Fueled by a resurgence of fixed annuities, bank sales of all annuities rose 14% in the second quarter.
After seeing their fixed-annuity sales decline or remain flat for a year, banks sold $3.1 billion of the product from April to June, an increase of 19% from the previous quarter, according to a survey by Kenneth Kehrer Associates, in Princeton, N.J.
Mr. Kehrer, the consulting firm's principal, attributed the rise in fixed-annuity sales to the fact that their interest rates jumped in May by 19 basis points, pushing the yield to 5.82%, a hefty 60 basis points higher than those on one-year certificates of deposit.
But he noted that fixed-annuity rates had dipped in September to 5.34%, while one-year CDs held steady at 5.17%.
"These tight spreads can be expected to have a strangling effect on bank fixed-annuity sales," said Mr. Kehrer.
Variable-annuity sales grew 7%, to almost $2.4 billion. Variable annuities account for 43% of annuities sold through financial institutions.
Bank and thrift sales of variable annuities lag sales through other distribution channels. According to Limra, a research association for the life insurance industry, variable annuities outsell fixed annuities among broker-dealers 7-to-1.
Because bank customers are more accustomed to CDs than mutual funds, Mr. Kehrer said, they are comfortable with the CD-like fixed annuities but wary of variable annuities, which are mutual funds in an insurance wrapper.
"My view is that variable-annuity sales in banks depend upon the continued buildup of bank mutual fund customers," said Mr. Kehrer. "The reason banks lag behind broker-dealers is that it wasn't until 1993 that banks began to have a significant amount of mutual fund sales."
At least some banks are seeing variables outsell fixed annuities.
"It's been two years since we did a lot of fixed," said Ed Hipp, president and CEO of Centura Securities, the broker-dealer of Centura Bancorp in Charlotte, N.C.
Mr. Hipp's bank gets 90% of its annuity investments in variables.
He added that both brokers and customers are becoming more sophisticated about investing, which has boosted the sale of variables.
Banks sold $17.2 billion of annuities last year, or 15% of sales through all channels.
Their share rose to 16.2% in the first quarter and 17.2% in the second quarter.
Banks sell far more in annuities than they do in life insurance or property-casualty insurance.
