Banks’ Insurance Revenues, Insurance Brokerage Fees Up

October 10, 2006

The nation’s bank holding companies increased their total insurance revenue 1.1 percent to $21.4 billion in the first half of 2006 from $21.2 billion during the same period in 2005.

Bank holding companies’ income from insurance brokerage fees rose more than 23 percen durng the same period.

CitiGroup (N.Y.), Wells Fargo & Company (Calif.), Countrywide Financial Corporation (Calif.), and HSBC North America Holdings Inc. (Ill.) led all bank holding companies with significant banking activities in total insurance fee income in the first six months of 2006, according to findings by Michael White Associates and the American Bankers Insurance Association.

The findings are based on data reported to the Federal Reserve Board by 990 top-tier large bank holding companies (BHCs). The analysis measures the growth of the bank insurance business and provides some benchmarks that gauge bank insurance performance.

“While the industry’s growth in total insurance revenue slowed in the first half of 2006, insurance brokerage fee income rose rapidly,” said Valerie Barton, associate director of ABIA. “Larger banking organizations experienced exceptionally strong double-digit growth, much of which derived from organic growth in insurance brokerage fee income as agency integration and cross-selling accelerate.”

During the first six months of 2006, 644 bank holding companies (65 percent of all top-level BHCs reporting) earned some type of insurance-related revenue, compared to 1,395 in the first half of 2005. Fewer bank holding companies reported total insurance revenues because, earlier this year, the Federal Reserve redefined “small” BHCs as those with less than $500 million, instead of $150 million, in consolidated assets. This reduced the total number of BHCs that must report detailed call report information by 1,300 and the number of BHCs that reported total insurance fee income in the first half of 2006 by 751. In addition, 81 BHCs reported earning some insurance underwriting fee income from underwriting or reinsurance activities.

The analysis includes a ranking of the top 50 bank holding companies on the basis of the absolute dollar amount of total insurance revenue (earnings from sales and underwriting) and on the basis of total insurance revenue as a percentage of the institution’s total noninterest income. Other findings include:

BHCs’ insurance brokerage fee income climbed 23.1 percent from $4.98 billion in the first half of 2005 to $6.13 billion in the first half of 2006, as 639 bank holding companies (64.6 percent of all top-level large BHCs reporting) engaged in sales activities that produced insurance brokerage fee income.

Joining the top 50 in total insurance revenue during the first half of 2006 were North Fork Bancorporation, Inc. (N.Y.), R&G Financial Corporation (P.R.), and Susquehanna Bancshares, Inc. (Pa.). North Fork Bancorporation increased its rank in total insurance income the most, having jumped from 65th place at mid-2005 to 39th at June 30, 2006. R&G Financial Corporation also jumped fairly dramatically, rising from an unrated position in 2005 to 46th place on June 30, 2006.

Sources:
The American Bankers Insurance Association
www.theabia.com

Michael White Associates (MWA)
www.BankInsurance.com

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