FARMINGTON, Conn. - Banks have emerged as big outlets for annuities, thanks to strong ties to older consumers.
A study by the Life Insurance Marketing Research Association found that banks and savings and loan associations account for 15% of all annuity sales.
That tops the market shares of such investment providers as stockbrokers and financial planners. Only employers and life insurance companies have higher shares, the study showed.
An annuity is an insurance contract that invests in a pool of securities to generate a steady stream of income. Earnings are not taxed until tapped, making annuities an attractive investment for retirement planning.
The Age Factor
People become increasingly likely to buy annuities as they grow older - and that is good new for banks. People older than 50 are more likely to buy annuities through banks or S&Ls than from other sources, according to the study.
"Banks and S&Ls operate more in the middle affluence group," said Walter H. Zultowski, a senior vice president in the association's research department.
For banks in search of receptive audiences for annuities, research from both the Farmington, Conn.-based research association and the Gallup Organization may help target customers.
The findings by both groups were presented earlier this month at a conference in Washington.
Median Age of 50
The median age of any annuity owner of any annuity is 50, according to the research association.
People who buy annuities under pension plans set by employers on behalf of their workers have a median income of $ 44,750, and the group's median age is 49.
People who invest in annuities on their own have a median income of $ 47,200, and their median age is 58.
The majority of households with the products have just one annuity, the study found.
Furthermore, "cross-selling is rarely occurring," Mr. Zultowski noted. Only 20% of annuity owners purchased another life insurance product from the same company, he said.
Variable-Product Sales Up
However, he said, "there is tremendous potential in this area."
The data, based on information from 2,775 respondents, shows that sales of variable products were up by 59% in 1992, while fixed-product sales slipped 2%. To date this year, fixed annuities are down 2% again, and variable product sales have grown by a third.
While fixed annuities pay set yields, much like bank certificates of deposit, yields on variable annuities fluctuate daily depending on the performance of the underlying mutual funds they invest in.
In another study, by the Gallup Organization, 86% of the 1,007 people surveyed said they owned annuities. All the names of people polled, however, were drawn from life insurance company databases - producing a group more likely to own annuities.
The Gallup poll found that 61% of the people surveyed own mutual funds and 57% own certificates of deposit.
About two-thirds of owners are married, the Gallup study found. Average income and education varied widely. While 29% of the respondents had incomes between $ 20,000 and $ 39,000, 20% earned between $ 50,000 and $ 74,999, and 17% had incomes over $ 75,000.
In terms of schooling, 20% of the Gallup poll respondents did postgraduate work and 23% were college graduates.
Still, marketers can't limit their scope to those with higher degrees since 28% held only high school diplomas.
