Bank holding companies (BHCs) earned a record $1.81 billion from the sale of annuities in the first half of 2014, up 11.5% from the $1.63 billion earned in first half 2013, according to the Michael White Bank Annuity Fee Income Report.
Second-quarter 2014 annuity commissions reached $916.8 million, the second-highest quarterly mark on record. That was 9.6% higher than the $836.4 million earned in second quarter 2013 and up 2.2% from $897.0 million in first quarter 2014.
Compiled by Michael White Associates (MWA), the report tracks annuity fee income of all 6,656 commercial banks, savings banks and savings associations (thrifts), and 1,063 large top-tier bank and savings and loan holding companies operating on June 30, 2014. Several BHCs that are considered insurance companies were excluded from the report.
Of the 1,063 BHCs, 422 or 39.7% participated in annuity sales activities during first half 2014. Their $1.81 billion in annuity commissions and fees constituted 16.1% of their total mutual fund and annuity income of $11.24 billion and 37.1% of total BHC insurance sales volume (i.e., the sum of annuity and insurance brokerage income) of $5.47 billion.
Of the 6,656 banks, 900 or 13.5% participated in first-half annuity sales activities. Those participating banks earned $435.4 million in annuity commissions or 19.7% of the banking industry’s total annuity fee income; their annuity income production was up 22.0% from $356.9 million in first half 2013.
“Of 422 large top-tier BHCs reporting annuity fee income in first half 2014, 218 or 51.7% were on track to earn at least $250,000 this year,” said Michael White, president of MWA, in a release.
“Of those 218, 127 BHCs or 58.3% achieved double-digit growth in annuity fee income for the quarter. That’s more than a doubling from first half 2013, when 61 institutions or 38.9% of 157 BHCs on track to earn at least $250,000 in annuity fee income achieved double-digit growth.
“Along with a 39% increase in BHCs that experienced increases in annuity commissions and fees, these findings of more growth in year-to-date banking industry annuity revenue and more increases in banks on track to earn at least $250,000 in annual annuity revenue are very positive.”
- Two-thirds (68.4%) of BHCs with over $10 billion in assets earned first-half annuity commissions of $1.69 billion, constituting 93.2% of total annuity commissions reported by the banking industry. This revenue represented an increase of 11.7% from $1.51 billion in annuity fee income in first half 2013.
- Among these largest BHCs in the first half, annuity commissions made up 15.5% of their total mutual fund and annuity income of $10.93 billion and 39.6% of their total insurance sales volume of $4.27 billion.
- BHCs with assets of $1 billion to $10 billion recorded an increase of 9.5% in annuity fee income, rising to $108.3 million in first half 2014 from $98.9 million in first half 2013 and accounting for 22.6% of their total insurance sales income of $480.0 million.
- BHCs with $500 million to $1 billion in assets generated $15.37 million in annuity commissions in first half 2014, down 0.1% from $15.38 million in first half 2013. Only 28.8% of BHCs this size engaged in annuity sales activities, which was the lowest participation rate among all BHC asset classes. Among these BHCs, annuity commissions constituted the smallest proportion (11.3%) of total insurance sales volume of $136.4 million.
Wells Fargo & Company (CA), Morgan Stanley (NY), and Raymond James Financial, Inc. (FL) led all bank holding companies in annuity commission income in first half 2014.
Among BHCs with assets between $1 billion and $10 billion, leaders included Santander Bancorp (PR), Stifel Financial Corp. (MO), and SWS Group, Inc. (TX).
Among BHCs with assets between $500 million and $1 billion, leaders were First Command Financial Services, Inc. (TX), Platte Valley Financial Service Companies, Inc. (NE), and Goodenow Bancorporation (IA).
The smallest community banks, those with assets less than $500 million, were used as “proxies” for the smallest BHCs, which are not required to report annuity fee income. Leaders among bank proxies for small BHCs were Sturgis Bank & Trust Company (MI), FNB bank, N.A. (PA), and Jacksonville Savings Bank (IL).
Among the top 50 BHCs nationally in annuity concentration (i.e., annuity fee income as a percent of noninterest income), the median Annuity Concentration Ratio was 9.0% in the first half of 2014. Among the top 50 small banks in annuity concentration that are serving as proxies for small BHCs, the median Annuity Concentration Ratio was 16.4% of noninterest income.
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