Wealth Effects of Banks' Rights to Market and Originate Annuities
Posted: 5 Nov 2001 Last revised: 18 Mar 2016
Date Written: 2002
We examine wealth effects, for banks and insurers, of bank rights to sell and underwrite annuities. The stock-price reactions to four court and regulatory decisions are consistent with expectations of bank gains at insurers' expense. Cross-sectionally, smaller, riskier insurers with higher distribution costs and substantial annuity business sustain larger wealth losses. Larger, riskier bank holding companies with fee-based and consumer business gain most, consistent with the extension of federal safety-net guarantees as a source of gains. Banking stock-price reactions to the Supreme Court's decision are opposite other findings, possibly reflecting unfulfilled expectations of a broader mandate for expanded bank rights.
Keywords: Annuities, VALIC, financial modernization, deregulation, deposit insurance, Blackfeet National Bank, event studies
JEL Classification: G21, G22, G28, G14, L51
Suggested Citation: Suggested Citation