Insurance products were boon for banks last year

Banks that sold insurance last year reaped higher profits than those that didn’t, according to a study from the Bank Insurance Market Research Group. Data gleaned from 7,563 commercial and savings banks across the country showed that those with an insurance operation had higher profits than those that didn’t. Of all participating banks, 3,338 had an insurance business and brought in a median net income of $1.16 million last year. That is 69% higher than the overall pool of banks. The full group of 7,563 banks reported median net income of $690,000 last year. The trend of higher profits was especially pronounced for banks with less than $250 million in assets. The total 5,243 banks of that size brought in a median net income of $470,000 last year. Meanwhile, the 2,136 banks with less than $250 million in assets brought in $830,000. Although the difference in profits held true for most banks of different asset sizes, institutions with more than $10 billion in assets had no difference in profit level when considering banks with insurance operations. Eighty-nine banks of that size had a median net income of $93.4 million. Meanwhile, 65 banks of comparable size and that had an insurance operation reported the exact same level of median net income: $93.4 million. The similar profits between the banks at the highest asset level could be due to the fact that major institutions are more likely to turn to other alternatives to help bolster their bottom line rather than relying on income from the insurance business. “They are like different creatures,” said Andrew Singer, managing director of the Bank Insurance Market Research Group in Mamaroneck, N.Y. “One is more traditional, and the other got into the crazy stuff: securitization of subprime mortgages and [collateralized debt obligations],” he said. “I don’t think insurance plays a big role in the big banks’ net income and bottom line, but at a small bank with only $100 million in assets and a little insurance business, it could have a larger impact.”