Banks’ annuity fee income rose, FA sales fell in "09 3Q

Fee income from annuity sales climbed at bank holding companies during the first three quarters of 2009, but sales of fixed annuities in the bank channel slipped, according to two separate studies released last week.

Fee income from the sale of fixed and variable annuities rose to $2 billion through the first nine months of 2009, a gain of 2.5% from the comparable period in 2009. Commissions from the sale of those annuities also leapt in the third quarter, rising to $669.8 million and reflecting a gain of 4% from the year-ago period, according to the Michael White-ABIA Bank Annuity Fee Income Report, which was sponsored by the American Bankers Insurance Association.

The data come from 7,319 commercial and FDIC-supervised banks, and 922 top-tier bank holding companies.

The bank holding company with the most annuity fee income in the first nine months of the year was Wells Fargo & Co., with $504 million, down 17.6% from the comparable period in 2008. JPMorgan Chase & Co. came in second with $258 million in annuity fee income, experiencing a more modest dip of 3.73% from the first nine months in 2008.

Some firms experienced drastic growth in their annuity fee income, including Regions Financial Corp. Fee income from annuity sales rose by 235% to $71.2 million for the first nine months of 2009. Bank of America Corp. had an 84.21% gain in annuity fee income, hitting $203 million. The company’s acquisition of Merrill Lynch & Co. Inc. helped strengthen BofA’s annuity distribution considerably, said Michael D. White, president of Michael White Associates.

The biggest firms — those with more than $10 billion in assets —made up the lion’s share of commissions from annuity sales. Through the first three quarters of the year, 71% of those large bank holding companies raked in $1.89 billion in commissions, accounting for 94.6% of total annuity commissions reported, according to the study. That’s up 3.5% from the same period last year.

Sales of fixed annuities in the bank channel, however, slid during the third quarter by 24% year over year to an estimated $7.25 billion, according to a separate study from Beacon Research Publications Inc. The biggest culprits behind falling sales are slumping fixed-annuity credited rates and the fact that the products aren’t offering as much of a competitive rate advantage over bank certificates of deposit, according to Beacon Research.

The top fixed-annuity seller in the bank channel during the third quarter was Western National Life, an American International Group Inc. subsidiary, according to Beacon.

Western National racked up some $1.123 billion in bank channel sales, taking over first place from New York Life Insurance Co. , which fell to third with $672,863 in bank channel fixed-annuity sales. Pacific Life Insurance Co. took second place with $1.119 billion in bank channel sales, according to Beacon Research.

Experts have attributed the success of Western National, formerly known as AIG Annuity Insurance Co., to a handful of factors, including its name change, the bonuses it offers to consumers and a decision by rivals to pull back on fixed-annuity sales after hitting sales limits.

Joining the top 10 ranks of bank annuity sellers are Jackson National Life Insurance Co., ING USA, and Hartford Life Insurance Co. The three carriers joined at seventh, eighth and ninth places, respectively.

Jackson sold $374,240 in fixed annuities through banks, while ING sold $220,969. Hartford sold $170,652 of fixed annuities in the channel.

Pacific Life’s Pacific Explorer, a book-value annuity that pays a declared rate of interest for a period, was the top-selling fixed annuity in banks. Western National’s Flex 5, also a book-value product, was second.

And Lincoln Financial Group’s New Directions indexed annuity rounded out the top three.

E-mail Darla Mercado at [email protected].

Related Topics: American International Group (AIG), Bank Products, New York Life Insurance Co.