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Recent Bank Insurance News In Brief

NOVEMBER 24 - 30, 2008

LINCOLN FINANCIAL, THE HARTFORD, GENWORTH FINANCIAL, AND TRANSAMERICA APPLY FOR THRIFT STATUS
Philadelphia-based Lincoln Financial Group, Hartford, CT-based The Hartford Financial Services Group, Richmond, VA-based Genworth Financial, Inc., and San Francisco, CA-based Transamerica Corp., a subsidiary of The Hague-based AEGON, have applied to the Office of Thrift Supervision (OTS) to become thrift holding companies.  In order to qualify, Lincoln Financial agreed to acquire Goodland, IN-based, $7 million-asset Newtown County Savings Bank.  The Hartford agreed to acquire and recapitalize Sanford, FL-based, $637 million-asset Federal Trust Corporation, parent of Federal Trust Bank.  Genworth Financial agreed to acquire Maple Grove, MN-based, $895 million-asset InterBank fsb.  And, Transamerica agreed to acquire Crofton, MD-based $381 million-asset Suburban Federal Savings and Loan.
   With their applications to become thrift holding companies pending, each of the insurers has applied to the U.S. Treasury Department to participate in the Troubled Asset Relief Program (TARP), which is available to thrift holding companies, but not to insurers.  The Hartford Chairman and CEO Ramani Ayer estimated that his company could be eligible for up to a $3.4 billion capital purchase if its application is approved.  “Securing capital at terms available through the Capital Purchase Program could be a prudent course in this market environment,” Ayer said.  AEGON CFO Jos Streppel said, “As a company with sizable operations in the United States [Transamerica], it makes sense for us to examine the terms and conditions which may be available under the U.S. government’s TARP program.”

U.S. BANK ACQUIRES DOWNEY SAVINGS & LOAN AND PFF BANK & TRUST
Minneapolis, MN-based, $247.1 billion-asset U.S. Bank has acquired Newport Beach, CA-based $12.8 billion-asset Downey Savings and Loan Association and Pomona, CA-based, $3.7 billion-asset PFF Bank and Trust in a move facilitated by the Federal Deposit Insurance Corporation (FDIC).  U.S. Bank has assumed Downey’s $9.7 billion and PFF Bank’s $2.4 billion in deposits and has agreed to purchase all their assets and assume their first $1.6 billion in combined losses.  The FDIC will share in any further losses and estimates the failures of the banks will cost the Deposit Insurance Fund $1.4 billion and $700 million, respectively.  The acquisitions add 208 branches to U.S. Bank’s 353-branch network in CA and another 5 in Arizona.  Downey and PFF will reopen as U.S. Bank on November 24, 2008.  They were the fourth and fifth banks to fail in California this year and the twenty-first and twenty-second to fail this year in the U.S.

PROTECTIVE LIFE TURNS TO TARP IN BID TO BUY BONIFAY HOLDING COMPANY

Birmingham, AL-based Protective Life Corp. has agreed to acquire Bonifay, FL-based $241.6 million-asset Bonifay Holding Company, parent of Bank of Bonifay, and has applied to the U.S. Federal Reserve Board to become a bank holding company.  In addition, Protective Life has filed an application with the U.S. Treasury Department to participate in the Capital Purchase Program under the Troubled Asset Relief Program (TARP).  Protective said it will not purchase Bonifay Holding Company if Treasury does not approve its participation in TARP.

MORTGAGE-HEAVY THRIFTS REPORT FOURTH CONSECUTIVE QUARTERLY LOSS
U.S. thrifts together set aside $7.9 billion in loan loss provisions and reported a $4 billion loss in the third quarter, its fourth consecutive quarterly loss, down from a loss of $5.4 billion in the second quarter and an $18.8 billion loss in fourth quarter 2007, but greater than the $267 million loss in first quarter 2008.  Office of Thrift Supervision (OTS) Supervision Director John Reich said, “The housing sector is at the eye of the nation’s economic storm, and the thrift industry, which focuses on home mortgages and other consumer retail lending, is feeling a strong impact.”
     By the end of the third quarter, the number of problem thrifts with composite examination ratings of 4 or 5, had risen from 17 in the second quarter and jumped from 12 a year ago to 23, according to the OTS.  Profitability over all dropped to –1.35%, down from –0.57% in the second quarter and 0.2% in third quarter 2007, the OTS said.

INDEXED ANNUITY SALES CLIMB 5.2% HIGHER IN 3Q
Indexed annuity sales in the third quarter grew 5.2% to $6.7 billion, up from $6.37 billion in third quarter 2007, according to the Advantage Index Sales and Market Report prepared by Pleasant Hill, IA-based Advantage Group Associates, Inc.  Year-to-date sales rose 3.9% over a year ago to $19.5 billion.  Des Moines, IA-based Aviva increased its dominant position in the indexed annuity market to a 29% market share.
     Third quarter sales of indexed life insurance products inched up less than 1% over third quarter 2007 to $129.5 million, but year-to-date sales grew 9% over a year ago to $381.2 million.  Advantage Group Associates CEO Sheryl Moore said, “Indexed life sales are increasing due to consumer demands for guarantees and higher upside potential.”  Aviva ranked first in this market, but Pacific Life more than doubled its year-ago sales to rank second, according to the index sales report.

SURVEY REVEALS INCOME GUARANTEES ARE TOP PRIORITY FOR MOST AMERICANS
Income guarantees became the top financial priority among 78% of Americans in October, up from 52% in April, according to a recent AXA Equitable survey of 400 randomly chosen consumers aged 35-70 with $75,000 or more in household incomes.  AXA Equitable EVP Barbara Goodstein said, “The heightened priority being placed so quickly on securing a stream of lifetime income is striking.”

