Govind Narayan had a problem. Industrywide, bank sales of fixed annuities were up 20% from the fourth quarter to the first. General Electric Co.'s were down 27%.
It was "a pretty dramatic experience," said Mr. Narayan, the senior vice president of fixed annuities at GE Financial Assurance Holdings Inc., the Richmond, Va., unit that sells annuities and life insurance through all channels. "We had to take a hard look."
He did, and reversed the slide.
Uncompetitively low interest rates were the main problem, Mr. Narayan said. GE's rate was 5.15% on Feb. 15, compared with 5.5% for American General Corp. and 6% for Prudential PLC's Jackson National Life, according to Kenneth Kehrer Associates.
Fixed annuities are a rate sale, and even a slight difference from prevailing rates will make a difference. "But to be honest, as it turned out we didn't have to do that much," Mr. Narayan said.
By May 15, GE's rate was 5.25%, versus 5.25% for American General and 5.80% for Jackson National, Kenneth Kehrer Associates said.
The other problem, Mr. Narayan concluded, was that his 17 external and 10 internal bank wholesalers were not being aggressive enough. It is important to make sure the wholesalers are calling on the banks constantly, he said.
"We had to reestablish our relationships - to let banks know why our products are good, and let them know we're a very strong company. I don't think we did enough of that" in the first quarter, Mr. Narayan said. "I think our message got lost."
He would not elaborate on his program, but did say that GE did not create incentives for the wholesalers.
GE Financial Assurance is rated A-plus by Standard & Poor's, Aa3 by Moody's and A-minus by A.M. Best.
Whether it was the message, the rates, or both, GE's second-quarter fixed annuity sales through banks jumped 90% from the first quarter and 47% from the fourth, to $548 million. The industrywide gain was 26% from the first quarter and 54% from the fourth, the Kehrer firm said.
Kenneth Kehrer, the president of Princeton, N.J., firm, said that for GE and many other fixed annuity providers, it came down to interest rates.
"It's a very competitive business, and there are only a couple of ways to sell a fixed annuity," Mr. Kehrer said. "Mainly, it's by having the best rate. If a competitor that sells through the same banks as you do has better rates, you're going to end up losing sales. There's no question."
Apart from increasing rates, the only way to raise sales of fixed annuities is to have wholesalers push them and tout their tax-deferral benefits, Mr. Kehrer said. "You can say that about anybody's annuity. The bottom line is, if the rate isn't competitive, it's going to lose sales. And that's what happened with GE."
Still, the decision to raise interest rates is not easy, he said. "Every time you raise rates, you lower profits. And your competitors are constantly moving their rates around, so it's not always clear where the rates should be. It's a moving target, and you never know where your competitors are going with their rates."
Mr. Narayan said GE will not get caught sitting still again.
"We're looking at launching new products and making changes to the fixed annuity, to make them more enticing to banks. We could add riders and waivers."
He would not say more about what changes could be made.
