Bank annuity sales stalled in 1998 because of volatility in the stock market late in the year.
Banks sold $19.5 billion in fixed and variable annuities last year, which was just 1% higher than 1997 sales, according to Kenneth Kehrer Associates of Princeton, N.J.
"On the face of it you'd say they didn't do well, because the sales were flat," Mr. Kehrer said. But "the variable annuity sales would have been gangbusters if it hadn't been for the stock market volatility in the third quarter."
Banks had been on pace to increase sales by 35% for the year when the market gyrations spooked investors, he said.
Variable annuity sales reached $11.1 billion in 1998-the first full year in which bank sales of variables outpaced those of fixed annuities. That was 19% higher than 1997 sales of $9.3 billion, despite the 8% decline in the fourth quarter.
Though variable annuities lost some luster, investors showed renewed interest in fixed annuities, where sales jumped 14% during the fourth quarter.
"Fixed annuities showed some strength in the fourth quarter, suggesting that maybe they can curtail their drop and grow a little bit," Mr. Kehrer said.
Earlier in the year a flat yield curve had CDs paying more than fixed annuities, Mr. Kehrer said. That helped suppress 1998 sales to $8.4 billion, 16% lower than 1997 sales of $9.3 billion.
But investor interest in fixed-rate products was buoyed in the fourth quarter by several insurers who offered bonus rate promotions, Mr. Kehrer said.
"It wasn't surprising that when the market became volatile that they moved toward fixed annuities because that's sort of a traditional safe harbor," Mr. Kehrer said.
James P. Heide, annuity product manager at KeyCorp, said he saw some increase in fixed annuity sales early this year. But, he said, he doesn't believe fixed annuity sales will recover until rates rise.
"I think if rates can get anywhere over 6% or closer to 7% there are some investors who'll prefer them," Mr. Heide said.
There were few changes in the Kehrer rankings of top underwriters selling annuities through banks.
Hartford Life racked up sales of $3.8 billion, maintaining a strong lead over second place American General Corp.
But American General did narrow the gap by increasing sales by about 23%, to $2.04 billion.
"They are coming on and they might be bigger and bigger to the extent they can get their variable annuity business growing," Mr. Kehrer said. American General has traditionally been stronger in fixed annuities.
Nationwide placed third and Allstate took fourth. The only newcomer in the top five was Safeco, which roared in with $974 million in sales-a 157% increase from a year earlier. Mr. Kehrer attributed the jump to the company's strong equity index sales in the first three quarters.
