Banks in Insurance Advance Despite Soft Market, Study Reports

December 4, 2007

Despite a soft property and casualty (P/C) insurance market, the top 100 banks in insurance made substantial gains in the past year, says a new report distributed by the Bank Insurance & Securities Association

The Who’s Who in Bank Insurance (2007 Edition) examined the top 100 banks and thrifts in insurance brokerage. Published annually by the Bank Insurance Market Research Group (Mamaroneck, NY), the study identified 23 institutions where insurance was a major (reportable) business segment. Seven of these bank companies drew 10 percent or more of net income (not revenues) from insurance. These were BNCCorp (53 percent), Oneida Financial (24 percent), Leesport Financial (19 percent), Greater Bay Bancorp (17 percent), Evans Bancorp (17 percent), ACNB (14 percent), and First Financial Holdings (13 percent).

Inclusion in the top 100 banks in insurance this year required $4.1 million in annual insurance brokerage revenues, up from $3.8 million in 2006 and $3.4 million in 2005. The top 100 threshold grew 7 percent over the past year despite declining property and casualty premium renewal rates.

The 50th ranking institution (Susquehanna Bancshares) had $12.89 million in insurance brokerage revenues, compared with $12.55 million at the 50th ranking institution in 2006 (First Charter Corp.) and $10.78 million in 2005 (Leesport Financial Corp.).

The median contribution to the parent company’s net income was 5.6 percent at the 23 institutions where insurance was a major (reportable) business segment. For every $100 of bank company profits, insurance accounted for $5.60. Last year the median earnings contribution was 4.4 percent, or $4.40 for every $100 of net income.

Commercial P/C lines dominated at the top 100 banks in insurance — although less so than in past years. Sixty-eight percent of institutions that responded to a BIMRG survey conducted in the summer and fall of 2007 affirmed that commercial lines were their leading revenue generator, down from 73 percent in 2006 and 79 percent in 2005.

Employee benefits or personal lines were typically the second leading line (in about equal measure).

Cross-selling insurance to bank customers
Among institutions that disclosed cross-selling ratios, the median rate was 13 percent, down from 14 percent in the previous year. That is, about 13 percent of new insurance business in 2007 was expected to come from bank customers or bank referrals.

The list of top 10 institutions was little changed from the previous year, although three of the top 10 institutions in this study recently underwent major changes.

Bank of America (ranked 6th) sold its commercial insurance agency to Hilb Rogal & Hobbs Co. Commerce Bancorp Inc. (ranked 10th) announced the (intended) sale of its insurance brokerage to agency founder George Norcross. And Greater Bay Bancorp (ranked 7th) sold (and its ABD Financial agency) to Wells Fargo.

“Other banks used the past year to reaffirm their insurance commitment,” writes Andrew Singer, author of the study. “Wells Fargo (ranked 2nd) and BB&T (ranked 3rd) continued to snap up agencies, and Wells Fargo CEO John Stumpf went so far as to declare that insurance brokerage and small business operations would be the key growth areas of the bank in the next three to five years. Shore Bancshares (ranked 73rd) doubled the size of its agency business in 2007 with two October acquisitions. National City (ranked 16th) continued to acquire employee benefits businesses. Meanwhile, at Angola, New York-based Evans Bancorp (ranked 75th), insurance contributed more net income than banking activities in the first half of 2007.”

The study was sponsored by BISA, EAI Information Systems, Invest Financial, Omni Builders Risk, and Symetra Financial.

Source: Bank Insurance Market Research Group,

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