Buoyed by renewed interest in variables, annuity sales at banks jumped to $5.6 billion in the first quarter, 10% above the fourth-quarter level.
Dollar-cost averaging, a feature new to the annuities business, attracted many investors to variables, whose sales had been flat in the previous three quarters, a consultant said.
"It has really helping variable annuities sell well, even in a market where mutual funds have pulled back a little," said the consultant, Kenneth Kehrer of Princeton, N.J.
In dollar-cost averaging, a fixed amount is invested at set intervals, so more securities are purchased when the price is low. "It's designed to appeal to the cautious investor," Mr. Kehrer said.
The customer typically puts money in a six- or 12-month interest-bearing account, which is gradually drawn down. The annual interest rates average 7.5% for the one-year accounts and 9.6% for the six-month accounts, so customers are eager to invest, Mr. Kehrer said.
Sales of annuities that allow dollar-cost averaging accounted for a quarter of Jackson National Life's $50 million in variable annuity sales through banks in the first quarter, said Bradley J. Powell, the president of the insurer's financial institutional marketing group.
Jackson's variable annuity sales were up 150% for the quarter. Other features, like no-surrender-charge products and commission bonuses, contributed to that growth, Mr. Powell said.
At Amsouth Bancorp in Birmingham, Ala., variable annuities sales were particularly robust in the first quarter, said Michael C. Baker, senior executive vice president of its capital management group. "Overall the product seems to meet the needs of bank customers," he said.
Mr. Baker said he expects the bank to have record sales of both fixed and variable products this year.
Industry sales of fixed annuities rose just 2% in the first quarter, Mr. Kehrer said, but probably climbed faster in the second, because of more attractive rates. The average rate advantage over one-year certificates of deposit widened to 50 basis points in April and May from about 35 basis points in the first quarter, he said.
Allstate Life Group of Northbrook, Ill., made the biggest strides in the first quarter. It doubled its sales, to $474 million from $236 million in the fourth quarter, moving from seventh place to fourth in annuity sales through banks.
Mr. Kehrer credited that growth mostly a new relationship with Bank One, Mr. Kehrer said. Allstate is probably seeing further growth in the second quarter as it begins to benefit from sales of a new variable annuity featuring Putnam-managed investment portfolios, Mr. Kehrer said.
Maryann Bruce, the president of Allstate Financial Distributors, said sales were also helped by Allstate's doubling of its bank wholesalers, to 10; the strategic change from client- to regional-centered wholesaling, and the creation of internal wholesaling to support banks. Allstate will continue to move up the rankings, Ms. Bruce said. By the end of July, she said, it will equal its total 1998 sales of fixed annuities through banks.
Hartford Life retained its stranglehold on first place, with $961 million in first-quarter sales. American General Corp. was second, with $670 million, followed by Nationwide, with $517 million.