Bank Insurance Fee Income Again Reaches Record High

May 3, 2011

Bank insurance brokerage fee income in 2010 reached a record level as it rose 7.9 percent from $12.36 billion in 2009 to $13.33 billion in 2010, according to a new report.

The report, compiled by Michael White Associates (MWA) and sponsored by The Prudential Insurance Company of America’s Individual Life Insurance, measures and benchmarks the banking industry’s performance in generating insurance brokerage and underwriting fee income. Results are based on data from all 6,927 commercial and FDIC-supervised savings banks and 911 large top-tier bank holding companies (BHCs) operating on Dec. 31, 2010.

“In 2010, the number of bank holding companies (BHCs) that grew their insurance brokerage revenues largely equaled those that didn’t. We examined 162 BHCs with at least $1 million in insurance brokerage income. While one BHC had no growth and six were new, positive reporters of that revenue, 81 BHCs increased their insurance brokerage income, while 74 experienced declines. Forty-four (44) had increases under 10 percent, and 46 had declines of less than 10 percent,” said Michael White, president of MWA. “Thirty-seven (37) achieved revenue increases over 10 percent, and 28 BHCs endured decreases greater than 10 percent. A difficult economy, soft commercial insurance markets, and BHCs’ capital restraint inhibiting acquisition have hindered agencies across the country, whether bank-owned or not. For many, life insurance seems to have been the one bright glimmer in 2010.”

The largest BHCs, those with assets over $10 billion, had the highest participation (92.0 percent) in insurance brokerage activities. They managed an 8.3 percent increase in insurance brokerage income from $11.63 billion in 2009 to $12.60 billion in 2010. BHCs with assets between $1 billion and $10 billion experienced a slight 0.2 percent decline in insurance brokerage income from $587.8 million in 2009 to $586.6 million in 2010.

Excluding MetLife, a traditional life insurer, Citigroup, Inc. (NY), Wells Fargo & Company (CA), BB&T Corporation (NC), and Morgan Stanley (NY) led all BHCs in insurance brokerage income in 2010. Among BHCs with assets between $1 billion and $10 billion, leaders included Eastern Bank Corporation (MA), Stifel Financial Corp. (MO), Old National Bancorp (IN), Trustmark Corporation (MS), and Johnson Financial Group, Inc. (WI).

Among BHCs with assets between $500 million and $1 billion, leaders were Two Rivers Financial Group (IA), 473 Broadway Holding Corporation (NY), Texas Independent Bancshares (TX), Evans Bancorp, Inc. (NY), and Northeast Bancorp (ME). The smallest community banks 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 Company (IL), Bank Forward (ND), Hoosac Bank (MA), First State Bank (IA), and Industry State Bank (TX).

“Single premium life insurance has proven to be particularly attractive to bank customers and offers a valuable stream of fee income to financial institutions,” said Joan H. Cleveland, senior vice president, Business Development with Individual Life Insurance, The Prudential Insurance Company of America.

Among the top 50 BHCs nationally in insurance brokerage concentration (i.e., insurance brokerage income as a percent of noninterest income), the adjusted mean Insurance Brokerage Concentration Ratio was 40.4 percent. Among the top 50 small banks in insurance brokerage concentration that are serving as proxies for small BHCs, the adjusted mean Insurance Brokerage Concentration Ratio was 73.0 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 $21,926 per employee. Among the top 50 small banks in insurance brokerage productivity, the adjusted mean Insurance Brokerage Productivity Ratio was $34,205 per employee.

Source: Michael White Associates

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