Insurance executives predict that banks will become bigger sellers of variables annuities as they look for new sources of revenue to combat deposit flight.

Investors who buy variable annuities are looking for the safety and guarantees they get from Federal Deposit Insurance Corp. coverage, said Ross D. Hansen, vice president and associate counsel of James Mitchell & Co., San Diego, Calif.

Indeed, about 81% of the people who purchased variable annuities from James Mitchell through September hold certificates of deposit, Mr. Hansen told people attending a National Association for Variable Annuities conference in Washington.

Record Sales

Variable annuities are insurance contracts that invest in underlying mutual funds. In addition to providing an income stream, they are tax deferred until tapped, making them a popular investment for retirement planning

While yields on fixed annuities have been declining (see related story on this page), meager interest rates and the desire for secure investments have sent variable annuity sales soaring to record levels.

Sales last year topped $28 billion, up from $17.7 billion in 1991, according to the Variable Annuity Research and Data Service Report, Roswell, Ga. By June 30, sales were nearing the $20 billion mark, 68% of the total volume for all of 1992.

"It's a relatively big jump," said R. H. "Rick" Carey, publisher of the report.

Big Gains Predicted

Analysts are forecasting another record year. Sales volume by yearend will approach $40 billion, according to Mr. Carey.

"We expect 1994 to be the real surprise, with total variable annuity sales in the $60 billion range," Mr. Carey predicted. He thinks sales will break the #100 billion mark by 1996.

Banks still have a long way to go to become big sellers of variable annuities. Just 5% of all variable annuity sales came from banks in the first six months of 1993.

IN contrast, 18% of variable annuity sales were made by independent firms and 16% by New York wirehouses. Eight percent came from regional firms, and the remaining 53% came from traditional sales channels such as insurance agents. "The bank number may go up a little more this year," Mr. Carey said in an interview.

Hopeful Forecast

Sales through banks will also improve as the product is demystified, he said. "There is going to be some simplicity put into the sales marketplace, which will help sales along."

Educating buyers and sellers will also boost sales, industry watchers predict. "The variable annuity itself is becoming better known," Mr. Hansen said.

Getting platform bankers to sell variables annuities "is an uphill battle," he said. While bank employees are comfortable with CDs and are becoming more at ease with other products, selling variables annuities "is a lot more complicated than selling a fixed annuity or a mutual fund," he noted.

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