Health insurance awareness in India is still extremely low

Howard Bolnick, who taught insurance at the Kellogg School of Management for 13 years,
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was in India for a five-day executive development programme on healthcare financing and health insurance, organised by the Insurance Foundation of India (IFI). Bolnick, a past president of the US Society of Actuaries, took time off to talk to Sarbajeet K Sen on how he viewed the Indian health insurance sector. Excerpts:n How do you see the present stage of the Indian health insurance market?It is very much in a formative stage still. I know there have been health insurance products roughly for 20 years but still the penetration level is barely 2 per cent of the population. This is very, very low. It is somewhat stagnant and listening to the people here, it is very clear in some sense it is not functional. I think insurance companies in India have things to learn; that they must do better. There is a generally bad but improving relationship between the health providers and the insurance companies. There is a low level of awareness of health insurance among the population. It is really not the kind of situation that is ready for takeoff.

However, given that the regulatory framework is improving and that many new players including foreign companies are willing to come in, I think things are at a takeoff stage.n Can the penetration levels of health insurance see a dramatic change in India going forward?You got a situation where there is 2 per cent market penetration. You will never get to 100 per cent. There are around 300-350 million people whom you could potentially sell health insurance to. I would argue to the health providers that if they cooperate with health insurance companies, the penetration can be as much as 150-200 million, which by the way will be growing. I am told there are some companies that take six months to pay claims. That’s absurd. How can you have a relationship with health providers if you are sitting on their money for so long?There are other things that from a US perspective might look perverse. I understand, not surprisingly, when an individual goes into a hospital here, one of the first questions asked is if the person is insured or not.That happens in the US too. But in the US context, you get a better deal than if you are not insured, but here it is a worse deal. Should that continue? No. At some point of time, there needs to be cooperation between the insurance industry and the health providers to set up a foundation to do things that makes sense to both of them.n Of late, there has been some debate on whether one should retain the commission structure in the insurance sector. What are your views given your US experience?My understanding here in India is that most of the market is retail. You have to reach them not through a place of employment but you have to reach them through an intermediary. In that sense, in the retail market, intermediaries are vital. In the US, agents are generally compensated by one of two ways, depending on the situation. Sometimes it is consultancy, sometimes it’s a flat fee. But in the retail market, it is a mainly percentage of the premium. It is a balancing act but where it will end up in India, I don’t know.n The government here is proposing to reduce the paid-up capital requirement of standalone health insurance companies to Rs 50 crore from the present Rs 100 crore. How do you see this move?I have heard that. Let’s put it this way. You really have to have capital in this industry, particularly when you are a nascent stage of development. I keep hearing about loss ratios of 140-150 per cent in India, which is very high. This really brings in the need of capital. What happens if you run out of capital? It is not good for the industry and not good for the policyholder if the company goes bankrupt. But bankruptcies and such types of disruptions will not help in the growth of health insurance in general. So, if I were a regulator, I would want to be careful to make sure that there is adequate capital.n What is the average loss ratio of health insurers in the US?Companies are making money. Health insurance companies in the US have been one of the real darlings of Wall Street.n Is it because they don’t pay claims?That’s bad. I have heard people say that. It is a political debate. There are certainly instances of it. But it is generally not true. The reason that they are so profitable is because they develop managed care techniques and have learned how to manage their business much better than what we knew as an industry 20 years ago. They have been able to reap nice profits.n There is a proposal to raise the foreign direct investment (FDI) cap in insurance to 49 per cent from the present 26 per cent. What are your views?Whether foreign partners should be allowed to own a majority or not is a local issue. But it seems to me that somehow the government and the regulator should create an environment that is encouraging for the right foreign companies to come in. Now, whether that is 49 per cent, 35 per cent or 55 per cent, I don’t know. But it should be a welcoming environment, an open environment, because a lot of foreign companies have knowledge, expertise that will help the health industry to grow.

