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FEBRUARY
1 - 7, 2010
BHC INSURANCE
BROKERAGE EARNINGS CLIMB 11.7% IN THIRD QUARTER
Insurance brokerage fee income earned by U.S. bank holding companies
(BHCs) in the third quarter climbed almost 12% (11.7%) to $3.05 billion,
up from $2.73 billion in third quarter 2008, according to the Michael
White-Prudential Bank Insurance Fee Income Report.
For the first three quarters combined, however, insurance
brokerage earnings slipped 0.7% to $9.1 billion, down from $9.2 billion
during the same period in 2008. In
the third quarter, the addition of $481 million generated by
newly-chartered BHCs Morgan Stanley ($155 million), GMAC ($106 million),
Discover Financial ($95.5 million), American Express ($84.7 million) and
Goldman Sachs ($80 million) more than compensated for the $184 million
drop in insurance earnings at Citigroup and the $4.5 million decline in
this revenue at BancorpSouth, the only two BHCs among the top twelve
insurance earners that recorded declines in insurance earnings.
Just
over 64% of U.S. BHCs reported insurance brokerage earnings through the
third quarter of 2009, led by San Francisco-based, $1.23 trillion-asset
Wells Fargo & Co., which, helped by the Wachovia acquisition,
reported a 5.34% increase in this revenue to $1.38 billion, enough to
comprise 4.5% of the company’s noninterest income.
New York City-based, $1.89 trillion-asset Citigroup ranked a
distant second, with insurance brokerage earnings dropping 19.3% to $771
million. Winston-Salem,
NC-based, $165.4 billion-asset BB&T Corp. ranked third, as insurance
earnings climbed 11.8% to $699.9 million, equal to 26.7% of the
company’s noninterest income. Charlotte,
NC-based, $2.25 trillion-asset Bank of America Corp. ranked fourth with
a 14.8% jump in insurance brokerage earnings to $367.3 million, and New
York City-based $767.3 billion-asset Morgan Stanley ranked fifth with
$115 million in insurance revenue.
Among the top twelve insurance earners, insurance revenue
comprised the largest percentage of noninterest income at Tupelo,
MS-based, $13.3 billion-asset BancorpSouth (32.46%) and BB&T Corp.
(26.7%); it comprised the smallest percentage of noninterest earnings at
New York City-based, $2.04 trillion-asset JPMorganChase & Co.
(0.23%) and New York City-based, $767 billion-asset Morgan Stanley
(0.68%).
Almost
90% (89.6%) of BHCs with over $10 billion in assets reported insurance
brokerage fee income. Their
combined earnings of $8.53 billion in the first three quarters slipped
0.7% compared to the same period in 2008, but accounted for 93.8% of all
insurance revenue generated by BHCs during the period.
BHCs with $1 billion to $10 billion in assets reported a 1.8%
decrease in insurance brokerage earnings to $455.4 million, but BHCs
with $500 million to $1 billion in assets reported 7.1% growth in
year-over-year earnings, led by New York-based, $849.7 million-asset 473
Broadway Holding Corporation. Prudential Individual Life Insurance Senior Vice President
Joan Cleveland said, “Among the top 100 BHCs in insurance brokerage,
three times as many have registered 20%+ increases in insurance income
compared to those that have registered declines of that magnitude.
Additionally, signs show an increase in life insurance
applications and sales.” For
more details on the third-quarter Michael White-Prudential Bank
Insurance Fee Income Report, please click here.
FINRA ISSUES NOTICE ON CHATS, TWITTERS AND BLOGS
The Financial Industry Regulatory Authority (FINRA) has issued
Regulatory Notice 10-06 outlining how FINRA rules governing financial
institutions and their registered representatives’ communications with
the public apply to the use of social media sites, such as blogs, chat
rooms, Facebook, Twitter and the like.
FINRA said, “The goal of this Notice is to ensure that …
investors are protected from false or misleading claims and
representations and firms are able to effectively and appropriately
supervise their associated persons’ participation in these sites.”
To
read Regulatory Notice 10-06, click here.
WHITE HOUSE TOUTS
ANNUITIES
The White House announced last week that it plans to promote “the
availability of annuities and other forms of guaranteed lifetime income,
which transforms savings into guaranteed future income, reducing the
risks that retirees will outlive their savings or that their living
standards will be eroded by investment losses or inflation,” the American
Banker reports. The
decision to promote annuities mirrors the growth already seen in bank
annuity sales, which rose 2.5% in the first three quarters of 2009 to
$2.0 billion, up from $1.95 billion during the same period in 2008, according
to the Michael White-ABIA Bank Annuity Fee Income Report.
SYMETRA RAISE
$282.5 MILLION IN IPO
Bellevue, WA-based Symetra Financial Corp. began trading on the New York
Stock Exchange on January 22 and by the end of its $12.00 initial public
offering last week netted $282.5 million, the company said. Symetra was originally incorporated as General Life Company
of America in 1957, before becoming Lifeco Insurance Company of America
in 1959. An investor group
led by affiliates of White Mountain Insurance Group and Berkshire
Hathaway acquired the life insurer from Seattle-based Safeco Corp. in
2004 and renamed it Symetra.
