Bank Holding Cos. Set Record in Insurance Brokerage Fee Income: Report

October 31, 2012

Bank holding companies (BHCs) set new records in insurance brokerage fee income in the second quarter and year-to-date (YTD) in the first half of 2012.

According to the Michael White-Prudential Bank Insurance Fee Income Report, bank holding company insurance brokerage income of $2.08 billion in second quarter 2012 was up 12.3 percent from $1.85 billion in second quarter 2011. First-half income of $3.89 billion was up 0.2 percent from $3.88 billion in first half 2011. Thus far in 2012, 61.1 percent of large top-tier BHCs engaged in insurance brokerage activities.

“In the first half of 2012, the number of BHCs on track to earn at least $250,000 in annualized insurance brokerage income that grew their insurance brokerage revenues increased substantially,” said Michael White, President of MWA. “In both first half 2012 and 2011, we examined 228 BHCs on track to earn $250,000 in annualized insurance brokerage income. At mid-year 2012, 150 BHCs showing positive growth in their insurance brokerage income increased 32.7 percent from 113 BHCs with positive growth at the end of first half 2011.”

Big winners, or those with double-digit increases in insurance brokerage income, rose 39.7 percent from 63 at the end of first half 2011 compared to 88 so far this year, White said. “These changes signal meaningful improvement among BHC-owned insurance agencies, despite the declines among larger BHCs, and the hope that insurance markets are beginning to harden.”

Among companies with significant banking activities as of June 30, 2012, Citigroup Inc. (NY) topped the leader board with insurance brokerage earnings of $1.00 billion. Wells Fargo & Co. (CA) ranked second nationally with $893.0 million; and BB&T Corp. (NC), which owns more agencies than any other financial holding company, ranked third with $609.5 million in insurance brokerage revenue in first half 2012.

Bank holding companies over $10 billion in assets continued to have the highest participation (81.8 percent) in insurance brokerage activities. These BHCs produced $3.43 billion in insurance fee income in the first half of 2012, 2.3 percent less than the $3.51 billion they produced in first half 2011. These large bank holding companies accounted for 88.2 percent of all BHC insurance brokerage fee income earned in first half 2012.

Among BHCs with assets between $1 billion and $10 billion, leaders in insurance brokerage income in the first half 2012 included Eastern Bank Corp. (MA), Stifel Financial (MO), Old National Bancorp (IN), Trustmark Corp. (MS), and Johnson Financial Group Inc. (WI). BHCs of this size registered a 13.5 percent increase in insurance brokerage income to $342.1 million in first half 2012, up from $301.42 million in first half 2011.

Among BHCs with assets between $500 million and $1 billion, leaders were First Command Financial Services Inc. (TX), Two Rivers Financial Group (IA), Oneida Financial Corp. (NY), 473 Broadway Holding Corp. (NY), and Texas Independent Bancshares (TX). BHCs of this size produced an increase of 73.1 percent year-over-year in their insurance brokerage income, improving from $68.1 million to $117.8 million in insurance brokerage income.

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 Co. (IL), Industry State Bank (TX), Benchmark Bank (TX), First State Bank (IA), and First South Bank (TN). These small banks, representing small BHCs, registered a decline of 1.0 percent in insurance brokerage income, dropping from $80.8 million in first half 2011 to $80.0 million in first half 2012.

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 35.9 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 63.5 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 $9,351 per employee (or an annualized Productivity Ratio of $18,702). Among the top 50 small banks in insurance brokerage productivity, the median Insurance Brokerage Productivity Ratio was $13,550 per employee (or an annualized Productivity Ratio of $27,100).

Compiled by Michael White Associates (MWA) since 2001 and sponsored by The Prudential Insurance Co. of America’s Individual Life Insurance business, a member of the American Bankers Insurance Association (ABIA), this report measures and benchmarks the banking industry’s performance in generating insurance brokerage and underwriting fee income. Results are based on data from all 7,246 commercial banks, savings banks, and savings associations (thrifts), and 1,070 large top-tier bank and savings and loan holding companies (collectively, BHCs) operating on June 30, 2012. Thrifts and savings and loan holding companies began reporting insurance fee income for the first time in first quarter 2012. Several BHCs that are historically and traditionally insurance companies have been excluded from the report.

Source: Michel White Associates

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