Agency acquisitions fueled banks’ 22% insurance revenue growth last year, to $40.8 billion, up $7.3 billion from 2003, according to the American Bankers Insurance Association.
Kevin McKechnie, an associate director at ABIA, said, “Banks are acquiring insurance agencies, and that’s a major contributor to the growth.” Organic growth has also fueled banks’ revenue, he said, though this factor is not as important as acquisitions.
“Consumers are increasingly looking to bank insurance agencies to meet their needs,” he said.
Nearly 82% of the insurance revenue was reported by the top three producers, including two companies primarily known as insurers. Citigroup Inc., MetLife Inc., and Manulife Corp. together reported about $33.3 billion of revenue last year, including the premium revenue they collected as underwriters. (Citigroup, however, this year announced a deal to sell its life and annuity business to MetLife.)
The total of bank holding companies reporting insurance revenue rose 11% last year, to 1,413, and 93 of them, or 5%, said they had premium revenue, indicating that they have underwriting businesses.
“The new record numbers in ABIA’s analysis confirm that banks are major and growing players in the insurance business,” said Valerie Barton, an associate director of ABIA, in a press release. “The bank-insurance industry is continuing to take advantage of the legislative reform of 1999 in expanding services it offers to customers.”
The Gramm-Leach-Bliley Act of 1999 repealed the Depression-era Glass-Steagall Act’s prohibition of mixing banking and commerce, including insurance sales.
Excluding the top three companies, the more typical bank-insurance operations had 19% growth in revenue, to $7.5 billion, the ABIA said. Ms. Barton said ABIA’s analysis indicates robust revenue generation this year. And assuming a 33% growth rate, she said, insurance revenues at the banks below the top three would reach $10 billion in 2005.
North Fork Bancorp. in Melville, N.Y.; First Charter Corp. in Charlotte; and F.N.B. Corp. in Hermitage, Pa., broke into ABIA’s Top 50 ranking last year. North Fork was 47th, with $12.2 million of revenue; First Charter 49th, with $11.5 million; and F.N.B. 50th, with $11.2 million.
And Cincinnati’s Fifth Third Bancorp rose the furthest, from 41st place in 2003 to 13th last year, with $84.8 million of revenue. The company, saying it wanted to focus on core banking businesses, had sold its property/casualty insurance business — with $25 million of annual revenue — in December 2002 but retained life and title insurance operations.
ABIA’s analysis, done in collaboration with the American Bankers Association’s economic and policy research group, is based on information reported to the Federal Reserve.
The figures for insurance revenue include commissions and fees as well as premiums from the sale of life and property and casualty products but exclude revenue from annuities sold by the banks’ securities units. Adding in annuity sales revenue would significantly increase the total. Revenue from related noninsurance products like debt cancellation and debt suspension services are also omitted from the ABIA figures.