BB&T’S RISING
INSURANCE REVENUE PASSES $1 BILLION AND COMPRISES 26.7% OF YEAR’S
NONINTEREST INCOME
Winston-Salem, NC-based, $165.8 billion-asset BB&T Corp. Chairman
and CEO Kelly King said, “We enjoyed record net revenues for 2009,
driven by strong mortgage banking income and record insurance income,
which exceeded $1 billion.” In
the fourth quarter, insurance earnings grew 5.3% to $260 million, up
from $247 million in fourth quarter 2008, bolstered by increased
property and casualty fees and the acquisition of a Fort Myers, FL-based
insurance agency. Income
from bank-owned life insurance (BOLI) rose 13.6% to $25 million, up from
$22 million. Trust and
investment advisory earnings increased 18.8% to $38 million, up from $32
million. But, investment brokerage fee income fell 13.5% to $83
million, down from $96 million. Insurance
earnings comprised 26.8% of noninterest income, which jumped 20.2% to
$970 million, up from $807 million.
Investment brokerage fee income comprised 8.6% of noninterest
earnings, while trust and investment advisory earnings and income from
BOLI comprised, respectively, 3.9% and 2.6% of that revenue.
Net interest income on a 3.8% net interest margin rose 11.4% to
$596 million, up from $537 million, despite an almost $200 million
increase in loan loss provisions to $725 million.
But, net income dropped 36.8% to $194 million, down from $307
million in fourth quarter 2008, hit by net charge offs and loan loss
provisions tied to “continued deterioration in housing-related
credits.”
For the
year 2009, insurance earnings grew 12.8% to $1.05 billion, up from $928
million in 2008, and income from bank-owned life insurance climbed 15.5%
to $97 million, up from $84 million.
In contrast, trust and investment advisory revenues slid 5.4% to
$139 million, down from $147 million, and investment banking and
brokerage fee income slipped 2.3% to $346 million, down from $354
million. Insurance earnings
comprised 26.7% of noninterest income, which jumped 23.1% to $3.93
billion, up from $3.2 billion. Investment
banking and brokerage fee income comprised 8.8% of noninterest earnings
and trust earnings and BOLI comprised, respectively, 3.5% and 2.5% of
noninterest income. Net
interest income fell 27.2% to $2.03 billion, down from $2.79 billion, as
loan loss provisions almost doubled to $2.81 billion, and net income
dropped 41.5% to $877 million, down from $1.5 billion in 2008,
reflecting both the FDIC assisted August 2008 purchase of Montgomery,
AL-based, $22 billion-asset Colonial Bank and increased loan provisions
and charge offs tied to housing-related credit issues.
BB&T Chairman and CEO King touted “record insurance
income,” “strong mortgage banking income” and “a significantly
slower growth rate in nonperforming assets in the fourth quarter” and
said, “We are encouraged by very strong growth of $1.5 billion in
client deposits in former Colonial branches.”
In 2008,
BB&T Corp. reported $847.3 million in insurance brokerage fee
income, which comprised 27.7% of its noninterest income and 11.6% of its
net operating revenue. The
company ranked 4th in insurance brokerage earnings among U.S.
bank holding companies (BHCs) with over $10 billion in assets and 4th
among all U.S. BHCs, according to the Michael
White-Prudential Bank Insurance Fee Income Report.
M&T BANK
REPORTS DECLINES IN TRUST AND BROKERAGE INCOME
Buffalo, NY-based, $69.9 billion-asset M&T Bank Corp. reported
fourth-quarter trust income dropped 19% to $29.7 million, down from
$36.6 million in fourth quarter 2008.
Fourth-quarter brokerage services income slid 6% to $14.4
million, down from $15.3 million. Trust
income comprised 11.2% of noninterest income, and investment brokerage
services earnings comprised 5.4% of that revenue, which grew 10% to
$265.9 million, up from $241.4 million.
Net interest income on a 3.71% net interest margin jumped 23% to
$413.7 million, up from $335.1 million, as provisions for credit losses
decreased 4% to $145 million, and net income grew 34.3% to $137 million,
up from $102 million in fourth quarter 2008, reflecting the second
quarter acquisition of $6.5 billion-asset Provident Bankshares and the
third quarter 2009 FDIC-assisted acquisition of certain Bradford Bank
assets.
For the
year 2009, trust income fell 18% to $128.6 million, down from $156.2
million in 2008, and brokerage services income decreased 10% to $57.6
million, down from $64.2 million. Trust
income and investment brokerage services income comprised, respectively,
12.3% and 5.5% of noninterest income, which grew 12% to $1.05 billion,
up from $938.98 million. Net
interest income slid 5% to $1.45 billion, down from $1.53 billion, as
loan loss provisions jumped 47% to $604 million, up from $412 million,
but net income, hit additionally by merger-related charges and
impairment charges on investment securities, dropped 31.7% to $380
million, down from $556 million in 2008.
M&T Bank Corp. Chief Financial Officer Rene Jones said,
“M&T produced solid earnings for both the fourth quarter and full
year.” Jones added,
“Our 2009 acquisitions of Provident and Bradford in the Mid-Atlantic
region … supplemented M&T’s full-year diluted net operating
earnings per common share by $0.16.”
In 2008, M&T Bank Corp. reported $30.1 million
in insurance brokerage fee income, which comprised 3.0% of its
noninterest income and 1.0% of its net operating revenue.
The company ranked 18th in insurance brokerage
earnings among U.S. bank holding companies (BHCs) with over $10 billion
in assets and 21st among all U.S. BHCs, according to the Michael
White-Prudential Bank Insurance Fee Income Report.
In 2008,
M&T Bank Corp. reported $71.2 million in investment program income
(securities brokerage plus annuity commissions), which comprised 7.2% of
its noninterest income and 2.4% of its net operating revenue.
