitive edge, as the spread between the yield on a five-year CD and the average effective yield on a fixed annuity fell by 90%. The difference in yields — as high as 155 basis points in January 2009 — fell to 15 basis points two months ago, according to Kehrer-LIMRA's Bank Fixed Annuity RateWatch. Meanwhile, banks sold some $1 billion in variable annuities in January, down 21% from December's high of $1.3 billion. Still, that's up from $700 million in sales in January 2009. Variable annuity bank sales had been relatively consistent for most of 2009, holding steady at about $1.1 billion between March and November.