BB&T Insurance Earnings Off 4%

NU Online News Service, Oct. 20, 2:57 p.m. EDT

BB&T Corp. says income from its insurance-services segment dropped 4 percent in the third quarter, but the company expects to see improvement in the fourth quarter.

The Winston-Salem, N.C.-bank says insurance income was down $11 million from the same period last year, to $241 million.

On a quarter-to-quarter basis, insurance decreased 19 percent, or $58 million, “primarily due to a seasonally stronger second quarter,” BB&T says.

BB&T owns the middle-market insurance-brokerage firm BB&T Insurance Services Inc.

For the first three months of this year, the bank says insurance income is down less than 1 percent, or $2 million, to $790 million.

During a conference call with analysts today, Daryl Bible, the company's chief financial officer, says fourth-quarter insurance income is expected to rebound, helping to improve fee income overall.

Overall, BB&T says third-quarter net income rose 69 percent, or $152 million, to $371 million from the same period last year.

For the first three months of this year, net income rose 46 percent, or $295 million, to $932 million from last year.

Kelly S. King, chairman and chief executive officer, tells analysts that this was “the best quarter in three years” despite the fact that the nation is in period of protracted slow growth that he believes will continue “for some time.”

Commenting on the insurance segment, King says the soft market is still leading to rate declines, but there is more indication that rates are beginning to harden, especially in the wholesale area. Insures, he says, are also experiencing earnings pressure, the will push them to increase rates.

In his opinion, “we're right at the cusp to see some hardening.” He adds that the firm's business has not “dropped as much as our competitors.”

During the quarter, BB&T Insurance Services expanded operations with the acquisition of Liberty Benefit Insurance Services of San Jose, Calif. The firm is a full-service employee benefits broker working with large commercial clients to help them manage “rising health care costs, changing regulations and complex benefits administration.

The firm also entered the metro-Baltimore area, acquiring Atlantic Risk Management Corp. of Columbia, Md. Atlantic Risk is a property and casualty and employee benefits broker.

In response to a question, King says acquisitions are expected to continue in the insurance space, reaching a “normalized pace over the next two to three years.” He notes that last year the firm made no acquisitions because of the acquisition downturn.

“We're back in that game,” he says.

So far, financial results from insurance brokerage firms has been mixed.

On Monday, Wells Fargo Insurance Services reported income increased 7 percent on a year-to-year basis, while dropping 26 percent on a quarter-to-quarter basis.

On Tuesday, Brown & Brown said organic growth remains a struggle, saying its own results net income for the third quarter was virtually flat.