The company ranked 20th in investment program earnings
among U.S. bank holding companies (BHCs) with over $10 billion in assets
and 21st among all U.S. BHCs, according to the MWA
Investment Program Fee Income Ratings Report.
INCREASED WEALTH
MANAGEMENT AND BOLI INCOME HELP DECREASE LOSSES AT M&I
Milwaukee, WI-based, $57.2 billion-asset Marshall & Ilsley Corp.
(M&I) reported fourth quarter wealth management income increased
8.9% to $69.9 million, up from $64.2 million in fourth quarter 2008,
while bank-owned life insurance (BOLI) jumped to $11.4 million, up from
a loss of $1.2 million. Trust
income and BOLI income comprised, respectively, 28.7% and 4.7% of
noninterest income, which climbed 46.8% to $243.8 million, up from
$166.1 million, helped by $40.6 million in net investment securities
gains. In contrast, a $639
million provision for loan losses drove a net interest loss of $232.9
million on a net interest margin of 2.95% compared to a net interest
loss of $381.4 million in fourth quarter 2008.
the overall net loss of $259.5 million was an improvement over
the net loss of $1.89 billion in fourth quarter 2008.
Marshall & Ilsley President and CEO Mark Furlong said,
“Despite the loss, there are some encouraging signs that credit
quality has stabilized and core earnings trends have improved.”
For the
year 2009, Marshall & Ilsley reported wealth management income
declined 6.1% to $265.1 million, down from $282.2 million in 2008, but
BOLI income grew 8.6% to $39 million, up from $35.9 million.
Wealth management and BOLI income comprised 29.0% and 4.3%,
respectively, of noninterest income, which jumped 22.4% to $915.6
million, up from $748.1 million, bolstered by $121.8 million in
securities gains. An almost
$30 million increase in loan loss provisions to $2.315 billion drove a
net interest loss of $706.6 million, compared to a $229.1 million net
interest loss the year before. For
the year, however, the net loss improved to $858.8 million compared to a
$2.06 billion net loss in 2008. Furlong
said, “M&I remains committed to returning the company to
profitability as soon as possible.”
INSURANCE COMPRISES
38.9% OF 2009 NONINTEREST INCOME AT FIRST NIAGARA
Buffalo, NY-based, $19.3 billion-asset First Niagara Financial Group
reported fourth-quarter insurance and benefits consulting fee income
dipped 4.1% to $11.07 million, down from $11.54 million in fourth
quarter 2008, and, reflecting the Harleysville National Corp. and
National City branch acquisitions, was replaced by banking services as
the number one contributor to noninterest income.
Bank-owned life insurance (BOLI) income fell 23.3% to $1.32
million, down from $1.72 million, but wealth management income rose
23.1% to $2.66 million, up from $2.16 million.
Insurance earnings comprised 31.1% of noninterest income, which
grew 28.6% to $35.5 million, up from $27.6 million, and wealth
management and BOLI comprised, respectively, 7.5% and 3.7% of that
revenue. Net interest
income jumped 60.0% to $101.9 million, up from $63.7 million, and net
income climbed 33.8% to $28.9 million, up from $21.6 million, reflecting
organic growth and acquisitions.
For the
year, insurance fee income slid 1.5% to $48.96 million, down from $49.7
million in 2008. Wealth
management income decreased 13.7% to $8.56 million, down from $9.92
million and BOLI income slipped 3.7% to $5.25 million, down from $5.45
million. Insurance, wealth
management and BOLI earnings comprised, respectively, 38.9%, 6.8% and
4.2% of noninterest income, which climbed 8.8% to $125.98 million, up
from $115.74 million in 2008, helped by a third-quarter gain on the sale
of a merchant services’ customer list.
Net interest income on a 3.69% net interest margin grew 30.3% to
$320.75 million, up from $246.1 million, despite an almost doubling of
loan loss provisions to $43.65 million.
But, net income decreased 10.2% to $79.4 million, down from $88.4
million primarily reflecting expenses tied to the acquisitions of
Harleysville National Corp. and certain National City branches.
BOLI UP, INSURANCE
AND INVESTMENT BROKERAGE INCOME DOWN AT PEOPLE’S UNITED
Bridgeport, CT-based, $18.76 billion-asset People’s United Financial
reported fourth-quarter insurance brokerage fee income slipped 4.1% to
$7 million, down from $7.3 million in fourth quarter 2008.
Investment management fees fell 17.7% to $7.9 million, down from
$9.6 million, and investment brokerage fees declined 9.4% to $2.9
million, down from $3.2 million. In
contrast, bank-owned life insurance (BOLI) income jumped 26.7% to $1.9
million, up from $1.5 million. Insurance
earnings comprised 9.8% of noninterest income, which slipped 2.7% to
$71.7 million, down from $73.7 million, and investment management fees,
investment brokerage fees and BOLI income comprised, respectively,
11.0%, 4.0% and 2.6% of noninterest revenue.
Net interest income on a 3.19% net interest margin decreased 7.4%
to $133.9 million, down from $144.6 million, as loan loss provisions
grew by $5.1 million to $13.6 million.
Net income dropped 26.1% to $24.9 million, down from $33.7
million in fourth quarter 2008, impacted by $4.5 million in system
conversion and merger-related expenses.
For the
year 2009, insurance brokerage fee income decreased 9.9% to $30 million,
down from $33.3 million; investment management fees fell 12.0% to $32.4
million, down from $36.8 million; investment brokerage commissions
dropped 23.8% to $12.2 million, down from $16 million, but BOLI earnings
rose 1.2% to $8.4 million, up from $8.3 million, and noninterest income
increased 1.8% to $309.1 million, up from $303.6 million, bolstered by
net gains on residential mortgage loan sales.
