U.S. bank holding companies diversify through insurance revenues in tough times

U.S. bank holding companies increased their total insurance revenue in the first half of this year to US$23.7 billion, up from US$21.7 billion during the same period a year ago, A.M. Best reports.
“Overall, insurance brokering activity is hardly mentioned among banks’ primary sources of profitability, but in the currently distressed banking environment, it has gained the reputation of the ultimate diversifier,” BestWire reports. “Even with the capital constraints, a number of bank holding companies have announced plans to expand their insurance operations despite the fact that the property/casualty insurance market itself is going through a sharp pricing decline.”
CitiGroup, Wells Fargo & Co., and BB&T Corp. led the bank holding companies that reported significant insurance fee income, according to findings in a new study by Michael White Associates and the American Bankers Insurance Association (ABIA), and as reported by A.M. Best.
ABIA executive director Valerie Barton said in a statement that the Top 50 bank holding companies in insurance revenue attained a mean ratio of insurance to non-interest income of 14.3%. “Insurance consistently proves it is a valuable revenue-generating activity during good times and bad times,” she said.
According to the study, bank holdings companies saw insurance brokerage fee income climb 3% (to US$6.44 billion in the first half of 2008 from US$6.26 billion in the first half of 2007).
A total of 603 bank holding companies engaged in sales activities that produced insurance brokerage fee income.