Holding its own through a sharp decline in fixed annuity sales, Nationwide Financial saw a vindication in the fourth quarter of the product diversification strategy it adopted in the late 1990s as the quarter's variable annuity sales rate rose in double digits.
The Columbus, Ohio, financial services company sold $449 million of variable annuities in the fourth quarter, 65% more than in the third quarter and 46% better than in the same period of 2001. But fixed annuity sales slipped to $417 million, down 43% from the third quarter and 29% from the year earlier.
The net effect was a slight sales decline from the third quarter in the bank channel. But Matt Riebel, the president of Nationwide Financial Institutions Distributors Agency Inc., the division that sells and markets Nationwide's insurance and investment products through banks, said the fourth-quarter sales supported its strategy of maintaining a balance between variable and fixed annuities.
"This is really something we pursued three and a half years ago," Mr. Riebel said. "To be the best partner, we had to offer multiple products. So it's been a good combination for us."
In the mid-1990s, Nationwide was predominantly a variable annuities player, but late in the decade, it decided to diversify in order to be ready to meet any product need in the bank channel.
Kenneth Kehrer, the president of Kenneth Kehrer Associates, a Princeton, N.J., consulting firm that tracks annuity sales through banks, said Nationwide's results were generally positive because of what he called their healthy mix.
"We still don't know which way the variable annuity market is going to go, so the fact they have nearly a 50/50 split is very good," Mr. Kehrer said. "They're in good shape because of that split. They've had a healthy split for quite a while. They have the most balanced distribution out there."
Consultant Bob Wick called Nationwide's distribution strategy exceptional.
"They should be congratulated in successfully weathering the annuity storm that developed in 2002," said Mr. Wick, the president of RVW Consulting in Davidson, N.C. "Nationwide has a very strong balance in their annuity sales, not heavy in either fixed or variable. They have had a strong variable brand name with the Best of America series."
However, Mr. Riebel called the decline in fixed sales disappointing.
"With interest rates decreasing, it seems a bit difficult for consumers to put their money in a fixed annuity," Mr. Riebel said. "I'd like for it to be more," he said, but he speculated that some bank salespeople had put more time into variable annuity sales, "and that probably affected fixed sales a little, too."
Nationwide is also close to expanding its list of proprietary annuity agreements, Mr. Riebel said. The company has eight variable and 11 fixed proprietary agreements with banking companies. About 30% of all annuity sales by Nationwide through banks came through these proprietary deals.
Usually, the participating bank's own funds are included on the menu of portfolios available in a proprietary variable annuity product. In a fixed proprietary annuity, often a bank helps manage the product. However, some proprietary agreements are set up more like a private-label deal in which the bank's name is on the annuity but otherwise it is the same shelf product the insurer offers elsewhere.
"Our proprietary deals go across the board," Mr. Riebel said. "We will add to the number we have in the first quarter."
Last quarter the company formally announced a proprietary fixed and variable annuity deal with Branch Banking & Trust Co., the flagship subsidiary of BB&T Corp. in Winston-Salem, N.C. BB&T also sells a proprietary variable annuity under an agreement with Hartford Life and a fixed proprietary product in a deal with American International Group.
Nationwide's sales of all products through banks rose 17% last year, to $4.2 billion. This includes fixed annuities, variable annuities, pension products, and life insurance. Most of Nationwide's bank life insurance sales are of a variable universal life product.
