Citigroup Inc., Wells Fargo & Co., BB&T Corp., and other banking companies increased their insurance brokerage revenue last year, despite market conditions and dwindling fees, by buying businesses in areas where they had little exposure and pushing ahead with cross-selling efforts, a study finds.
"It was a difficult year," said Andrew Singer, a managing director at Bank Insurance Market Research Group, which released the study March 8 on the top 10 bank insurance brokerages. "Increases in production were usually primarily because … [the bank holding companies] acquired an agency or something along those lines."
Experts say insurance became less expensive last year. In previous years fees increased because of fears related to catastrophes like the Sept. 11 attacks and hurricanes, but now sales representatives are elbowing each other over to snatch deals, often reducing their fees in the process, observers say.
Wells Fargo offers one example of how some firms overcame challenges by acquiring. In May the San Francisco company announced a deal to buy Greater Bay Bancorp of East Palo Alto, Calif. The deal included Greater Bay's retail insurance unit, ABD Insurance and Financial Services, which generated more revenue in 2006 than most of its competitors of similar size. In June, Wells bought the Grand Rapids risk management and insurance company Universal Insurance Services Inc.
Scott Isaacson, an executive vice president for Wells Fargo Insurance Services Inc. in Chicago, said his company also uses cross-selling to develop revenue. For example, it might try to introduce insurance planning to a foreign exchange customer.
"A lot of our competitors don't have those customers," Mr. Isaacson said. "We have the ability to have a warm lead, rather than making a cold call."
Wells Fargo's insurance brokerage revenue rose 19% last year, to $1.27 billion, according to the study. The company ranked 2nd, trailing only Citi, which did not return phone calls.
Bank Insurance Market Research Group compiled its the top 10 list by looking at data that U.S. banking companies reported in last year's Federal Reserve Board Y-9 filings. The results exclude annuity sales.
Mr. Isaacson said Wells Fargo Insurance Services plans to acquire more this year and next. It is looking for companies such as brokerage firms that provide employee benefit products or midsize property/casualty insurance shops. "I think having a balanced book is good" for beating the competition.
The study also found that having a full array of products to sell can offset a banking company's losses in one area with gains in another. For example, while insurance rates dropped last year, health insurance became more expensive.
"Obviously, being predominantly commercial P&C, the soft market really had a dramatic impact on us last year," said Wade Reece, the president of BB&T Insurance Services in Raleigh. "We had to adjust to that, and we were successful."
BB&T's insurance brokerage revenue rose 4% last year, to $842 million, the third-highest total among banking companies, according to the study.
Mr. Reece said his team renewed 93% of its clients. His unit also bought five businesses last year, and in September it announced an agreement to buy the commercial and personal property/casualty company Sidney O. Smith Inc. to expand in northern Georgia.
"In 2008 we'll continue with the same emphasis on good client retention and business sales, and we'll make more acquisitions," he said. BB&T has already closed four deals this year, and on Feb. 28 it announced an agreement to buy Florida risk management and employee benefits services company Burkey Risk Services.
Not all banking companies with hefty insurance brokerage revenue acquired or added to their offerings last year.
JPMorgan Chase & Co. ranked 6th in the study, but its revenue fell 66%, to $138 million, as a result of the sale of the Zurich Insurance business to Protective Life Insurance in July 2006, according to Bank Insurance Market Research Group. (The New York company did not return calls.)
BancorpSouth Inc. ranked 9th in the study, joining the top 10 list for the first time. The Tupelo, Miss., company's insurance revenue climbed 4%, to $71.58 million.
Like other companies, BancorpSouth expanded through acquisitions, and it continues to do so. Its BancorpSouth Insurance Services Inc. bought the Springfield, Mo., office of Arthur J. Gallagher Risk Management Services Inc. for an undisclosed amount on Dec. 31.
"Rates continue to come down, but we have a strong sales culture," said James Threadgill, BancorpSouth's vice chairman. "We found new business."
