Bank Insurance Brokerage Income Marks New Record; Up Amost 20%

Bank holding companies (BHC) set a new record, marking the highest quarterly results ever recorded for first-quarter insurance brokerage income.

BHCs posted $3.98 billion in insurance brokerage income in the first quarter 2011, up 19.8 percent from $3.32 billion in first quarter 2010, according to the Michael White-Prudential Bank Insurance Fee Income Report. The last two quarters have registered the highest quarterly watermarks ever recorded in BHC insurance brokerage fee income, and first quarter was 10.6 percent greater than fourth quarter 2010. Thus far in 2011, 58.9 percent of large top-tier BHCs engaged in insurance brokerage activities.

“In first quarter 2011, the number of BHCs that grew or maintained their insurance brokerage revenues largely equaled those that didn’t,” said Michael White, president of MWA.

The report examined 156 BHCs with at least $1 million in annualized insurance brokerage income. While two BHCs had no growth, 74 BHCs showed positive growth in their insurance brokerage income, while 80 experienced declines. Twenty-seven (27) had increases under 10 percent, and 42 had declines of less than 10 percent. Forty-seven (47) achieved revenue increases over 10 percent, and 38 BHCs endured decreases greater than 10 percent, according to the report.

“Across the country, insurance agencies and brokerages continue to be hampered by a difficult economy, seven years of soft commercial insurance markets, and capital restraint on the part of many potential buyers, thereby inhibiting acquisition,” White said.

Excluding MetLife, a traditional life insurer, Citigroup Inc. (NY) topped the leader board in first quarter 2011 with insurance brokerage earnings of $552.0 million. Wells Fargo & Co. (CA) ranked second nationally with $455.0 million in insurance brokerage fee income. BB&T Corp. (NC), which owns more agencies than any other financial holding company, ranked third with $222.4 million in insurance brokerage revenue in first quarter 2011.

Bank holding companies over $10 billion in assets continued to have the highest participation (89.2 percent) in insurance brokerage activities, the report noted. These BHCs produced $3.78 billion in insurance fee income in first quarter 2011, 21.0 percent more than the $3.13 billion they produced in first quarter 2010. These large bank holding companies accounted for 95.0 percent of all BHC insurance brokerage fee income earned in first quarter 2011.

Among BHCs with between $1 billion and $10 billion in assets, leaders in insurance brokerage income in first quarter 2011 included Eastern Bank Corp. (MA), Stifel Financial Corp. (M0), Old National Bancorp (IN), Johnson Financial Group Inc. (WI), and Trustmark Corp. (MS). BHCs of this size registered a 3.7 percent increase in insurance brokerage income to $163.5 million in first quarter 2011, up from $157.7 million in first quarter 2010.

The report stated that among BHCs with assets between $500 million and $1 billion, leaders were Two Rivers Financial Group (IA), 473 Broadway Holding Corp. (NY), Evans Bancorp (NY), Texas Independent Bancshares (TX), and Northeast Bancorp (ME). BHCs of this size registered an 11.7 percent decline in insurance brokerage income to $34.5 million, down from $39.0 million in first quarter 2010.

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 Company (IL), Industry State Bank (TX), Hoosac Bank (MA), First State Bank (IA), and Stoneham Savings Bank (MA). These small banks, representing small BHCs, also registered a decline in insurance brokerage income, albeit a smaller 3.4 percent, from $39.6 million in first quarter 2010 to $38.2 million in first quarter 2011.

Among the top 50 BHCs nationally in insurance brokerage concentration (i.e., insurance brokerage income as a percent of noninterest income), the median Insurance Brokerage Concentration Ratio was 36.7 percent. Among the top 50 small banks in insurance brokerage concentration that are serving as proxies for small BHCs, the median Insurance Brokerage Concentration Ratio was 64.4 percent of noninterest income.

Among the top 50 BHC leaders in insurance brokerage productivity (i.e., insurance brokerage income per BHC employee), the median Insurance Brokerage Productivity Ratio was $4,957 per employee (or an annualized Productivity Ratio of $19,828). Among the top 50 small banks in insurance brokerage productivity, the median Insurance Brokerage Productivity Ratio was $5,168 per employee (or an annualized Productivity Ratio of $20,670).

This report, compiled by Michael White Associates (MWA) since 2001 and sponsored by Prudential’s Individual Life Insurance business, a member of the American Bankers Insurance Association (ABIA), measures and benchmarks the banking industry’s performance in generating insurance brokerage and underwriting fee income. Results are based on data from all 6,850 commercial banks and FDIC-supervised savings banks and 942 large top-tier bank holding companies operating on March 31, 2011.

Source: Michael White Associates

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