Total annuity sales through banks during the first three months of this year topped $10 billion, a jump of 22% over the prior quarter -- the largest quarter-to-quarter gain since the second quarter of 1999, according to Kehrer-LIMRA.

The quarter started off poorly, with January total annuity sales slipping to $2.5 billion from $2.8 billion in December, an 8% decline. But then things turned around dramatically.  For both February and March, fixed and variable annuities sold in the bank channel both showed double-digit growth.

Even within the quarter, there was considerable acceleration, with February annuity sales outstripping January sales by 26%, and March sales outstripping February by 31%.

"Annuity sales have been relatively stagnant for the last year," said Kehrer-LIMRA research director Janet Cappelletti. "We finally got the lift everyone was hoping for."

While the first quarter total annuity sales figure sets a two-year record for the bank channel, the sales of variable annuities alone hit a three-year peak in March, reaching $2 billion for the month. That’s a 29% increase over March 2010.

“What’s impressive is that March of 2011was the strongest month we’ve seen for VA sales in almost four years. What’s more impressive is that we have not seen fixed and variable annuity sales move up this strongly in tandem since March of 2006,” says Scott Stathis, Managing Director of Kehrer-LIMRA.

Fixed annuity sales rose 32% to 2.2 billion in March, the first time fixed annuity sales in the bank channel have exceeded $2 billion since October 2009. For the quarter, fixed annuities were up 45% from the prior quarter.

Kehrer-LIMRA reports that mutual fund sales through the bank channel were more sluggish. Although March mutual fund sales were up by 4% over February to $4.7 billion, that total was 14% lower than the sales figure for March 2010. For the whole first quarter, mutual fund sales in the bank channel totaled $13.6 billion, down 7% from the last quarter of 2010.

A customer shift in favor of annuities in the first quarter, continuing a trend begun last year, pushed the mutual fund share of the bank channel product mix to 53%, its lowest level since July 2009.