Spokane Journal of Business

Banks, holding companies increase annuity-fee income

Report says money earned in first quarter hit highest point since early in 2007

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Income earned from the sale of annuities at bank holding companies rose 28 percent to $748.2 million in the 2011 first quarter, up from $582.6 million in the year-earlier quarter, says a recently released bank annuity fee income report.

That's the highest quarterly amount of annuity fee income since the 2007 first quarter, when these data first became available.First-quarter 2011 annuity commissions were about 3 percent more than the $729.5 million earned in fourth quarter 2010.

Compiled by Michael White Associates and sponsored by the American Bankers Insurance Association, the report measures and benchmarks the banking industry's performance in generating annuity fee income. It's based on data from all 6,850 commercial and FDIC-supervised banks and 942 large top-tier bank holding companies operating on March 31, 2011.

Of the 942 bank holding companies, 40 percent participated in annuity-sales activities during the 2011 first quarter. Their $748.2 million in annuity commissions and fees constituted 12 percent of their total mutual fund and annuity income of $6.31 billion and 16 percent of total insurance sales volume (i.e., the sum of annuity and insurance brokerage income) of $4.73 billion.

Of the 6,850 banks, 12 percent participated in first-quarter annuity sales activities. Those participating banks earned $204.2 million in annuity commissions, or 27 percent of the banking industry's total annuity fee income. In contrast to the holding companies, the banks' annuity production was up 10 percent from $186.1 million in the 2010 first quarter.

Seventy-four percent of the holding companies with more than $10 billion in assets earned first-quarter annuity commissions of $708.3 million, for 95 percent of total annuity commissions reported by the banking industry. That was an increase of 29 percent from $547.8 million in annuity fee income in the year-earlier period.Among this asset class of largest holding companies, annuity commissions made up 11 percent of total mutual fund and annuity income of $6.20 billion and 16 percent of total insurance sales revenue in the first quarter.

Bank holding companies with assets between $1 billion and $10 billion recorded an increase of 14 percent in annuity-fee income, growing to $33.8 million in this year's first quarter from $29.7 million in the year-earlier period and accounting for 32 percent of their mutual fund and annuity income of $1.33 billion.

Holding companies with $500 million to $1 billion in assets generated $6.12 million in annuity commissions in this year's first quarter, up 19 percent from $5.15 million in the year-earlier quarter.Only 30.5 percent of BHCs this size engaged in annuity sales activities, which was the lowest participation rate among all BHC asset classes. Among these companies, annuity commissions constituted the smallest proportion of total insurance sales volume of $40.6 million.

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