Bank holding companies earned $1.58 billion in annuity fee income in the first half of 2012, up 3.4% from $1.53 billion earned in the first half of 2011, according to the Michael White ABIA Bank Annuity Fee Income Report.
But the seemingly good news isnt cause for celebration. The uptick in income was due to the fact that more banks namely thrift holding companies and bank holding company Raymond James Financial began reporting insurance fee income for the first time. If fee income from the new banks were subtracted from the total, the first-half results would fall to $1.41 billion, or 8% less than the $1.53 billion earned last year, Michael White, the author of the report, said in an email.
Second-quarter annuity commissions of $799.9 million, up 2.4% from the year-ago quarter, were also misleadingly robust. If the income from the new banks were deleted, the second-quarter results would drop to $703.1 million, down 10% from the $781.4 million in annuity fee income generated in the second quarter of 2011.
Kevin McKechnie, executive director of the American Bankers Insurance Association, noted that of the 426 large top-tier bank holding companies reporting annuity fee income in the first-half of 2012, 185 (43.4%) were on track to earn at least $250,000 this year. He added that far fewer banks were able to achieve double-digit growth this year than last year and that twice as many experienced decreases in annuity commissions and fees. These findings of less growth and more declines are troublesome, despite the overall increase in the banking industrys annuity revenues year-to-date, he said in a statement.
The largest banks and saving and loans commanded the greatest share of the annuity income in the industry, according to the report. Two-thirds of banks with more than $10 billion in assets earned first-half annuity commissions of $1.49 billion, or 94.1% of the industry total.
Banks with between $1 billion and $10 billion in assets earned $76.8 million in annuity fee income in the first half, up 24.3% from a year ago. Banks with $500 million to $1 billion in assets generated $16.2 million, up 31.7%.
The top three producers of annuity fee income were Wells Fargo, Morgan Stanley and Raymond James Financial, which generated $383,000, $313,000, and $142,000, respectively, in the first half of 2012. JPMorgan Chase, which generated $124,000 in fees, and Bank of America, which produced $104,000, ranked fourth and fifth.
The report is based on data from the nations 7,246 commercial banks, savings banks and savings associations and 1,070 large top-tier bank and savings and loan holding companies. The report was sponsored by the American Bankers Insurance Association and compiled by Michael White Associates, a bank insurance consulting company in Radnor, Penn.