Investment management fees comprised 10.5% of noninterest income,
followed by insurance earnings (9.7%), investment brokerage (3.9%) and
BOLI income (2.7%). Net
interest income dropped 14.8% to $519.8 million, down from $610.2
million, as loan loss provisions more than doubled to $57 million, up
from $26.2 million, and net income fell 26.6% to $101.2 million, down
from $137.8 million. People’s
United Bank President and CEO Philip Sherringham said, “Our pending
acquisition of Financial Federal reflects our strategic focus on
expansion through opportunistic acquisitions.
At the same time, we remain committed to organic growth
throughout our franchise.”
CULLEN/FROST
REPORTS RISING INSURANCE REVENUE
San Antonio, TX-based, $16.3 billion-asset Cullen/Frost Bankers reported
fourth-quarter insurance commissions and fees increased 4.0% to $6.73
million, up from $6.47 million and trust fees rose 1.1% to $17.67
million, up from $17.48 million, while noninterest income climbed 24.7%
to $86.3 million, up from $69.2 million, driven by a $17.7 million gain
tied to an interest rate swap on a debt paid off early.
Trust fees comprised 20.5% of noninterest income and insurance
earnings comprised 7.8%. Net
interest income on a 4.2% net interest margin, however, decreased 5.0%
to $128.5 million, down from $135.2 million, as loan loss provisions
increased by almost $14 million to $22.25 million, but net income,
helped by noninterest earnings, decreased only 2.8% to $51.5 million,
down from $53 million.
For the
year, insurance commissions and fees rose 0.6% to $33.1 million, up from
$32.9 million, but trust fees decreased 9.8% to $67.3 million, down from
$74.6 million. Insurance
earnings comprised 11.3% of noninterest income, while trust fees
comprised 22.8% of noninterest revenue, which increased 2.2% to $293.7
million, up from $287.3 million. Net
interest income declined 0.8% to $512.3 million, down from $516.5
million, as loan loss provisions climbed by over $27.5 million to $65.4
million, and net income fell 13.7% to $179 million, down from $207.3
million in 2008. Cullen/Frost
Chairman and CEO Dick Evans said, “We are working harder in this
environment to grow the number of relationships and to broaden and
deepen the existing ones. When
the economy begins to grow again, we will be well-positioned to reap the
benefits of this effort.” Cullen/Frost
completed construction of a $50 million technology center in the fourth
quarter and opened four new financial centers in 2009.
In 2008,
Cullen/Frost Bankers reported $33.1 million in insurance brokerage fee
income, which comprised 11.9% of its noninterest income and 4.1% of its
net operating revenue. The
company ranked 17th in insurance brokerage earnings among
U.S. bank holding companies (BHCs) with over $10 billion in assets and
19th among all U.S. BHCs, according to the Michael
White-Prudential Bank Insurance Fee Income Report.
In 2008,
Cullen/Frost Bankers reported $74.6 million in fiduciary-related fee
income, which comprised 26.7% of its noninterest income and 9.1% of its
net operating revenue. The
company ranked 29th in trust-related earnings among U.S. bank
holding companies (BHCs) with over $10 billion in assets and 32nd
among all U.S. BHCs, according to the MWA
Trust Fee Income Ratings Report.
JANUARY
25 - 31, 2010
OBAMA
PUSHES CONGRESS FOR BANK REFORM
U.S.
President Barak Obama announced on January 21 that he will ask Congress
to enact legislation prohibiting banks from engaging in proprietary
trading and owning, investing in or sponsoring hedge and private equity
funds. In addition, he said
he would ask Congress to enact legislation that would cap each bank’s
share of the total market of nondeposit liabilities.
Obama said, “My resolve to reform the system is only
strengthened when I see a return to old practices at some of the very
firms fighting reform, and when I see record profits at some of the very
firms claiming they cannot lend more to small businesses, cannot keep
credit card rates low and cannot refund taxpayers for the bailout.”
Speaker
of the House Nancy Pelosi called the President’s proposals “what
taxpayers demand and deserve.” She
said, “We look forward to working with the President and the Senate in
enacting these common-sense reforms into law.”
3Q
BHC ANNUITY FEE INCOME RISES 12.9% OVER 2Q
Annuity fee income
generated by U.S. BHCs rose 4% in the third quarter to $669.8 million,
up from $644.2 million in third quarter 2008, according to the Michael
White-ABIA Bank Annuity Fee Income Report. The 12.9% jump in third quarter earnings over second quarter
earnings of $593.1 million helped drive annuity earnings up 2.5% in the
first three quarters to $2 billion compared to $1.95 billion in the
first three quarters of 2008.
Just
over 42% of BHCs sold annuities in the first three quarters, led by BHCs
with over $10 billion in assets (71.4%), while short of 35% of BHCs with
$500 million to $1 billion in assets sold annuities.
BHCs with over $10 billion in assets saw their annuity earnings
rise 3.5% to $1.89 billion to comprise 94.6% of total BHC annuity
earnings. In contrast,
annuity fee income fell 12.2% among BHCs with $1 billion to $10 billion
in assets to $91.4 million, down from $104.2 million, and annuity
earnings among BHCs with $500 million to $1 billion dropped 18% to $16.7
million, down from $20.4 million.
