Magazine article American Banker

Bank Annuity Income Resilient

Magazine article American Banker

Bank Annuity Income Resilient

Article excerpt

Byline: Steve Garmhausen

Last year was the worst year for bank-sold annuities in the past decade - yet banks' income from the products seems to have defied gravity, posting just a small decline.

What's going on? It appears that banks have shifted significantly to a fee-based sales approach for the products, away from the old up-front commission model.

"I think this is an increasing trend," said Michael White, the president of the research firm Michael White Associates in Radnor, Pa.

Last year, total annuity sales through banks declined 25% from the previous year, which itself was down 18% from the year before that, according to another research firm, Kehrer-Limra of Windsor, Conn. The $33.2 billion of annuities that banks sold in 2010 was the lowest level since the $31 billion sold in 2000.

Yet data from the Michael White-ABIA Bank Annuity Fee Income Report showed that income from annuities was down just 1.8%. In 2010, bank holding companies took in $2.57 billion from annuities sales, down from $2.62 billion in 2009, according to the report, which was released April 19.

The report is based on data from all 6,927 commercial and Federal Deposit Insurance Corp.-supervised banks as well as 911 large top-tier bank holding companies. It appears that more of the annuity revenues accruing to bank holding companies are in the form of asset fees or trailer commissions, which make sellers less dependent on front-end commissions from new sales, according to Valerie Barton, executive director of the American Bankers Insurance Association, which sponsored the report. …

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