Not only did income from the sale of annuities at bank holding companies (BHCs) increase 9 percent last year, but bank annuity fee income set record revenues each quarter.
Income from the sale of annuities at BHCs went from $3.15 billion in 2012 to a record $3.43 billion in 2013, according to the Michael White Bank Annuity Fee Income Report. Fourth-quarter 2013 BHC annuity commissions reached a record $932.0 million, up 6.5 percent from $875.0 million in the record third quarter. They increased 17.3 percent from $794.8 million earned in fourth quarter 2012.
“There were signs of a definite improvement in BHC annuity earnings momentum,” said Michael White, president of MWA and author of the report. “Of 423 large top-tier BHCs reporting annuity fee income in 2013, 216 or 51.1 percent (up from 179 or 41.8 percent) earned a minimum of $250,000 selling annuities. Of those 216, 127 BHCs (58.8 percent) achieved double-digit growth in annuity fee income. That was a 24-point rise from 2012, when 62 BHCs (34.6 percent) that earned at least $250,000 in annuity income achieved double-digit growth in annuity fee income.”
Sixty-seven percent of BHCs with more than $10 billion in assets earned annuity commissions of $3.20 billion, constituting 93.1 percent of total annuity commissions reported – an increase of 7.7 percent from $2.97 billion in annuity fee income in 2012. Among this asset class of largest BHCs, annuity commissions made up 37.9 percent of their total insurance sales volume of $8.44 billion, the highest proportion of annuity income to insurance sales revenue of any asset class.
BHCs with assets between $1 billion and $10 billion recorded an increase of 32.4 percent in annuity fee income in 2013, rising from $156.4 million in 2012 to $207.1 million and accounting for 22.2 percent of their total insurance sales volume of $932.4 million.
BHCs with $500 million to $1 billion in assets generated $31.7 million in annuity commissions in 2013, up 8.7 percent from $29.2 million the year before. Only 29.9 percent 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 (11.5 percent) of total insurance sales volume of $275.7 million.
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.
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 8.2 percent in 2013, up from 6 percent in 2012. Among the top 50 small banks in annuity concentration that are serving as proxies for small BHCs, the median Annuity Concentration Ratio was 13.3 percent of noninterest income, down from 14.8 percent in 2012.
Results are based on data from all 6,812 commercial banks, savings banks and savings associations (thrifts), and 1,062 large top-tier bank and thrift holding companies (collectively, BHCs) with consolidated assets greater than $500 million operating on December 31, 2013. Several BHCs that are historically insurance or commercial companies have been excluded from the report.