ASSURED GUARANTY TO PURCHASE FINANCIAL SECURITY ASSURANCE
Brussels, Belgium-based Dexia has agreed to sell New York City-based Financial Security Assurance (FSA), its U.S. bond insurance subsidiary, to Bermuda-based Assured Guaranty for $361 million in cash and 44.6 million Assured Guaranty shares.  Pierre Mariani, CEO and Chairman of the Management Board of Dexia, said, “We must now quickly focus on our core client franchises, reduce our risk profile and remove unnecessary costs.”  Dexia reported a €1.5 billion ($1.89 billion) loss in the third quarter, hit by €460 million ($579.16 million) in FSA losses and €1.73 billion ($2.18 billion) in other losses.

SUCCESSFUL INSURANCE EARNINGS COMPRISE 61.5% OF NONINTEREST FEE INCOME AT VIST FINANCIAL
Wyomissing, PA-based, $1.18 billion-asset VIST Financial reported that the third quarter acquisition of Fisher Benefits Consulting bolstered group insurance commissions and drove insurance brokerage fee income generated by VIST Insurance up 3.0% to $3.05 million, compared to $2.97 million in third quarter 2007.  Insurance earnings dwarfed all other sources of noninterest fee income, comprising 61.5% of the $4.96 million that made up that revenue.  Noninterest income, however, was hit by almost $7 million in net securities losses tied to VIST’s investment in preferred Fannie Mae and Freddie Mac shares and plunged to a loss of $2.04 million.  Net interest income increased 4.9% to $8.6 million, up from $8.2 million, but VIST reported a net loss of $4.61 million, impacted by the Fannie Mae and Freddie Mac charges.  VIST Financial President and CEO Robert Davis said, “Our core operating earnings continued to be strong through the third quarter.”
     In 2007, VIST Financial reported $11.4 million in insurance brokerage fee income, which comprised 57.2% of its noninterest income and 21.3% of its net operating income.  The company ranked 11th in insurance brokerage earnings among U.S. bank holding companies (BHCs) with $1 billion to $10 billion in assets and ranked 45th among all U.S. BHCs, according to the
Michael White-Symetra Bank Holding Company Fee Income Report.

INSURANCE BROKERAGE FEE INCOME UP 2.7%, COMPRISES 20.8% OF NONINTEREST INCOME AT FIRST M&F
Kosciusko, MS-based, $1.64 billion-asset First M&F Corp reported third quarter insurance brokerage fee income was second only to service fees on deposits and rose 2.7% to $1.15 million, up from $1.12 million in third quarter 2007.  Insurance earnings comprised 20.8% of noninterest income, which increased 1.7% to $5.52 million, up from $5.43 million.  Net interest income on a 3.7% net interest margin fell 18.2% to $10.8 million, down from $13.2 million, as loan loss provisions jumped to $2.2 million, up from $630,000 in third quarter 2007.  Net income dropped 42.1% to $2.2 million, down from $3.8 million a year ago, but M&F Corp Chairman and CEO Hugh Potts said, “We have taken losses, added to the Allowance, disposed of some other real estate, paid our $0.13 quarterly dividend and added to our capital.”
     In 2007, First M&F reported $4.02 million in insurance brokerage fee income, which comprised 21% of its noninterest income and 5.4% of its net operating income.  The company ranked 39th in insurance earnings among U.S. bank holding companies (BHCs) with $1 billion to $10 billion in assets and ranked 87th among all U.S. BHCs, according to the
Michael White-Symetra Bank Holding Company Fee Income Report.

INSURANCE BROKERAGE FEE INCOME SLIDES 19.8% LOWER AT ALLIANCE FINANCIAL
Syracuse, NY-based, $1.3 billion-asset Alliance Financial Corp. reported Ladd’s Agency, Inc., its insurance agency subsidiary, generated $384,000 in insurance brokerage fee income in the third quarter, down 19.8% from $479,000 in third quarter 2007.  Insurance brokerage comprised 7.5% of noninterest income, which slid 5.5% to $5.13 million, down from $5.43 million, despite a jump in income from bank-owned life insurance to $243,000, up from $160,000.  Net interest income, on a 3.43% net interest margin, grew 23.5% to $8.73 million, up from $7.07 million, as loan loss provisions decreased, and net income jumped 25% to $3 million, up from $2.4 million a year ago.  Alliance President and CEO Jack Webb said, “Our strong capital position and solid earnings performance have positioned us to carry out our ongoing commitments to serve the credit and related banking needs in our markets.”

GROWING INSURANCE BROKERAGE FEE INCOME IS NECK-AND-NECK WITH ATM FEES AT FIRST MARINER BANCORP
Baltimore, MD-based, $1.28 billion-asset First Mariner Bancorp reported third quarter insurance brokerage fee income almost equaled ATM fees and climbed 14.1% to $769,000, up from $674,000, to comprise 12.6% of noninterest income, which increased 4.6% to $6.08 million, up from $5.81 million.  Net interest income rose 1.2% to $8.6 million, up from $8.5 million, but the company reported a net loss of $2.28 million compared to a net loss of $3.58 million a year ago.  First Mariner Chairman and CEO Edwin Hale said, “We are seeing progress as our expense levels continue to moderate.”  First Mariner said total revenue grew 11% to $1.89 million, helped by “strong growth in fee-based revenue.”
     In 2007, First Mariner reported $2.9 million in insurance brokerage fee income, which comprised 15.6% of its noninterest income and 4.5% of its net operating revenue.  The company ranked 53rd in insurance brokerage earnings among BHCs with $1 billion to $10 billion in assets and 109th among all U.S. BHCs, according to the
Michael White-Symetra Bank Holding Company Fee Income Report.

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