Overall sales of annuities through bank holding companies rose 0.5% to $2.62 billion last year, according to the Michael White-ABIA Bank Annuity Fee Income Report, but the results are skewed somewhat by Bank Holding Company-in-name-only Morgan Stanley [MS].
Thanks to its acquisition of Smith Barney from Citigroup [C] in 2008, the former investment bank inherited a sizable annuity business and currently ranks third in terms of sales, at $253 million.
Banking giants Wells Fargo [WFC], Bank of America [BAC] and PNC [PNC] also benefited from their acquisitions of Wachovia, Merrill Lynch and National City, respectively, in annuity sales. Wells Fargo, at No. 1, sold $678 million of the product last year. But removing Morgan Stanley from the mix shows that, as many other reports have indicated, sales of annuities by banks are actually down considerably.
Without Morgan Stanley’s contribution (Goldman Sachs, another investment bank that became a bank holding company, isn’t anywhere near the Top 10 in annuity sales), bank holding companies would actually have sold $2.37 billion, a 9.2% decline from a year earlier.
“The numbers are not a big surprise,” said Michael White, president of Michael White Associates in Radnor, Pa. “It’s been a tough time, especially for fixed annuities, what with interest rates, even with the tax leverage in the products. And variable annuities have been hit badly by revisions to their riders, many of which have been removed or priced higher. Of course, the fallout from the market hasn’t helped much either.”
This year may prove to be a better year, but White said that he doubts results for annuity sales will be stellar. He expects unemployment to remain high, although there are signs of improvement. On the plus side, for annuity vendors at least, “baby boomers took a big hit to their net worth, so more will look for guarantees,” White predicts.