Bank Insurance Brokerage Earnings Break Highest Mid-Year Level

September 15, 2008

Mid-year earnings from bank insurance brokerage hit their highest level ever in the first half of 2008.

Bank insurance brokerage earnings in the first six months of 2008 were $2.12 billion, up 6.4 percent from $1.99 billion in the first half of 2007, according to the Michael White-Symetra Bank Fee Income Report. Growth slowed in the second quarter, however, as insurance brokerage revenues of $1.04 billion were 3.4 percent lower than the $1.08 billion in first quarter 2008. So far this year, 3,142 banks or 41.2 percent of all banks reported earning some insurance brokerage income.

Banks over $10 billion in assets continued to have the highest participation (72.4 percent) in insurance brokerage activities that produced $1.73 billion in income in first half 2008, 11.3 percent more than the $1.56 billion they produced in first half 2007. These large banks accounted for 81.6 percent of all bank insurance brokerage fee income earned in first half 2008.

Nationally, Citibank N.A. (New York) reported insurance brokerage earnings of $743 million as of June 30, 2008, putting it in first place. Branch Banking and Trust Co. (North Carolina) ranked second nationally with $420.5 million in insurance brokerage fee income. FIA Card Services N.A. (Delaware), the former MBNA America Bank, N.A. now owned by Bank of America Corp., ranked third with $136.1 million in insurance brokerage revenue. Bank of America, N.A. (North Carolina) and BancorpSouth Bank (Mississippi) rounded out the top five in insurance brokerage income in first half 2008.

Banks with assets between $1 billion and $10 billion registered $213.6 million in first-half insurance brokerage income, down 20.4 percent from $268.4 million a year ago. Their revenue represented 10.1 percent of total insurance brokerage income generated by banks. Banks with assets under $1 billion achieved a 4.3 percent increase, when their first-half insurance brokerage income rose from $168.7 million in 2007 to $176.0 million in 2008. Among these smaller banks, nearly two-fifths (39.7 percent) reported insurance brokerage income in first half 2008.

Among banks with assets under $1 billion, the leader with $10.8 million in insurance brokerage income in first half 2008 was the small, $88 million-asset, Florida-based Banco Popular, N.A., a subsidiary of the large Puerto Rico-based bank holding company, Popular Inc. The Adirondack Trust Co. (New York) was second with $4.6 million. Rounding out the top five were Spirit of America National Bank (Ohio), Bank First National (Wisconsin), and The Oneida Savings Bank (New York). Among these top five small banks, insurance program Concentration, i.e., ratio of insurance brokerage income to non-interest income, ranged from 51 percent to 93 percent, well above the mean Insurance Program Concentration Ratio for all banks of 5.2 percent. Seven of the top 10 banks in insurance brokerage income exceeded that mean ratio, and five had Concentration Ratios between 15 percent and 56 percent.

Compiled by Michael White Associates LLC (MWA) and sponsored by Symetra Financial, the report measures and benchmarks banks’ performance in generating insurance, securities brokerage, annuity and mutual fund fee income. It is based on data from all 7,622 commercial and FDIC-supervised savings banks operating at the end of second quarter 2008.

Bank insurance brokerage fee income consists of commissions and fees earned by a bank or its subsidiary from insurance product sales and referrals of credit, life, health, property, casualty, and title insurance. It does not include income earned from the sale or servicing of annuities. Banks’ insurance income represents only a portion (historically, roughly one-third) of the banking industry’s total insurance income, which will be revealed more completely in several weeks when year-to-date bank holding company fee income data at the end of second quarter 2008 becomes available.

Source: Michael White Associates LLC

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