Bank Annuity Sales Rise, Insurance Income Falls

Income earned in 2016 from the sale of annuities at bank holding companies rose 2.3 percent to $3.22 billion compared with 2015 as more large banks increased annuity programs, new research found.

The proportion of big banks with growing annuity sales programs increased in 2016 over the previous year, as did the rates of growth among those programs, said bank insurance consultant Michael White.

The data, published in the Michael White Bank Annuity Fee Income Research report, points to what could be “the onset of an overall growth period in bank annuity sales production,” White said in a news release.

“And yet, we would not be overly enthusiastic, particularly because the regulatory environment remains hazy due to uncertainty relating to the Department of Labor’s fiduciary rule,” he added.

The fiduciary rule, which takes effect June 9, raises investment advice standards into retirement accounts.

Banks could benefit as independent agents decide not to sell annuities under the rule and as insurance companies redirect more annuity sales through banks, which are regulated as financial institutions.

Bank annuity sales in the third quarter reached a record $937 million, but the other three quarters were among the six smallest quarters in the last five years, said White, owner of Michael White Associates in Radnor, Pa.

Fourth quarter 2016 bank holding company annuity commissions fell 4.2 percent to $764.1 million compared with the year-ago period, White said, and declined 18.5 percent from the third quarter.

Insurance Brokerage Fee Income Dips 2 Percent

Insurance brokerage fee income to bank holding companies in 2016 dipped 2 percent to $5.35 billion compared with 2015, according to the Michael White Bankinsurance Fee Income Report.

The decline in insurance brokerage income was attributable to a small number of very big banking companies, White said.

In 2016 insurance brokerage fee income at Wells Fargo, Citigroup, American Express, and Morgan Stanley dropped by $471 million compared with 2015, the report said.

The decrease among a handful of the largest banks masks what has been rising income growth in bank insurance brokerage income.

“Within the banking industry, there is renewed interest in acquiring insurance brokerages,” White said in the news release. “Acquisition of producing agencies remains a compelling strategy for generating immediate and meaningful growth in bank fee income.”

Of the 596 largest banks with at least $1 billion in assets, 65.4 percent engaged in insurance brokerage activities in 2016, the report found.

Banks generate billions of dollars in fee income every year and buying insurance agencies allows banks to sell banking products and services to the agency’s clients.

Conversely, the agency can sell insurance products and services to the bank clients.

InsuranceNewsNet Senior Writer Cyril Tuohy has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].

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Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. He can be reached at [email protected].