Bank Holding Companies’ Insurance Revenue Jumps 9.5%

October 16, 2008

The nation’s bank holding companies increased their total insurance revenue 9.5 percent to $23.7 billion in the first half of 2008 from $21.7 billion during the same period in 2007. CitiGroup (N.Y.), Wells Fargo & Co. (Calif.), and BB&T Corp. (N.C.) led all bank holding companies with significant banking activities in total insurance fee income in the first six months of 2008, according to findings released by Michael White Associates and the American Bankers Insurance Association.

The findings are based on data reported to the Federal Reserve Board by 946 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.

“The top 50 bank holding companies in insurance revenue attained a mean ratio of insurance to noninterest income of 14.3 percent,” said Valerie Barton, executive director of ABIA. “That level of Insurance Concentration demonstrates considerable contribution to BHCs’ noninterest income. Insurance consistently proves it is a valuable revenue-generating activity during good times and bad times. Those institutions that engage in it are glad to have the additional income for diversification of their revenue sources and for their bottom lines.”

During the first six months of 2008, 607 bank holding companies (64.2 percent of all top-level large BHCs reporting) earned some type of insurance-related revenue, compared to 627 in the first half of 2007. In addition, 67 BHCs reported earning some insurance underwriting fee income from underwriting or reinsurance activities, down from 77 BHCs a year ago.

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 3.0 percent from $6.26 billion in the first half of 2007 to $6.44 billion in the first half of 2008, as 603 bank holding companies (63.7 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 2008 were nine BHCs: National Penn Bancshares (Pa.), CoBiz Financial Inc. (Colo.), Shore Bancshares Inc. (Md.), Encore Bancshares Inc. (Texas), Tompkins Financial Corp. (N.Y.), VIST Financial Corp. (Pa.), First Bancorp (Puerto Rico), Doral GP Ltd. (Puerto Rico), and Comerica Inc. (Texas).

— Among the top 50, BBVA USA Bancshares Inc. (Texas) increased its rank in total insurance income the most, having jumped from 81st place at mid-2007 to 14th at June 30, 2008.

— Encore Bancshares Inc. (Texas) and Huntington Bancshares Inc. (Ohio) also jumped fairly dramatically, rising, respectively, from the 72nd and 42nd positions in 2007 to 41st and 12th places.

Source: Michael White & Associates

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