Income earned by bank holding companies (BHCs) from the sale of annuities fell steadily throughout the first three quarters of 2010, according to the Michael White/ABIA Bank Annuity Fee Income Report.
Performance figures for the first three quarters of 2010 stood at $1.84 billion, down 7.6% from $2 billion in annuity income earned by BHCs during the same period a year earlier. Third-quarter annuity commissions of $621.3 million were 3.1% lower than the previous quarter and 7.3% less than the third quarter 2009.
“Fixed annuities have obviously had a difficult time, and that has impacted what banks have earned,” explained Michael White, president of Michael White Associates in Radnor, Pa. “Variable annuities have bounced back a bit, but not enough to make up for the shortfall.”
Market conditions may conspire to make 2011 a better year for annuities, though. White pointed out that inflation has already begun to rise, bringing up the cost of food, and fixed annuities will benefit as interest rates respond to the rate of inflation. And, assuming the market continues its upward climb, so should sales of variable annuities.
There are 915 BHCs reporting to the FDIC, 386 of which, or 42.2%, sell annuities. Wells Fargo, Morgan Stanley and JPMorgan Chase sold the most annuities in the first three quarters of 2010.