A recently released report from Michael White Associates and the American Bankers Insurance Association (ABIA) found that income earned from the sale of annuities at bank holding companies (BHCs) jumped 10.4% in 2011, rising to $2.84 billion from $2.57 billion in 2010.
Yet statistics released in the Michael White-ABIA Bank Annuity Fee Income Report showed that sales decelerated in the second half of last year, with the most significant decline registered in the fourth quarter. In the final quarter of 2011, BHC annuity commissions plunged to their lowest point since Q4 2007, hitting $579.7 million, down 25.8% from the record-setting $781.4 million charted in Q2 2011, and a decrease of 20.5% from the $729.5 million earned in the fourth quarter of 2010.
Numbers were based on data from all 6,679 commercial and FDIC-supervised banks and 930 large, top-tier BHCs with consolidated assets of more than $500 million that were operating as of Dec. 31, 2011. The Michael White-ABIA report tallies and benchmarks the banking industry’s status in generating annuity fee income.
In a release detailing the results, Kevin McKechnie, executive director of ABIA, said that the double-digit increase in annuity fee income in 2011 was due to “widespread growth throughout the industry.” He noted that of the 389 large, top-tier bank holding companies reporting annuity fee income in 2011, 187, or 48.1%, earned a minimum of $250,000 selling annuities. Of those 187, 120 BHCs, or 64.2%, gained double-digit growth in annuity fee income from 2010 to 2011. Another seven BHCs with either negative or zero annuity income in 2010 made at least $250,000 in 2011, McKechnie added
“That’s all very positive news,” he said. “What gives cause for concern was the significant slide in quarterly annuity income, particularly in the last quarter.”
Of the 930 BHCs, 389, or 41.8%, booked annuity sales during 2011. The $2.84 billion in annuity commissions and fees they earned constituted 11.3% of their total mutual fund and annuity income of $25.04 billion as well as 15.3% of total BHC insurance sales volume (the sum of annuity and insurance brokerage income) of $18.58 billion. Of the 6,679 banks, 910, or 13.6%, participated in annuity sales activities, earning $745.2 million in annuity commissions, or 26.2% of the banking industry’s total annuity fee income.
Three-fourths (75.3%) of BHCs with more than $10 billion in assets received annuity commissions of $2.69 billion, accounting for 94.8% of total annuity commissions reported. This represented an increase of 10.9% from the $2.43 billion in annuity fee income accumulated in 2010. Among the largest BHCs, annuity commissions made up 10.6% of their total mutual fund and annuity income of $24.62 billion and 15.2% of their total insurance sales volume of $17.69 billion, the highest proportion of insurance sales volume of any asset class. Leading all bank holding companies in annuity commission income in 2011 were: Wells Fargo & Co.; Morgan Stanley; JPMorgan Chase & Co.; Bank of America Corp.; and SunTrust Banks, Inc.