San
Francisco-based, $1.23 trillion-asset Wells Fargo & Co. ranked first
in annuity fee income among all U.S. BHCs, despite reporting a 17.6%
drop in these earnings to $504 million compared to $612 million during
the same three-quarter period in 2008.
New York City-based, $2.04 trillion-asset JPMorgan Chase ranked
second, showing a 3.73% slide in annuity fee income to $258 million.
Charlotte, NC-based $2.25 trillion-asset Bank of American Corp.
ranked third, as annuity fee income, reflecting the Merrill Lynch
acquisition, jumped 84.2% to $203.2 million.
New York City-based, $767.3 billion-asset Morgan Stanley ($168
million) and Pittsburgh, PA-based, $271 billion-asset PNC Financial
Services Group ($98.9 million) ranked fourth and fifth, respectively,
with PNC reporting a 99% jump in annuity earnings, helped by its
acquisition of National City Corp., the Michael
White-ABIA Bank Annuity Fee Income Report
shows.
Among
the top 10 BHC fee income earners, annuity revenue fell among five and
achieved the highest growth (235.7%) at Birmingham, AL-based, $140
billion-asset Regions Financial, where $71.2 million in annuity earnings
comprised 2.57% of the company’s noninterest income, the largest
percentage among the top 10 earners, the White-ABIA
Report
reveals.
BANKS’
FIXED ANNUITY SALES FALL
Fixed annuity sales
at U.S. banks dropped 24% in the third quarter to an estimated $7.25
billion down from $9.54 billion in third quarter 2008, impacted by their
narrowing interest rate advantage over bank certificates of deposit
(CDs). Sales in the first
three quarters rose 7% to an estimated $26.9 billion, up from $25.1
billion in the same period a year ago, according to the Beacon
Research Fixed Annuity Premium Study.
Western
National Life ($1.13 billion), Pacific Life ($1.12 billion), New York
Life ($673 million), AEGON/Transamerica Companies ($608 million) and
Lincoln Financial ($423 million) were the top five bank channel annuity
providers, where the top two book value products dominated.
Among the top ten fixed annuity providers, book value products
were preferred (70%) followed by indexed annuities (20%) and MVAs (10%). Pacific Life Marketing Vice President Christine Tucker said
her company’s popular Pacific Explorer fixed annuity product “aligns
nicely with the bank-based advisor interest in products that are simple
and promote preservation of customer assets.”
Evanston,
IL-based Beacon Research President and CEO Jeremy Alexander said he
expected to find a continued downturn in bank fixed annuity sales in the
fourth quarter “due to the continued drop in credited rates and their
spread over CDs.” He
added, “There is still strong demand by bank customers for
conservative investments like fixed annuities, so results should improve
when the interest rate environment normalizes.”
2009
SEES 13% HIKE IN APPLICATIONS
FOR INDIVIDUALLY UNDERWRITTEN LIFE INSURANCE
U.S. applications
for individually underwritten life insurance rose 2.6% in December 2009
over December 2008 and increased 2.9% in the fourth quarter compared to
fourth quarter 2008, according to the MIB Life Index.
For the year, applications among individuals aged 60 and over
jumped 13% over 2008 and rose 1.8% among individuals aged 45 to 59.
A 3.8% decline in applications among individuals aged 0-44,
however, kept overall application activity flat at -0.2% compared to
2008, Braintree, MA-based MIB Group said.
NEW
TREND? AFFLUENT INVESTORS FAVOR IRAS OVER EMPLOYER-SPONSORED RETIREMENT
PLANS
Affluent investors
for the first time have allocated more dollars to individual retirement
accounts (IRAs) than to employer-sponsored retirement plans [401(k)
plans], according to Cambridge, MA-based Cogent Research.
This, among other factors, has contributed to the rise of Charles
Schwab as the number one distributor of mutual funds, the rise of
Vanguard as the number one mutual fund provider and the decline of
Fidelity from first to second in both categories.
In addition, Cogent said, “Fidelity no longer ranks among the
top five mutual funds on performance, a critical factor impacting
loyalty.”
According
to Cogent Research, the top five mutual fund distributors include
Charles Schwab, Fidelity Investments, Morgan Stanley Smith Barney,
Edward Jones and Merrill Lynch. The
top five mutual fund companies include Vanguard, Fidelity Investments,
American Funds, T. Rowe Price and TIAA-CREF.
For
more information about Cogent’s 2010 Investor Brandscape Report,
click here.
MUTUAL
OF OMAHA TO LAUNCH FLAGSHIP COMMUNITY BANK IN TAMPA, FLORIDA
Omaha, NE-based,
$3.5 billion-asset Mutual of Omaha Bank, a subsidiary of $22
billion-asset insurer Mutual of Omaha, plans to launch a full-service
community bank in Tampa, Florida in March.
Mutual of Omaha Bank Florida President Kevin Hale said, “This
flagship location will serve as a focal point for our expansion in the
Tampa Bay market.” Mutual
of Omaha Bank Tampa Bay Market President Brian Holliday said, “Tampa
customers who do business with Mutual of Omaha Bank will find the
resources of a financially strong and stable national leader.”
Mutual of Omaha Bank operates full-service community banks in
Arizona, California, Colorado, Nebraska, Nevada and Texas and has
offices in Florida, Iowa and Kansas.
