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Report: Brokerage Fee Income at BHCs Achieves Record High

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Insurance brokerage fee income of bank holding companies rose 9.1% in the second quarter of 2011 and 14.3% for the first half of the year, both record highs, according to a new report.

Michael White Associates, Radnor, Pa., published this finding in a survey that measures and benchmarks the banking industry’s performance in generating insurance brokerage and underwriting fee income. Sponsored by Prudential Financial, Newark, N.J., the report is based on data from all 6,805 commercial banks and FDIC-supervised savings banks, plus 934 large top-tier bank holding companies operating on June 30, 2011.

BHC insurance brokerage income hit $3.88 billion in second quarter 2011 up from $3.55 billion in second quarter 2010, the report says. First-half income of $7.86 billion was up from $6.88 billion in first half 2010. Thus far in 2011, 62.4% of large top-tier BHCs engaged in insurance brokerage activities, the survey finds.

Among companies with significant banking activities as of June 30, 2011, Citigroup Inc. (NY) topped the leader board with insurance brokerage earnings of $1.12 billion. Wells Fargo & Company (CA) ranked second nationally with $923.0 million; and BB&T Corporation (NC), which owns more agencies than any other financial holding company, ranked third with $492.7 million in insurance brokerage revenue in first half 2011.

Five of the top ten producers of insurance brokerages were BHCs chartered during the financial crisis: Morgan Stanley (NY), American Express (NY), The Goldman Sachs Group (NY), Discover Financial (IL) and Ally Financial (MI), the former GMAC Inc. But the report says these BHCs contributed only $41.76 million or 4.3% of the industry’s $980.99 million or 14.3% increase in insurance brokerage income in first half 2011.

Bank holding companies over $10 billion in assets continued to have the highest participation (89.3%) in insurance brokerage activities. These BHCs produced $7.49 billion in insurance fee income in the first half of 2011, 15.2% more than the $6.50 billion they produced in first half 2010. These large bank holding companies accounted for 95.3% of all BHC insurance brokerage fee income earned in first half 2011.