earlier level in the third quarter as customers continued their flight to certificates of deposit and mutual funds. That's the word from Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks the annuities business. It found that insurance companies captured $2.4 billion in third-quarter premiums on fixed annuity sales through banks, compared with $9.6 billion a year earlier. The firm, which had been tracking annuity sales on a semi-annual basis, began quarterly reports with the Sept. 30 data. Kenneth Kehrer, the firm's principal, attributed the decline to an interest rate environment that favors short-term CD investments over long- term fixed annuities. At the same time, a vigorous stock market has been drawing flocks of customers to equity mutual funds. "This is a prolonged slump that's lasted six months," Mr. Kehrer said. The continued interest in mutual funds among bank customers has offset declines in fixed annuity revenue in bank brokerages, even though the latter product offers much higher commissions, Mr. Kehrer said. The losers are insurance companies that place a heavy emphasis on fixed annuities. The leaders in the field include Aegon USA, American Enterprise Life Insurance Co., and Glenbrook Life and Annuity Insurance Co. Insurance companies saw their sales drop in the third quarter from the first six months by an average of one third, Mr. Kehrer said. The largest decline during that period occurred at ITT Hartford Co., which saw sales drop a whopping 80%, according to Mr. Kehrer. But Hartford's overall annuity sales weren't hurt, because it is one of the few companies targeting banks that also sells variable annuities, said Stephen Joyce, director of bank and thrift sales. To show how much the pendulum swings, Mr. Joyce said that in October, 95% of the $166 million of annuities sold were variable annuities. In March, when interest rates were higher, fixed annuities accounted for about 45% of the $163 million total. Cedar Rapids, Iowa-based Aegon, the leading seller of fixed annuities in banks at the end of last year, continues to be the top seller in the third quarter. But that company also saw a decline of 16% over the first six months. Despite the drop, Aegon still captured almost twice as much premium as the second-highest seller of fixed annuities through banks, American Enterprise Life, a unit of American Express Co.

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.