Income earned from the sale of annuities at bank holding companies (BHCs) amounted to $2.62 billion in the first three quarters of 2015, down 2.5% from the $2.69 billion in the first three quarters of 2014, according to Michael White Associates (MWA), Radnor, Pa.
Wells Fargo & Company (CA), Morgan Stanley (NY), Raymond James Financial, Inc. (FL), JPMorgan Chase & Co. (NY), and Bank of America Corporation (NC) led all bank holding companies in annuity commission income.
Third-quarter BHC annuity commissions were the sixth-best quarterly annuity commissions in history at $888.5 million. They were down 0.8% from $893.0 million in second quarter 2015, however, and down 0.3% from $888.5 million earned in third quarter 2014.
Of the 583 bank holding companies surveyed:
- 49.1% (286) participated in annuity sales activities during the first three quarters of 2015.
- Their $2.62 billion in annuity commissions and fees constituted 17.6% of their total mutual fund and annuity income of $14.84 billion.
- The $2.62 billion represented 39% of total BHC insurance sales volume (i.e., the sum of annuity and insurance brokerage income) of $6.71 billion.
Of the 6,270 banks, 876 or 14.0% participated in annuity sales activities, earning $594.8 million in annuity commissions or 22.7% of the banking industry’s total annuity fee income. Bank annuity production was down 2.5% from $644.4 million in the first three quarters of 2014.
“Of 286 large top-tier BHCs reporting annuity fee income in the first nine months of 2015, 180 or 62.9% were on track to earn at least $250,000 this year,” said Michael White, president of MWA and author of the study, in a release. Of those 180, 81 BHCs or 45.0% achieved double-digit growth in annuity fee income.
“That’s a 7.2-point decrease from the same period of 2014, when 93 institutions or 52.2% of 178 BHCs on track to earn at least $250,000 in annuity fee income achieved double-digit growth. This decreased double-digit growth in annuity revenues among large BHCs demonstrates the continued weakening of the bank annuity sector.”
Over two-thirds (68.4%) of BHCs with over $10 billion in assets earned third quarter year-to-date annuity commissions of $2.49 billion, constituting 94.8% of total annuity commissions reported. This was a decrease of 2.5% from $2.53 billion in annuity fee income in the first three quarters of 2014.
Among this asset class of largest BHCs in the first three quarters, annuity commissions made up 17.4% of their total mutual fund and annuity income of $14.35 billion and 41.2% of their total insurance sales revenue of $6.04 billion.
Banks with $1 billion to $10 billion
Banks in the next tier didn’t fare as well. With 45.2% participating in annuity sales, BHCs with assets between $1 billion and $10 billion recorded a decrease of 18.4% in annuity fee income. Sales fell to $128.9 million in the first three quarters of 2015 from $158.0 million in the first three quarters of 2014 and accounted for 19.3% of their total insurance sales income of $667.0 million.
Among BHCs with assets between $1 billion and $10 billion, leaders included:
- Santander Bancorp (PR)
- Stifel Financial Corp. (MO)
- Wesbanco, Inc. (WV)
- National Penn Bancshares, Inc. (PA)
- First Commonwealth Financial Corporation (PA)
The smallest community banks, those with assets less than $1 billion, 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:
- The Oneida Savings Bank (NY)
- Sturgis Bank & Trust Company (MI)
- The Security National Bank of Sioux City, Iowa (IA)
- Bank of Springfield (IL)
- Bank Midwest (IA)
These banks with assets with less than $1 billion generated $50.9 million in annuity commissions in the first three quarters of 2015, down 6.7% from $54.5 million in the first three quarters of 2014. Only 10.6% of banks this size engaged in annuity sales activities, which was the lowest participation rate among all asset classes.
Among these banks, annuity commissions constituted the smallest proportion (18.7%) of total insurance sales volume of $271.4 million.
Among the top 50 BHCs nationally in annuity concentration (i.e., annuity fee income as a percent of noninterest income), the median year-to-date Annuity Concentration Ratio was 5.60% at the end of third quarter 2015.
Among the top 50 small banks in annuity concentration that are serving as proxies for small BHCs, the median Annuity Concentration Ratio was 16.04% of noninterest income.
The findings are based on data from all 6,270 commercial banks, savings banks and savings associations (thrifts), and 583 large top-tier bank and savings and loan holding companies (collectively, BHCs) with consolidated assets greater than $1 billion operating on September 30, 2015. Several BHCs that are historically insurance or commercial companies have been excluded from the study.
© 2016 Michael White Associates.