Bank Insurance Fee Income Hits $3.5 Billion

Michael White, the firm's president and author of the report, said the data, which banks provide to regulators, does not distinguish between revenues from property-casualty insurance, life insurance or annuities.

"One can imagine that the majority of that fee income is probably derived from the sale of annuities," he said. P-C insurance income is small, but "is definitely a growing share of it as you look at the number of agencies being acquired and integrated into the banking operation," Mr. White said.

He noted that the report does not include "revenues that would be owned under the [bank's] holding company structure."

Of the $3.49 billion figure in the report, close to $2 billion "would be due to annuities–$1.5 billion might be due to credit, life, health and property casualty insurance," he guessed.

The report said that the $3.49 billion was a 17.3 percent increase over $2.98 billion earned in 2001.

According to the study, banks over $10 billion in assets had the highest participation (78.2 percent) in insurance activities and produced $2.58 billion in insurance fee income.

The large banks' insurance income was found to have increased 45.3 percent from the $1.77 billion they produced in 2001. These large banks accounted for 73.7 percent of all bank insurance fee income earned in 2002, the report said.

The White study found banks under $10 billion in assets recorded $919 million or 26.3 percent of all bank insurance fee income, and they earned more insurance than investment fee income. Four of the five bank-asset classes under $10 billion produced almost as much or more insurance than investment fee income.

According to White Associates, the data revealed that "the historical center of bank insurance gravity shifted from the middle of the country to the eastern seaboard. For the first time, the Midwest region lost its first-place rank in insurance fee income, falling to third in 2002.

The report said the Northeast region took over first place with $881 million, 25.2 percent of total bank insurance income in 2002. The Southeast region was found to be a close second with $864.5 million, a 24.7 percent share.

Bank investment fee income declined 0.6 percent from $9.16 billion earned in 2001 to $9.11 billion in 2002, the report said, noting that about one-fourth of banks (2,338 of 8,380 or 27.9 percent of them) earned investment fee income in 2002.

The banks with over $10 billion in assets were reported to have the highest participation (82.8 percent) in investment fee income activities and recorded $8.2 billion or 90 percent of total banking industry investment fee income.

In the Northeast, the report said, banks had the highest participation in investment fee income activities (37.1 percent) and largest amount of investment fee income, $3.9 billion or a 42.7 percent share.

According to the White Associates research, the number of banks with proprietary product-assets under management decreased 16.1 percent from 211 banks in 2001 to 177 in 2002, and their proprietary mutual fund and/or annuity assets under management dropped $80 billion or 5.6 percent from $1.43 trillion in 2001 to $1.35 trillion at the end of 2002.

"Michael White's Bank Insurance & Investment Fee Income Report" based on data reported to regulators is one of a series of semi-annual and annual reports for the periods ending June 30 and December 31. Its companion report on bank holding companies, "Michael White's Bank Holding Company Insurance and Investment Fee Income Report" is published annually and covers the period ending December 31.

The 140-page Bank-FIR contains 40 pages of narrative analyses and 155 illustrative tables and graphs showing national, regional and asset-class performance in bank insurance and investment fee income.

It also ranks the nation's top 100 banks in insurance, investment, and mutual fund and annuity fee income and the top 50 banks for each of eight asset-size classes and six regions. Leaders in ratios of insurance and investment fee income to noninterest income and noninterest fee income are ranked by the top 50 nationally and the top 25 by each asset class.

The annual report price is $650, and the semi-annual bank report $400. Annual subscription price for both semi-annual and year-end bank reports is $850. Reports can be purchased online at http://www.bankinsurance.com/mwa/publications/firs/order-online-select.htm or by check and mail.