INSURANCE
AGENTS PROTEST NEW YORK’S PROPOSED COMPENSATION DISCLOSURE REGS
Glenmont, NY-based
Professional Insurance Agents of New York State (PIANY) has submitted
its written comments to the New York State Insurance Department (NYSID)
in response to the latter’s published draft producer compensation
disclosure regulation: Conduct, Trustworthiness and Competence of
Insurance Producers, Especially Relating to Compensation Arrangements
with Insurers. In its
response, PIANY argued the NYSID’s plan to mandate disclosure “is
neither supported by real and actual experiences of consumers nor is it
required by law, since commissions are being paid from the companies to
the producers and not to the policyholders.”
In addition, PIANY said, “since the Legislature has not chosen
to mandate disclosure of consumer compensation, the department has no
authority to impose one by regulatory fiat.”
As a bottom line item, PIANY noted, “the cost of compliance is
disproportionate to any purported benefit provided the purchaser.”
PIANY went on to point out vagaries in the draft regulation and
the need to clarify terms, intent and application.
Overall, PIANY opposes the draft regulation. To
read PIANY’s comments on NYSID’s draft producer compensation
disclosure regulation, click here.
STUDY
SAYS INSURERS’ INVESTMENTS IMPROVED 4.7% IN THE FIRST THREE QUARTERS
OF 2009
Invested assets
held by insurance companies improved 4.7% in the first three quarters of
2009, according to Cincinnati-based Ward Group’s study of 43 U.S.
insurers. In its study, Portfolio
Management and Insurance-Company Owned Life Insurance (ICOLI), Ward
found that equities as a percent of invested assets has declined 23%
among insurers since 2007; preservation of capital is a primary
investment objective among 47% of companies, and 74% of companies are
concerned about funding future benefits liabilities.
As an investment strategy, only 11% of companies use ICOLI to
improve the efficiency of their investment portfolio.
Ward Group President Jeff Rieder said, “The majority of
companies utilize ICOLI only for the life insurance benefits.”
The deBart Group CEO Richard deBart, who commented on the Ward
Group study, said the disinclination of insurers to use ICOLI as an
investment strategy is “potentially due to lack of familiarity with
ICOLI products,” an interesting comment since life insurers are the
source of the products.
PACIFIC
LIFE IDS WOMEN AS “THE MOST UNDERSERVED LIFE INSURANCE MARKET”
Women control about
half the $14 trillion in U.S. private wealth, live nearly five years
longer than men and need approximately $2 trillion in life insurance,
according to Newport Beach-based Pacific Life.
Yet, Pacific Life Marketing Services Vice President Alyce
Peterson said, “Whether they are business owners, corporate executives
or simply affluent, women are the most underserved life insurance
market.” To
access What Women Need to Know About Retirement, the independent
study on which Pacific Life based its findings, click here.
ONLY
A QUARTER OF AMERICANS SUPPORT PROPOSED HEALTHCARE LEGISLATION
Twenty-five percent
of Americans are in favor of the healthcare legislation proposed by
Congress, according to a LIMRA survey of 900 adults conducted in the
second week of January. Eighty-six
percent of the individuals surveyed said they had healthcare coverage,
and 75% of that number said they were happy with the quality of
healthcare they receive relative to the premiums they pay.
LIMRA Associate Research Director Scott Kallenbach said, “We
believe that many people are leery that the proposed legislation could
affect their current coverage.”
JANUARY
18 - 24, 2010
CULLEN/FROST
BANKERS’ INSURANCE UNIT ENDORSED BY TEXAS NONPROFITS
Frost Insurance, a unit of San Antonio, TX-based, $16.2 billion-asset
Cullen/Frost Bankers, has been endorsed by The Texas Association of
Nonprofit Organizations (TANO) to offer property and casualty insurance
and directors and officers liability coverage to TANO members as a
member benefit. TANO has
also endorsed Frost Insurance to its members as a source for employee
benefits and health insurance. TANO
President and CEO Barry Silverberg said, “It is great to work with
such a strong and well-respected organization.
TANO seeks to better serve its organizational members and their
staff throughout the state by establishing our relationship with Frost
Insurance.” First
Insurance offers a full range of business and personal insurance
products to consumers throughout Texas.
In 2008,
Cullen/Frost Bankers reported $33.1 million in insurance brokerage fee
income, which comprised 11.9% of its noninterest income and 4.1% of its
net operating revenue. The
company ranked 17th in insurance brokerage earnings among
U.S. bank holding companies (BHCs) with over $10 billion in assets and
19th among all U.S. BHCs, according to the Michael
White-Prudential Bank Insurance Fee Income Report
PELOSI SLAMS INSURERS
Speaker of the House of Representatives Nancy Pelosi accused U.S.
insurance companies last week of funneling between $10 and $20 million
through the U.S. Chamber of Commerce to fund deceptive ads opposing
health insurance reform. In
a press release issued on January 12, Pelosi said, “This duplicity is
not surprising coming from an industry that has used every method to try
to kill health insurance reform that would save lives, save money, save
jobs and save Medicare.” Insurers,
Pelosi said, want to “maintain a health insurance system of high
costs, limited access and arbitrary cut-offs for American consumers.”
CONSUMER DEMAND SPARKS AGENT RECRUITMENT AT
NORTHWESTERN MUTUAL
Milwaukee, WI-based Northwestern Mutual Life Insurance Co. announced it
plans to recruit more than 2,300 financial representatives and more than
2,500 interns in 2010. The
effort, it said, is in line with its increased hiring trend, which was
up 10% in 2009 over 2008. Northwestern
Mutual Field Recruitment Director Michael Van Grinsven said, “People
are seeking guidance and clarity in their long-term planning, so
there’s a high demand for trained financial professionals.
