Niche Business: Ranking Banks by Insurance Sales

In an industry in need of new sources of revenue, some banks have turned to selling insurance, making brokerage operations core parts of their strategy.

At companies like BancorpSouth and BB&T, which have bought up strings of agencies in the past decade, the business line accounted for almost 40 percent of total noninterest revenue for the first nine months of 2011, almost double the contribution in the first nine months of 2003. (That's the year when regulators began requiring that banks report insurance brokerage earnings separately from overall insurance earnings.)

These aggressive buildups aren't representative of the industry, however. At 3 percent of total noninterest revenue among bank holding companies, insurance brokerage income in the first nine months of last year hovered at about the same level that prevailed from 2003 through most of 2007, according to data from Financial Information Systems. (For a spreadsheet with a complete list of holding companies and their insurance brokerage revenues, and for other trend data, click here. The data excludes institutions where loans were less than 30 percent of assets at Sept. 30, removing companies like MetLife from consideration.)

Still, insurance provided valuable ballast during the financial crisis. There was an unprecedented spike in revenue contribution in the loss-fueled fourth quarter of 2007, when insurance brokerage operations accounting for 5.9 percent of noninterest revenue. The contribution retreated to more normalized levels over the next nine months, only to see another spike, to 7.6 percent, in the fourth quarter of 2008. In both instances, the increase was mainly due to collapses in other noninterest lines at large banks.

BB&T reaffirmed its commitment to insurance with several deals for agencies in the third and fourth quarters. The acquisitions, including employee benefits and commercial property and casualty operations, followed a two-year pause in such transactions, which BB&T ascribed to reluctance among sellers to exit during a downturn. In the fall, CEO Kelly King called the purchases "bread-and-butter type deals" and said BB&T would continue to buy at a "fairly normalized pace for the next 2 or 3 years."

In general, though, selling insurance is relatively more important to smaller institutions. For the first nine months of 2011, insurance brokerage operations accounted for 4.6 percent of noninterest revenue at banks with assets of less than $2 billion, and 4.9 percent at banks with $2 billion to $10 billion in assets, compared with just 2.8 percent at banks with $10 billion or more in assets.

Recent contributions for all size categories are lower than they were during the most acute stage of the financial crisis, when the importance of insurance sales was exaggerated by weakness elsewhere within banks.

Some banks have continued to draw a disproportionate amount of their noninterest income from insurance sales. At Hampton Roads Bankshares, insurance brokerage operations accounted for more than 90 percent of noninterest income for the first nine months of 2011. But the $2.4 billion-asset company shed its Gateway Insurance Services unit in the third quarter, recording $1.3 million gain on the sale. The buyer was Bankers Insurance, a brokerage owned by a consortium of Virginia banks.