Income earned from the sale of annuities at bank holding companies (BHCs) reached $2.62 billion in 2009, up only 0.5% from the 2008 figure of $2.61 billion, according to the Michael White-ABIA Bank Annuity Fee Income Report.
Of that amount, Wells Fargo & Co. accounted for $678 million, or almost 26%, thanks to its acquisition of the perennial leader in bank annuity sales, Wachovia Bank, during the depths of the 2008-2009 financial crisis. The ten largest bank holding companies accounted for about three-fourths of annuity fee income. (See chart on RIJ homepage, April 28, 2010.)
The report is based on data from all 7,247 commercial and FDIC-supervised banks and 913 large top-tier bank holding companies, of whom 391 or 42.8% participated in annuity sales activities during the year.
Their $2.62 billion in annuity commissions and fees constituted 13.0% of their total mutual fund and annuity income of $20.17 billion and 17.5% of total BHC insurance sales volume (i.e., the sum of annuity and insurance brokerage income) of $14.96 billion.
Of the 7,247 banks, 985 or 13.6% participated in annuity sales activities. Those participating banks e arned $824.2 million in annuity commissions or 31.5% of the banking industry’s total annuity fee income.
Sixty-eight percent (68%) of BHCs with over $10 billion in assets earned annuity commissions of $2.48 billion, constituting 94.7% of total annuity commissions reported. This was an increase of 1.2% from $2.45 billion in annuity fee income in 2008.
Among this asset class of largest BHCs, annuity commissions made up 15.7% of their total mutual fund and annuity income of $15.84 billion and 17.6% of their total insurance sales volume of $14.11 billion, the highest proportion of insurance sales volume of any asset class.
Annuity fee income at BHCs with assets between $1 billion and $10 billion fell 9.8% in 2009, to $116.7 million from $129.4 million in 2008, and accounted for 2.7% of their mutual fund and annuity income of $4.32 billion, the lowest proportion of investment sales of any asset class.
| Top 10 BHCs in Annuity Fee Income (Millions) | |||
|---|---|---|---|
| Bank Holding Co. | 2009 Fees | 2008 Fees | % Change |
| Wells Fargo & Co | $678.00 | $118.00 | 474.6%* |
| JPMorgan Chase & Co. | 328.00 | 363.00 | -9.6% |
| Morgan Stanley | 253.00 | N/A | N/A |
| Bank of America Corp. | 251.83 | 145.89 | 72.6% |
| PNC Financial Services | 121.28 | 69.50 | 74.5% |
| Regions Financial Corp. | 93.53 | 109.50 | -14.6% |
| SunTrust Bank Inc. | 80.46 | 123.84 | -35.0% |
| US Bancorp | 66.00 | 100.00 | -34.0% |
| KeyCorp | 60.73 | 56.42 | 7.6% |
| BB&T Corp. | 46.07 | 45.94 | 0.39% |
| Source: Michael White-ABIA Bank Annuity Fee Income Report *Reflects acquisition of Wachovia Bank. |
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BHCs with $500 million to $1 billion in assets generated $21.9 million in annuity commissions in 2009, down 15.2% from $25.8 million the year before. Only 35.4% 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 (13.6%) of total insurance sales volume of $160.7 million.
Among BHCs with assets between $1 billion and $10 billion, leaders included Stifel Financial Corp. (MO), Hancock Holding Company (MS), and NewAlliance Bancshares, Inc. (CT). Among BHCs with assets between $500 million and $1 billion, leaders were First Citizens Bancshares, Inc. (TN), CCB Financial Corporation (MO) and Codorus Valley Bancorp, Inc. (PA).
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 Vantage Point Bank (PA), FNB Bank, N.A. (PA) and Sturgis Bank & Trust Company (MI).
Among the top 50 BHCs nationally in annuity concentration (i.e., annuity fee income as a percent of noninterest income), the mean Annuity Concentration Ratio was 8.5%. Among the top 50 small banks in annuity concentration that are serving as proxies for small BHCs, the mean Annuity Concentration Ratio was 22.7% of noninterest income.
Among the top 50 BHC leaders in annuity productivity (i.e., annuity income per BHC employee), the mean Annuity Productivity Ratio was $2,775 per employee. Among the top 50 small banks in annuity productivity, the mean Annuity Productivity Ratio was $4,574 per employee.
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