Magazine article American Banker

Bank Insurance Likely to Take off, Analysts Say

Magazine article American Banker

Bank Insurance Likely to Take off, Analysts Say

Article excerpt

Wall Street is bullish about the banking industry's ability to make a success out of the insurance business.

Several leading analysts believe the nation's largest banks - which have vast networks of branch offices through which they reach customers - are well-positioned to take market share from competitors.

Analysts have issued a flurry of reports about this emerging business in the three weeks since the U.S. Supreme Court ruled that states must allow national banks to sell insurance from small towns.

"Banks have been gearing up for this ruling, so they're ready to move," said Thomas Hanley, an analyst at UBS Securities Inc. "The floodgates have been opened."

Consultants estimate that banks account for about 1% of the life insurance sold in this country, but Mr. Hanley believes they can boost that share to 20% by the year 2000, equaling their current share of total annuity sales.

Indeed, he and others point to Western Europe, where a less restrictive regulatory environment has allowed banks to capture a sizable share of insurance sales.

Analysts said U.S. banks that are most prepared to exploit this new opportunity include: Citicorp, Chase Manhattan Corp., Norwest Corp., NationsBank Corp., First Union Corp., Wells Fargo & Co., and Barnett Banks Inc. - the successful litigant in the Supreme Court case.

Richard Bove, an analyst at Raymond James & Associates, predicted insurance sales at Barnett will contribute 10% to earnings by 1998. He figures that the Jacksonville-based bank, which has relationships with 40% of the households in Florida, can easily capture 10% of the $20 billion a year in insurance premiums in that state.

In an era when an aging population is demanding savings vehicles such as mutual funds and annuities, banks are reaching out for nontraditional revenue streams. And insurance brings in the highest commissions, analysts said. …

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