BB&T Says Soft Market Hits Insurance Earnings

BB&T said its insurance brokerage business suffered a 1.4 percent decrease in commissions because of the soft market.

The Winston-Salem, N.C., bank formally known as BB&T Corporation reported that for the third quarter of this year, insurance operations decreased $3 million to $206 million.

Insurance commissions account for close to 50 percent of BB&T's fee business.

During a conference call John A. Allison, chairman and chief executive officer, said insurance fees were "fairly challenging" in the quarter in part due to seasonal downtrends but also the competitive pricing environment. He said commissions have been flat with premium pricing down 10-to-15 percent. He expected earnings to be stronger in the fourth quarter but overall growth in that sector to be modest.

"We are moving market share to keep revenues up in insurance," said Mr. Allison.

BB&T is ranked the fourth largest bank holding company of insurance, according to a report issued recently by Michael White Associates and the American Bankers Insurance Association.

The company reported fee business income increased over 2 percent, or $15 million, to $675 million for the third quarter of this year.

As a whole, BB&T reported net income for the quarter increased close to 7 percent, or $27 million, to $444 million, or 80 cents a share.

Interest income rose 13 percent, or $227 million, to more than $2.03 billion.

For the first nine months of this year, net income rose $46 million, or 4 percent, to $1.3 billion, or $2.40 a share. Fee income rose 7 percent, or $137 million, to $2.06 billion. Interest income was up 17 percent, or $855 million, to $5.9 billion.

Insurance fees increased close to 6 percent by $33 million to $632 million compared with the first nine months of last year.

The company said the insurance service made two acquisitions during the quarter, Sydney O. Smith Inc. of Atlanta and Heritage Title Services of Louisville, Ky.

Mr. Allison said BB&T has suffered the same challenges as other banks in losses in lending due to disruptions in the housing market. He said the company's results were three cents a share off from street estimates.

He said the bank will continue to pursue acquisition opportunities outside of the bank industry, particularly in insurance.

In the mortgage lending area, Mr. Allison said he does not believe the bank will go through the same problems with loan failures because the institution did not get into the subprime and unsecured loans that other banks have.

However, the institution is a large lender to home builders who are suffering from the drop in the real estate market, which is affecting BB&T's earnings. In this area, the institution has taken care to be very conservative in its lending practices. He said he expects the current disruption to last from a year to 18 months, but improvements should begin by this spring.

"The market will correct itself," he said.