Fixed and variable annuities often act like seesaws – while one goes up in popularity, the other dips. Or, during prosperous times, both rise together as investors pump in money across the board.

Last year, however, brought an almost never-seen phenomenon: Sales of both types of investments slumped.

All told, fixed annuities dropped 1 percent while variables went down 18 percent, according to Windsor, Conn.-based insurance researcher LIMRA. In addition, both types of annuities were down for bank-sold investments in January as well. Fixed annuity sales in the bank channel dropped 14 percent, to $1.3 billion from December 2009 to January, and were 61 percent less than sales for January 2009. Variable annuities dipped 21 percent for the same time period, to $1 billion.

In 20-plus years of monitoring such sales, LIMRA researchers had never seen a slump in both types of annuities at the same time, said Joe Montminy, assistant vice president and director of LIMRA’s annuity research.

“It was a really interesting time, period, for all of those,” he said.

Popularity of the two categories are often linked to each other, thanks to larger factors. For example, variable annuities sales are tied to the performance of equities markets, so when markets are shaky, investors often seek the safe harbor of conservative options like fixed annuities.

But in 2009, several factors drove both types down, Montminy said. Fixed annuities sales are heavily driven by interest rates. At the start of last year, rates were attractive compared to other types of fixed-rate investment products. But as the year progressed, the interest rate spread began to decline significantly. The rate for fixed annuities with a one-year guarantee dropped by 25 percent to 30 percent, while the five-year guarantee dropped 75 percent, he said.

In addition, financial services companies were concerned with maintaining large amounts of available capital, possibly because they wanted to keep their capital positions strong or because they wanted to direct it to other types of business. To accomplish that, they lowered what they were crediting on fixed annuities and made the investment less attractive for the time being. That, coupled with the interest rate environment, brought fixed products down relative to previous years, Montminy said.

Variable annuities had also had a prosperous recent history, he said, with record-high sales in 2007. At that time, financial services companies had made variable annuities extremely popular thanks to generous guarantees for investors. Even during the financial turmoil in 2008, financial services companies kept variable annuities attractive enough to keep buyers around – they were just purchasing fewer products. Coming off a high in 2007, growth in sales was difficult to maintain, Montminy said.