Report: Bank Insurance Brokerage Income Falls Slightly in 2008

June 3, 2009

Bank holding companies’ (BHC) insurance brokerage income overall experienced a 3.6 percent drop in 2008, the first decline in total BHC brokerage income since 2001, according to a new industry report.

“BHCs with assets greater than $10 billion, and, principally, a handful of them, were responsible for an overall decline for the industry in 2008,” said Michael White, president of Michael White Associates (MWA). “This constituted a 3.6 percent decrease from a record $12.26 billion earned in insurance brokerage income in 2007.”

Even so, BHCs in total earned $11.80 billion in insurance brokerage income in 2008 despite the current economic environment, White added.

BHCs with less than $10 billion in assets experienced a 6.3 percent increase in their insurance brokerage income, moving from $687.67 million in 2007 to $730.82 million in 2008.

Among this group, BHCs with assets between $1 billion and $10 billion performed best, achieving 8.4 percent growth in insurance brokerage income, growing from $540.4 million in 2007 to $586.1 million in 2008, according to the Michael White-Prudential Bank Insurance Fee Income Report.

The report also found that 65 of the top 100 BHCs in insurance brokerage income registered increased income in 2008.

These largest BHCs had the highest participation (93.1 percent) in insurance brokerage activities and accounted for 93.7 percent of the industry’s insurance brokerage income. They experienced a 4.2 percent decrease from $11.56 billion in 2007 to $11.07 billion in 2008.

“Since MWA began conducting this report in 2001, this is the first year we’ve seen a decline in total BHC insurance brokerage income,” added White.

The Insurance Fee Income Report is compiled by MWA and sponsored by Prudential’s Individual Life Insurance business. The annual report measures and benchmarks the banking industry’s performance in generating insurance brokerage and underwriting fee income. Results are based on data from all 7,495 commercial and FDIC-supervised savings banks and 880 large top-tier bank holding companies operating on Dec. 31, 2008.

BHC Leaders in 2008

Excluding MetLife, which did not engage in significant banking activities, Wells Fargo & Co. (California), Citigroup Inc. (New York), BB&T Corp.(North Carolina), and Bank of America Corp (North Carolina) led all BHCs in insurance brokerage income in 2008.

Among BHCs with between $1 billion and $10 billion in assets, leaders included Eastern Bank Corp. (Massachusetts), Old National Bancorp (Indiana), Trustmark Corp. (Mississippi), and Johnson Financial Group Inc. (Wisconsin).

Among BHCs with assets between $500 million and $1 billion, leaders were 473 Broadway Holding Corp. (New York), Texas Independent Bancshares (Texas), First Manitowoc Bancorp Inc. (WI), and Northeast Bancorp (Maine).

The smallest community banks, those with assets less than $500 million, were used as “proxies” for the smallest BHCs, which are not required to report insurance brokerage income. Leaders among bank proxies for small BHCs were Soy Capital Bank and Trust Co. (Illinois), Hoosac Bank (Massachusetts), Stoneham Savings Bank (Massachusetts), and SussexBank (New Jersey).

Mean Brokerage Concentration Ratio

Among the top 50 BHCs nationally in insurance brokerage concentration (i.e., insurance brokerage income as a percent of noninterest income), the mean Insurance Brokerage Concentration Ratio was 45.1 percent.

Among the top 50 small banks in insurance brokerage concentration that are serving as proxies for small BHCs, the mean Insurance Brokerage Concentration Ratio was 72.0 percent of noninterest income.

Among the top 50 BHC leaders in insurance brokerage productivity (i.e., insurance brokerage income per BHC employee), the mean Insurance Brokerage Productivity Ratio was $22,300 per employee.

Among the top 50 small banks in insurance brokerage productivity, the mean Insurance Brokerage Productivity Ratio was $60,800 per employee.

Source: Michael White Associates

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