Bank Broker Fee Gains Lessen

Bank holding company insurance brokerage fee income was up 0.6 percent in the first three quarters of 2007 compared with 2006, according to a bank-sponsored consulting firm's report.

The Michael White-Symetra Bank Holding Company Fee Income Report said that income for that sector in the third quarter was $3.01 billion–a 4.1 percent decrease from $3.14 billion in second-quarter 2007, which was a record high.

Compiled by Radnor, Pa.-based Michael White Associates and sponsored by Symetra Financial, the report measures and benchmarks banks' performance in generating insurance, securities brokerage, annuity and mutual fund fee income.

Michael White said its figures are based on data reported by nearly 950 top-tier large bank holding companies.

According to the report, through nine months of 2007, 66.8 percent of large bank holding companies engaged in some insurance sales activities.

The study attributed slower-than-normal insurance growth through three quarters to several factors.

It noted charter conversions from bank holding companies to thrift holding companies (e.g., Countrywide Financial, People's United Financial Inc. and Chittenden Corporation), which are not required to report insurance income. Insurance income that a holding company previously reported is no longer reported when it converts to a thrift.

Sales of bank-affiliated property-casualty agencies (e.g., Bank of America, BNCCORP Inc., Capital One, Citizens Financial Group Inc., Commerce Bancorp and JPMorgan Chase) to nonbanks are another factor.

However, the report said, these sales do not constitute a trend of the banking industry exiting the insurance business and relate specifically to the particular circumstances, strategic aims and commitment to insurance of each of the selling institutions.

At the same time, the report noted, numerous other bank holding companies, like BancorpSouth, BB&T Corporation, Huntington Bancshares, Northeast Bancorp, Shore Bancshares and Wells Fargo, continue to acquire agencies.

Other listed factors include:

o An increasingly soft market in commercial property-casualty insurance.

o Sporadic decreases in contingent commissions.

o Removal of annuity commissions not earned via securities units from insurance brokerage totals.

Michael White said bank holding companies of over $10 billion in assets continued to have the highest participation (93 percent) in insurance brokerage activities. These BHCs produced $8.61 billion in insurance fee income year-to-date at the end of third-quarter 2007, 0.7 percent more than the $8.55 billion they produced for the same period a year ago, the firm continued.

Large bank holding companies accounted for 93 percent of all BHC insurance brokerage fee income earned in three quarters of 2007, said Michael White.

Among companies with significant banking activities, Citigroup Inc. in New York reported insurance brokerage earnings of $1.45 billion as of Sept. 30, 2007, topping the list.

Wells Fargo & Company, in San Francisco, ranked second nationally with $1.01 billion in insurance brokerage fee income. BB&T Corporation (NC) ranked third with $627.3 million in insurance brokerage revenue

Among BHCs under $1 billion in assets, the top five in insurance brokerage fee income in three quarters of 2007 were Central Community Corporation, Shore Bancshares Inc., MountainOne Financial Partners MHC, First Western Bancorp Inc. and 473 Broadway Holding Corp.