2008 Will Be Tough Act To Follow for Sales of Fixed Annuities.(Annuities)

Byline: Steve Garmhausen, American Banker

Banking companies will be hard-pressed to repeat a banner 2008 in terms of sales of fixed annuities. Fixed annuities were popular late last year and early this year, but with interest rates falling and the markets in a fingers-crossed recovery, executives and analysts expect demand for these products to start tapering off.

At SunTrust Banks, strong fixed annuity sales last year carried over into this year, said Alex Null, senior vice president of mutual funds and annuities at SunTrust Investment Services.

"Sales are still strong, but they have slowed with what the markets have done recently," Null said.

Changes in interest rate spreads and a degree of restored confidence in the markets, meanwhile, mean that demand for variable annuities and mutual funds-while still below its normal level-has begun to rise in recent weeks, according to Null.

"The yields that drive fixed annuity rates are compressing, which will make it tough for insurers to offer the rates they did in 2008," he said. "And the equity and bond markets are recovering."

Variable annuity sales through banks have been in decline. Of total bank sales of annuities and mutual funds, variable annuities fell from 24% in the fourth quarter of 2007 to 13% in the first quarter of this year, according to the research firm Kehrer-Limra of Princeton, N.J.