Our forecasts show that this demand will continue to grow in the
foreseeable future.” Northwestern
Mutual offers life insurance, long-term care insurance, disability
insurance, annuities, investment products and advisory products and
services and has over $1 trillion in life insurance protection in force.
CRC ASKS BANK CEOS TO DONATE “BLOATED BONUSES”
TO “JOB CREATION”
The California Reinvestment Coalition (CRC) has delivered letters to the
CEOs of those banks which it said together hold 60% of deposits in
California: San Francisco-based, $1.23 trillion-asset Wells Fargo &
Co., Charlotte, NC-based, $2.25 trillion-asset Bank of America Corp.,
New York City-based, $1.89 trillion-asset Citigroup Inc., and New York
City-based, $2.04 trillion-asset JPMorgan Chase & Co..
In the letters the coalition asked each CEO to tithe 10% of his
executive compensation to “a ‘Main Street Stimulus’ for job
recovery.” CRC Executive
Director Alan Fisher said, “Since the public had to give banks such a
generous gift, we propose that top bank executives give back from their
bloated bonuses to help create the jobs our economy desperately
needs.” San
Francisco-based CRC is comprised of more than 275 of California’s
nonprofit organizations and public agencies and says it “advocates for
the right of low-income communities and communities of color to have
fair and equal access to banking and other financial services.”
LIFE INSURERS SEE MODEST TO FLAT YEAR AHEAD
Most life insurers are predicting that growth in sales, premium and
profitability in 2010 will be modest to flat compared to 2009, according
to a recent LOMA Resource magazine survey.
Variable product guarantees, battered investment portfolios and
exceptionally low interest rates are expected to be drags on profits.
In addition, consumers are expected to seek low-cost coverage and
be more cautious about purchasing variable products.
In order to drive profits, insurers are looking at faster
processing technologies, automated underwriting, smart phones, wireless
tools, workforce virtualization and voice-over-Internet communications.
LIMRA, LOMA and LL Global President and CEO Robert Kerzner said,
“The environment will remain difficult – some companies will thrive
while others will struggle.” He
predicts that highly capitalized companies will seek to increase their
market through mergers and acquisitions in 2010.
NEW YORK INSURANCE ASSOCIATION SUES STATE
The New York Insurance Association (NYIA) has filed suit in State
Supreme Court, Albany County against the State of New York alleging the
state is illegally diverting assessments on insurers to pay for other
state programs. According
to the suit, the insurer assessment (332 assessment) makes up $455
million of the 2009-2010 state budget, and “by law is strictly for the
expenses of the New York State Insurance Department (NYSID).”
Yet, $317 million of that assessment is allegedly being used to
fund other state agencies. NYIA
President Ellen Melchionni said, “NYIA filed this lawsuit because the
state is treating the 332 assessment as a bottomless ATM for programs
that may be worthy but cannot be legally funded by this assessment.”
The NYIA wants this “clear violation of state law” to stop.
FDIC PROPOSES RULE TYING EMPLOYEE COMPENSATION TO
INSURANCE ASSESSMENTS
The Federal Deposit Insurance Corporation (FDIC) has issued an Advance
Notice of Proposed Rulemaking (ANPR) on Employee Compensation and is
seeking comments on the ways the risk-based deposit insurance assessment
system can be changed to account for employer compensation.
The FDIC has determined that assessments need to be in line with
“risks inherent in the design of certain compensation programs.”
In this way, companies that incentivize risk will pay for the
cost of insuring that risk by paying higher assessment fees into the
Deposit Insurance Fund (DIF). The
FDIC said it “seeks to provide incentives for institutions to adopt
compensation programs that better align employees’ interests with the
long-term interests of the firm and its stakeholders, including the
FDIC.” To
read the ANPR, click here.
Comments on the ANPR are due 30 days after its publication in the
Federal Register.
WELLS FARGO TO MERGE, REORGANIZE AND LIQUIDATE FUNDS
San Francisco-based, $1.23 trillion-asset Wells Fargo & Co.
subsidiary Wells Fargo Funds Management plans to merge, reorganize and
liquidate various funds currently held under Wells Fargo Advantage Funds
and Evergreen Investment Management Company.
In the move designed to eliminate product overlap, 27 Evergreen
Funds will be reorganized into new Wells Fargo Advantage Funds, 53
mutual funds from both fund families will merge and 4 Evergreen Funds
and 1 Wells Fargo Advantage fund will be liquidated.
Evergreen portfolio managers will continue their roles as part of
Wells Capital Management. The
reorganization requires shareholder approval.
STATE AGS OPPOSE SENATE HEALTH CARE BILL AS
UNCONSTITUTIONAL
The Attorneys General (AGs) of Alabama, Colorado, Florida, Idaho,
Michigan, North Dakota, Oklahoma, Pennsylvania, South Carolina, South
Dakota, Texas, Virginia and American Samoa have stated their opposition
to the Senate Health Care Bill H.R. on Constitutional grounds.
The attorneys general describe the bill’s special treatment of
Nebraska as a state whose residents will share in the health insurance
plan but never have to pay the cost of underwriting the medical mandates
in the plan as “arbitrary and capricious,” not for the general
welfare of all states and, therefore, unconstitutional.
In a letter to Speaker of the House Nancy Pelosi and Senate
Majority Leader Henry Reid, the attorneys general said, “As legal
officers of our states we are contemplating a legal challenge to this
provision and we ask you to take action to render this challenge
unnecessary by striking that provision.”
