Led by Citigroup Inc., insurance units of bank holding companies generated a record $7.9 billion in fees during the first half of this year, up 14% from the same period in 2010.

In the second quarter, bank brokerages brought in $3.9 billion of fees, according to a report compiled jointly by Michael White Associates and Prudential Financial Inc. and released Monday.

Michael White, the president of Michael White Associates in Radnor, Pa., said the increase in fees is largely a result of organic growth at the insurance units of the nation's largest bank holding companies. Nearly nine in 10 banking companies with more than $10 billion of assets operate insurance subsidiaries and, combined, that group generated 95% of the industry's brokerage fees in the first half, White said.

"Some implemented additional sales programs and incentives," White said in an interview Tuesday. "Some were fortunate in terms of programs they have put in place to cross sell products to drive revenues."

White noted that the number of holding companies that grew or maintained their insurance brokerage revenues mostly equaled those that did not. For example, a total of 38 achieved revenue increases over 10% while 37 holding companies saw decreases greater than 10%.

Citigroup generated $1.1 billion of fees, by far the most of all the bank holding companies. Year over year, its brokerage fees increased 45%, which was also best among large companies. Wells Fargo ranked second with $923 million, down 8% from a year ago, while BB&T rounded out the top three with $493 million in brokerage income, up 1.8% from a year ago.

The bank holding company that posted the largest drop among the top 12 was JPMorgan Chase & Co., which saw a 36% decline from a year earlier, to $34 million

Among the top 12, BB&T — which owns more than 100 brokerage firms and recently inked deals for three more — relies most heavily on insurance brokerage income to drive overall fee income. According to the report, insurance accounts for 38% of noninterest income at BB&T, versus 6.7% at Citi and 4.8% at Wells. BancorpSouth Inc. in Tupelo, Miss., was the only other company among the top 12 that generated as much one-third of its overall fee income from insurance.

White noted that the number of holding companies that grew or maintained their insurance brokerage revenues mostly equaled those that did not. A total of 38 achieved revenue increases of more than 10% year over year, while 37 saw decreases greater than 10%.

Holding companies with more than $10 billion in assets produced $7.49 billion in brokerage fees for the first half of the year, up 15.2% from a year earlier. By contrast, companies with between $1 billion and $10 billion in assets saw brokerage income decline 0.2% while brokerage income for companies with between $500 million and $1 billion dropped 7.8%.

White attributed this disparity to the fact that larger banks have more resources to devote to marketing or expand through acquisitions.

He added that some smaller companies have also recently sold their insurance brokerages mostly to large public brokerage firms in an effort to raise needed capital.

"Large bank holding companies tend to have large commercial insurance operations that they can try to utilize," he said. "They have more leeway in terms of overall resources than among the smaller banks."

-- This article first appeared on American Banker.



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