Bank Insurance Sales Rose In 2002, But Agency Acquisitions Were Down
Bank sales of insurance and investment products continued to hold their own in 2002 and even show respectable growth, analysts say.
However, another gauge of banks interest in insurance, agency acquisitions continued to decline. But even there, observers say, the industry may be seeing just a passing lull.
For the first six months of 2002, the most recent data available, banks sales of new life policies grew 44% over the same period in 2001, to $314 million, reports the Princeton, N.J., research firm, Kenneth Kehrer Associates. Bank sales of single-premium products grew 55% during that time, to $241 million, while recurring-premium life sales were up about 16%.
Liberty Life Assurance Company, a unit of Liberty Mutual Insurance Company, Boston, held its lead among life insurers in banks in the first half of 2002. Liberty increased its sales of new premiums to $58.2 million, from $45.4 million in the first half of 2001, Kehrer reports.
Allstate Corp., Northbrook, Ill., just edged out Aegon USA for second place, increasing its new-premium income in banks to $41.2 million, from $31.4 million. Aegon USA, a unit of Aegon N.V., The Hague, Netherlands, saw sales jump to $41.1 million, from $24.4 million.
Ranked by weighted premium, which gives extra importance to more profitable recurring-premium sales than to single-premium products, Nationwide Financial Services Inc., Columbus, Ohio, retained its lead in banks. However, its weighted premiums fell from $19.4 million in the first half of 2001 to $18.9 million in the same period this year.
Significant gains in weighted-premium sales in banks were made by Allstate, CGU and Aegon, all of which tied for sixth place in Kehrers rankings with $4.1 million in the first half of 2002. Allstates bank life premiums totaled $3.1 million the previous year, while CGU had $1.9 million and Aegon had $2.4 million.
Banks are learning to see life insurance not just as a profitable transaction but as a way to build a lifetime relationship with a customer, observes Cynthia Saccocia, senior analyst for the Tower Group, a Needham, Mass., consulting firm.
“Life insurance represents a longer sales process than what investment reps are used to, but it has value in building customer relationships,” she observes. “Insurance agents typically know a lot more about the customer than a broker does. The value that insurance can bring to bank brokers is in relationship sales and lifetime selling and retirement planning.”
Bank sales of investment products were mixed.
As of June, bank sales of variable annuities were up 34% over year-ago levels, Kehrer reports. Sales of fixed annuities were up 45%.
But long-term mutual funds had not won back bank customers full confidence as of the end of October, data from the Investment Company Institute in Washington show.
Looking only at mutual funds sold by banks under their own name, year-to-date sales totaled almost $3.5 billion, compared to roughly $4 billion in the same period of 2001.
Total assets in proprietary bank long-term funds stood at roughly $72.7 billion at the end of October, down from $76 billion YTD in October 2001, ICI reports.
Banks interest in buying insurance agencies remained relatively slack this year.
SNL Securities Inc., Charlottesburg, Va., counts 57 agency acquisitions by banks as of mid-December, down from 63 for all of 2001 and 74 in 2000.
The data does not differentiate between types of agencies acquired, although banks are generally interested in buying property/casualty agencies, experts note.
Out of a total of 156 agency acquisitions of all kinds year to date, 36.5% were by banks, compared to 38.9% in 2001 and 44.3% in 2000, reports Eric Fitzwater, mergers and acquisitions research manager for SNL.
John Wepler, executive vice president with Marsh Berry Inc., a consulting firm in Concord, Ohio, believes many banks have purchased their first agency and now are digesting their acquisition.
“After a bank acquires an agency, they often let that deal settle in a little and allow producers and bank managers work together for a while,” says Wepler.
He believes, too, that the total dollar value of bank agency acquisitions was up this year.
“During 2001, with the hard market and with capacity issues, banks recognized that buying a very large broker secured their ability to have the right insurance company contracts,” he says. Next year, he adds, you will see even fewer deals than this year but even larger transactions.
“If you look at the top 100 brokers, of those not currently bank-owned, we know that 41% are in discussions that could potentially lead to [merger] transactions.”
Toward the fourth quarter of 2003, Wepler predicts, the industry will see a resurgence of smaller deals as some of large agencies acquired by banks look to grow.
Reproduced from National Underwriter Life & Health/Financial Services Edition, December 30, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.