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By Cyril Tuohy
Income earned from the sale of annuities at bank holding companies (BHCs) reached a record $3.43 billion last year, up 9 percent from 2012, with bank annuity fee income setting records in each of the four quarters, according to the bank consulting firm Michael White Associates (MWA).
The top bank holding company in annuity fee income last year was Wells Fargo, with $837 million, up 10.28 percent from 2012, MWA said.
Morgan Stanley was next with $663 million, up 6.76 percent over 2012, and Raymond James Financial with $321 million, up 6.32 percent.
JPMorgan Chase reported $235 million in annuity fee income last year, a decline of 7.84 percent from 2012, and Bank of America reported $178 million in annuity fee income, down 12.32 percent from 2012.
Michael White, president of Michael White Associates, said in a news release that the overall numbers in the “Michael White Bank Annuity Fee Income Report” showed “signs of a definite improvement in BHC annuity earnings momentum.”
In a separate report issued earlier this month by the Bank Insurance & Securities Association (BISA), total annuity sales through banks topped $35 billion in 2013.
Sales of fixed annuities through banks was the No. 2 channel behind the independent agent channel, according to the Bank Insurance & Securities Research Association (BISRA), BISA’s research division, as rising interest rates over the summer made annuities more attractive compared to rates paid on bank certificates of deposit (CDs).
Life insurance and annuity companies like to sell annuities through banks because depositors with CDs offer a ready market for safe, income-generating investments like annuities. Every time depositors are ready to roll over their CDs, banks have an opportunity to offer them an annuity.
With higher interest rates, fixed annuities offered a more attractive investment compared to CD rates that remained flat. In addition, with baby boomers entering retirement, banks have more depositors to whom an annuity may be attractive.
The higher the volume of annuities sold through banks, the more fee income to the bank.
Of the 1,062 large banks holding companies, 423 or 39.8 percent participated in annuity sales in 2013.
Of the 423 large banks reporting annuity fee income last year, 216 or 51.1 percent earned a minimum of $250,000 selling annuities, White said.
The top ten bank holding companies in annuity fee income were Wells Fargo, Morgan Stanley, Raymond James, JP Morgan Chase, Bank of America, Suntrust Banks, U.S. Bancorp, Citigroup, BB&T and BBVA USA Bancshares.
Cyril Tuohy is a writer based in Pennsylvania. He has covered the financial services industry for more than 15 years. Cyril may be reached at [email protected].
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