To Jill T. McGruder, president and chief executive officer of both annuity distributor IFS Financial Services Inc. and its mutual fund subsidiary, Touchstone Securities Inc., other providers bad news is our good news.
No, she is not wishing ill to other providers. But as the head of the bank marketing subsidiary of Western-Southern Life Assurance Co. in Cincinnati, which has distributed fixed annuities through banks for the past 10 years, the stock markets first-quarter downturn promised good news for her fixed annuity sales totals.
The company sells fixed annuities through roughly 200 banks, about 100 of which sell annuities on a regular basis, she said.
Fixed annuities saw their best quarter ever in sales through banks, according to Kenneth Kehrer Associates, the Princeton, N.J., consulting firm, but variable annuities lost ground in the quarter.
And IFS was a beneficiary. As of early June, it had already reached its 2001 sales target of $500 million of fixed annuities through banks.
Though Ms. McGruder does not expect sales to soar at the same rate during the years second half, IFS is anticipating total fixed annuity volume of about $850 million for 2001.
Overall, the beginning of 2001 was a bad time for variable annuities. First-quarter bank sales dropped 10% compared with the fourth quarter an unusually steep drop for quarter-to-quarter sales comparisons, according to Mr. Kehrer.
IFS had been planning since last year to expand its bank distribution to include variable annuities, but the plan was put on hold until its unbundled variable annuity product, which was introduced in May, came out, Ms. McGruder said. IFS is just now getting out word about this product to banks decision makers.
IFS will need to get shelf space for its variable products if it wants to benefit when variable sales increase, Mr. Kehrer said.
Sixty-one percent of first-quarter 2001 annuity sales through banks were of fixed-return products, according to Kehrer Associates. Fixed annuities outsold variables $4.9 billion to $3.1 billion, the firm said.
Fixed sales in the quarter were at an all-time high. Banks never sold as much fixed annuities as they did in the past quarter, Mr. Kehrer said. A large part of that is market conditions but also the growing number of licensed platform bankers that are selling fixed annuities.
Though fixed annuity sales will not remain so strong, he said, as market conditions improve, the more people selling fixed annuities, the less volume lost.
Western-Southern, the brand name on the products IFS distributes, was ranked 13th overall by Kehrer for the quarter. Its sales grew 140%, to $206 million, from the fourth quarter, an increase Ms. McGruder attributed mainly to fixed annuity volume.
In mergers, we have a history as the acquired banks preferred provider, she said. Being a key supplier to the acquired bank can often mean displacement after the transaction closes, as the bigger bank imposes its own choices, she added. However, IFS has managed to hang on to its relationships and not be displaced, she said, which has broadened its prospects as its distributors get bought.
She attributed the companys success to its 12 wholesalers dedicated to the bank channel; they have developed good relationships with bank employees, she said.
Building on these relationships will be crucial to getting bank clients to put IFS variable annuities on their shelves, she said an judgment in which Mr. Kehrer concurred. If youre doing a lot of fixed annuity business with a bank, and they like working with you because youre doing a good job, they might be more receptive to taking on your variable annuities, he said.
Fixed annuities continue to do well, given the market conditions, he said, but when the market comes back as it seems to want to do variables will become more important.