The emerging bear market depressed bank sales of variable and fixed annuities in the third quarter.

Sales dropped 7%, to $7.9 billion, from the second quarter’s $8.5 billion total, according to a study released last week by Kenneth Kehrer Associates of Princeton, N.J. The second-quarter figure was the highest for any quarter in three years. The third-quarter figure was the second highest.

Variable annuity sales slipped 9%, to $4 billion, while fixed annuities fell 5%, to $3.9 billion.

“This was a bad quarter to sell investments,” said Ken Kehrer, president of the consulting firm. “A lot of people didn’t invest, and from the early reports I’ve received from banks, the numbers could get worse in the fourth quarter.”

The bank’s market share has remained steady for much of this year. Banks were responsible for 12.6% of all variable annuity sales, up from 12.5% in the second quarter; while the 26.9% share in fixed annuities in the third quarter is down only a bit from 27.9% in the second quarter.

But Mr. Kehrer said that should bring little comfort to banks. “When sales are down, it hurts financially,” he said. “For an individual bank, it might be nice to know that everyone is hurting, but it’s still not good.”

Hartford Life of Simsbury, Conn., retained the top bank distributor spot for all annuities in the third quarter with $970 million in sales, $800 million of which came from variable products. But its variable annuity sales fell nearly 13%, from $922 million in the second quarter. The company, a member of The Hartford Financial Services Group, had $1,137 million in total annuity sales through banks in the second quarter.

Houston-based American General fared even worse. The second-largest company in annuity sales through banks saw its total annuity sales slip nearly 23%, to $837 million. American General remains the top bank distributor of fixed annuities with $637 million in sales, but that is 25% below its second quarter sales.

“American General fell in part because its flagship product is a super bonus annuity. If you invested in one of these products in the first year, you get extra percentage points of interest in the first year,” Mr. Kehrer said. “Banks have shied away from that, because when customers saw such a drop from their first year, they started complaining to banks. So banks want a simpler product.”

Matt Riebel, president of Nationwide Financial Distributors Agency in Columbus, Ohio, scoffed at the notion that the stock market is the sole determinant of annuity sales performance. “I wouldn’t say the stock market has much of an effect. The stock market is always going to go up and down,” he said. “If a company’s sales go up and down because of the stock market, you have to wonder what they’re selling. If a company’s selling a quarter-to-quarter product versus a long-term investment, that’s a dilemma. An annuity is a long-term investment.”

For comparison, Mr. Riebel suggested looking at sales compared to last years’ third quarter. “There is a seasonality to our business, and comparing third quarter to third quarter is comparing apples to apples,” he said.

Bruce Ferris, vice president of investment sales products for Hartford Life, agrees with Mr. Riebel. “The stock market is not a 100% excuse, because it comes down to a call to action and the ability to get people to recognize it’s a buying opportunity,” he said. But, he added, “I also think that despite our best efforts, the stock market does determine to some extent how high our highs are and how low our lows are.”

While overall numbers were down, not all annuity distributors’ bank sales fell in the third quarter. For instance, according to Kehrer’s study, Boston-based Keyport Life Insurance Co. had fixed annuity sales of $362 million, up from $286 million in the second quarter and from $137 million in last year’s third quarter.

“Keyport has become the main provider at FleetBoston,” Mr. Kehrer said. “Two years ago, Fleet licensed its bankers to sell fixed annuities, and that training is paying off for Fleet and Keyport.”

And Nationwide’s variable annuity sales in the third quarter jumped 12% from the third quarter of 1999, just over the industry average of 11%. On the fixed side, Nationwide’s growth was sharply higher — 58% from 1999’s third quarter to this year’s, compared with an industry average of around 11%.

On the variable annuity side, American Enterprise nearly doubled its bank distribution in the third quarter, from $80 million in the second quarter to $157 million, and Equitable had variable sales of $155 million in the third quarter, up from $130 million in the second quarter.

“American Enterprise has a joint venture product with Wells Fargo, where Wells Fargo’s funds are in the annuity,” Mr. Kehrer said.

The top five companies in bank variable annuity sales were Hartford Life with $800 million; Nationwide, which sold $597 million; Allstate Financial, at $334 million; American Skandia with $215 million; and American General, which sold $200 million.

The top five in bank fixed annuity sales were American General, then Aegon/Transamerica, which sold $531 million; Allstate at $377 million; GE Companies at $366 million; and Keyport at $362 million.

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