Variable annuity sales through banks tumbled this year when the stock market went from bull to bear, but American Skandia Life Assurance Corp., a variable annuity specialist that was hit harder than most bank sellers, hopes to stop the slide by making its products more conservative.

Kenneth Kehrer Associates’ quarterly study of bank variable annuity sales showed American Skandia slipping from fourth place in the third quarter of last year to ninth place in the first quarter of this year.

The Shelton, Conn., company, which is owned by Skandia Insurance Co. of Stockholm, sold only $112 million of variable annuities through banks in the first quarter, a 31% drop from the fourth quarter and only slightly more than half the $215 million it sold through banks in the third quarter, according to Kehrer Associates of Princeton, N.J.

American Skandia is known for the aggressive investment portfolios it uses in its variable annuities, a potential strike against it in a shaky equity market. But last month it introduced a guaranteed-return option rider for its seven bank-sold variable annuities in an effort to recast the group in a more conservative light.

Patricia J. Abram, senior vice president and chief marketing officer, chalked up the sales downturn to the stock market slump.

The new rider should help sales recover because it enhances the “maturity of our business plan,” she said. “If you look at the sales of variable annuities, those with defense structures built in are getting the most attention.”

American Skandia’s overall sales were also hit hard by the market drop but not nearly as hard as its bank sales. According to Info-One/Vards Inc., a variable annuity research company, the company’s total first-quarter variable annuity sales dropped 16.4% from the fourth quarter.

“They aren’t diversified, so they can’t play up other products like fixed products when the market drops,” said Val Jordan, president of Jordan & Jordan Associates of Belchertown, Mass. “When you’re a variable company, you don’t have anything to drop back to.”

Ms. Abram said that offering a rider that guarantees a return on principal is “an opportunity for investors worried about the market” and its fluctuations. “It puts 100% of the money into the equity market and then moves money to the fixed markets in concert with the stock market. So it’s defensive, but it’s still tied to the stock market.”

The rider should help the company’s annuity sales through banks because bank customers are more conservative than the average investor, she said. “The bank is the safest place in American society to keep money. The more aggressive investor doesn’t go there.”

American Skandia also hopes to boost its bank sales through the new bank distribution agreements it has signed for the AS Apex variable annuity it introduced in late January.

“We’re just starting to see selling agreements on that,” Ms. Abram said.

Ken Kehrer, president of Kehrer Associates, said that even though American Skandia’s sales have been down he “wouldn’t write them off.”

The company has been innovative, and the guaranteed-return rider could be another example of that, he said. “They were one of the movers of creating a bonus or extra credit product a few years ago, and now that’s been copied by a lot of other providers.”

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.