Banks that underwrite insurance saw decreases in premiums in 2010, in a trend related to the decrease in loans that require insurance, according to Michael White Associates.
Of the 49 bank holding companies involved in credit insurance underwriting, reinsurance or both in 2010, 35 experienced declines, according to Michael White, president of the Radnor, Pa.-based research firm.
“This is understandable, since credit insurance is dependent on loan activity and volume,” he says, “and they were down in 2010 as lending remained tight.”
White’s data also show a longer-term trend of fewer bank holding companies reaping credit insurance premiums. Banking organizations as a group have not engaged widely in insurance underwriting or reinsurance, notes White.
And that small group is contracting fast: The 2010 total of 49 is down from 81 in 2003 and 149 in 2002. Interestingly, credit insurance premiums overall were $2.1 billion in 2010, more than double the total from 2003, White notes.
Non-credit insurance premiums are actually a bigger deal in the bank world. They constituted 90.6% of holding companies’ insurance premiums in 2010, and the total rose 8.2% last year to $30.35 billion, according to the White study, which was sponsored by American Bankers Insurance Association.
But the slip in credit insurance helped push overall insurance income at bank holding companies downward. Excluding MetLife, which is a traditional life insurer, total bank holding company insurance income was $14.21 billion in 2010, down 5.7% from a record $15.08 billion in 2009, according to White Associates. Total insurance income consists of both insurance brokerage and insurance underwriting fee income.
Strategic decisions by banks also impacted insurance premium revenue in 2010. Citigroup’s spin-off of Primerica reduced the national total premiums considerably, notes White. All Financial, which was formerly GMAC, has sold off certain domestic and foreign insurance operations.
Beyond those cases, most of the other bank holding companies posted small declines: 46 of 68 that engaged in underwriting last year reported a drop in insurance and underwriting income, the report notes.
Like credit-insurance premiums, noncredit insurance premiums are appearing at fewer and fewer banks. In 2010, 26 bank holding companies reported non-credit property-casualty and/or life-health insurance premiums. That is four fewer than in 2009, six fewer than in 2007, 12 fewer than in 2005.
Still, the $30.35 billion of noncredit premiums written in 2010 was 8.2% more than the $28.05 billion in noncredit insurance premiums underwritten in 2009. As for income from insurance brokerage, it grew 6% in 2010, excluding MetLife.
Citigroup, Inc., Wells Fargo & Co. and Bank of America Corp. led all bank holding companies in total insurance income in 2010. And joining the top 50 in total insurance revenue were RBC USA Holdco Corp., First Niagara Financial Group, Two Rivers Financial Group, in Burlington, Iowa, Doral Financial Corp., in San Juan, Puerto Rico, and Valley National Bancorp, in Passaic, N.J.