The AGs said the Nebraska exemption was the price supporters of
the bill were willing to pay Nebraska Senator Ben Nelson for his crucial
60th vote in favor of the Senate bill.
To
read the letter in its entirety, click here.
THE UNREGULATED SHADOW BANKING SYSTEM FUELED
FINANCIAL CRISIS, BAIR TELLS COMMISSION
Federal Deposit Insurance Corporation (FDIC) Chairman Sheila Bair said
in testimony before the Financial Crisis Inquiry Commission last week
that products and practices that originated in the shadow banking system
not regulated by the FDIC fueled the financial crisis. Adding “more regulation upon insured banks,” she said,
“will simply provide more incentives for financial activity to be
conducted in less-regulated venues and exacerbate the regulatory
arbitrage that fed the crisis.” To
read her entire testimony, which includes her proposed solutions, click
here.
SEC CHAIRMAN SCHAPIRO POINTS COMMISSION TO LACK OF
REGULATORY AUTHORITY
Security and Exchange Commission (SEC) Chairman Mary Schapiro told the
Financial Crisis Inquiry Commission last week that the financial crisis
“resulted from many interconnected and mutually reinforcing causes.”
Mortgage securitization encouraged weaker underwriting standards
and reliance on credit rating agencies.
Because markets were viewed as always self-correcting, weaker
standards and regulatory gaps increased.
Complex, illiquid and not easily understood financial products
like derivatives proliferated. Compensation incentives encouraged significant risk taking.
Companies that marketed or purchased complex financial products
failed to appropriately oversee and manage risks, and the regulators had
no authority to monitor and reduce risks that flowed outside their
regulatory domains. To
read her entire testimony and recommendations, click here.
ERNST & YOUNG MAPS ROAD AHEAD FOR LIFE INSURERS
The U.S. life insurance industry is likely to experience an extended
period of weak earnings, slow growth and increased regulatory oversight
in 2010, according to Ernst & Young’s Global Insurance Center
2010 U.S. Outlook. In
order to become more profitable and achieve growth, Ernst & Young
advised, insurers need to strengthen prices for in force business by,
for example, increasing non-guaranteed fees.
They need to assess their company’s risk appetite and establish
procedures for risk-adjusted performance and, at the same time, reduce
risks by re-designing and re-pricing products to match consumer demands.
They need to reallocate capital to those businesses with the best
chance of success and match business opportunities with increased
regulatory oversight. Instead
of cutting jobs to reduce expenses and free capital, they need to
improve operational efficiency. Summing
up, Ernst & Young Global Director of Insurance Industry Services
Peter Porrino said, “By focusing on optimizing capital, broadening
risk management capacity and remaining agile in a constantly evolving
regulatory environment, life insurance companies will be more prepared
for future crises and better positioned once the market rebounds.”
To
access the Ernst & Young report, click here.
AXA RETIREMENT PLANNING CURRICULUM APPROVED FOR
CREDIT IN 49 STATES
New York City-based AXA Distributors, the wholesale annuity distribution
unit of AXA Equitable Life Insurance Company, has created a retirement
income planning curriculum for financial professionals.
The curriculum has been approved in 49 states for continuing
professional education credit and includes a step-by-step guidebook that
describes the mechanics of Social Security and Medicare, IRA planning
strategies, available technology platforms, practice management and
marketing techniques. AXA
Distributors Vice President Kelly Lavigne said, “After the challenging
markets of the last two years, many clients and prospects are seeking
retirement income planning expertise to help them rebuild assets and
sustain their retirement dreams.”
AFFLUENT AMERICANS AWAKENED BY FINANCIAL CRISIS
About 9 in 10 Americans (88%) with at least $500,000 in investable
assets believe it is more important than ever to live within their
means, according to a PNC Wealth Management survey.
Half of this group is re-evaluating its priorities; 47% are
discussing money management with their children; 42% say the recession
has had a negative impact on their family budget, and they have cut
their spending on non-essential goods, PNC Wealth Management found.
INDIA’S ICICI LOMBARD GENERAL INSURANCE AND
DEVELOPMENT CREDIT BANK FORGE BANCASSURANCE DEAL
Mumbai, India-based ICICI Lombard General Insurance Co. (ICICI Lombard
GIC), a 74:26 joint venture between Mumbai-based, $75 billion-assets
ICICI Bank and Toronto, Canada-based, $27 billion-asset Fairfax
Financial Holdings, has forged a bancassurance agreement with Mumbai,
India-based Development Credit Bank (DCB).
Under the agreement, ICICI Lombard GIC will distribute life,
health, home, travel, auto, fire, marine and industrial insurance
through DCB’s 80 branches across 10 states and 2 territories in India.
ICICI Lombard GIC Retail Director Neelesh Garg said, “Our
partnership strengthens and enhances ICICI Lombard’s reach to provide
innovative insurance solutions to a widespread customer base.”
DCB CEO Marali Nalrajan said the partnership gives DCB a “big
opportunity to bring value to our customers.”
ICICI Lombard GIC issued over 4 million policies in the year
ended March 31, 2009.
TAIWAN LIFE INSURANCE REPORTEDLY TOP BIDDER FOR
METLIFE’S TAIWAN BUSINESS
Taipei, Taiwan-based Taiwan Life Insurance Company has reportedly
offered to pay MetLife $122 million to acquire the New York City-based
insurer’s business in Taiwan. The
offer reportedly tops bids previously submitted by Taipei-based
Waterland Financial and Taipei-based Hontai Life, Reuters
reports.
___
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