Data Management in Insurance Industry

While data storage and management is a critical issue for IT professionals across industries, its severity gets accentuated for the insurance industry. Here's a brief on various techniques to control it.

Data is all pervasive � it begins much earlier than the initial stages of client understanding and diligence, and extends far beyond helping revenue generation, encompassing cross and up-selling products or services. It also helps to understand the business risks and verify whether the regulatory compliance needs are met. The insurance industry depends on promises made on paper, which are eventually converted into supporting databases and document repositories. This article elaborates on the types of data, modes of data acquisition, data checks and usage, and the prevalent techniques for data management.

Data sources

Insurance industry's data can broadly be classified as employee-related, distribution-related, customer-related, product-related, operations- related and accounting-related. Of these categories, employee-related data is required purely for internal workforce operations management and the rest have a direct impact on the cost and revenue of the insurance company.
All data is collected and stored in databases, data warehouses and as documents or images.

Data management stagesManagement of data could be defined in three major stages: Data Acquisition, Data Quality Management, and Data Exploitation or Data Utilization. Let us look at these in detail:
Data acquisition results from new business management, internal operations (HR, accounting, distribution and product & policy management systems). These are made available in unique respective data structures, in an integrated way. One step up, they can be consolidated into data warehouses and document management systems, jointly referred to as the universe of the insurance enterprise data.
Data exploitation could be done to cater to different needs like planning or analyzing growth of revenue, cost control, improving efficiency of operations, planning and executing business expansions, conceptualizing new products, and to provide data-related services to customers, distribution networks and employees.
Data Quality Management: Most of the big insurance enterprises have been operational for several decades and hence the data available with them may not be 100% accurate. Many such insurance enterprises still use green screens for systems support and policy administration. Data quality could be maintained and ensured, by continuously checking, correcting and preventing data errors, thereby making data ready for exploitation.
The link between data acquisition, data quality management and data utilization could be described in the ICO (Input-Check-Output) model.
Data management stagesManagement of data could be defined in three major stages: Data Acquisition, Data Quality Management, and Data Exploitation or Data Utilization. Let us look at these in detail:
Data acquisition results from new business management, internal operations (HR, accounting, distribution and product & policy management systems). These are made available in unique respective data structures, in an integrated way. One step up, they can be consolidated into data warehouses and document management systems, jointly referred to as the universe of the insurance enterprise data.
Data exploitation could be done to cater to different needs like planning or analyzing growth of revenue, cost control, improving efficiency of operations, planning and executing business expansions, conceptualizing new products, and to provide data-related services to customers, distribution networks and employees.
Data Quality Management: Most of the big insurance enterprises have been operational for several decades and hence the data available with them may not be 100% accurate. Many such insurance enterprises still use green screens for systems support and policy administration. Data quality could be maintained and ensured, by continuously checking, correcting and preventing data errors, thereby making data ready for exploitation.
The link between data acquisition, data quality management and data utilization could be described in the ICO (Input-Check-Output) model.
Data management stagesManagement of data could be defined in three major stages: Data Acquisition, Data Quality Management, and Data Exploitation or Data Utilization. Let us look at these in detail:
Data acquisition results from new business management, internal operations (HR, accounting, distribution and product & policy management systems). These are made available in unique respective data structures, in an integrated way. One step up, they can be consolidated into data warehouses and document management systems, jointly referred to as the universe of the insurance enterprise data.
Data exploitation could be done to cater to different needs like planning or analyzing growth of revenue, cost control, improving efficiency of operations, planning and executing business expansions, conceptualizing new products, and to provide data-related services to customers, distribution networks and employees.
Data Quality Management: Most of the big insurance enterprises have been operational for several decades and hence the data available with them may not be 100% accurate. Many such insurance enterprises still use green screens for systems support and policy administration. Data quality could be maintained and ensured, by continuously checking, correcting and preventing data errors, thereby making data ready for exploitation.
The link between data acquisition, data quality management and data utilization could be described in the ICO (Input-Check-Output) model.
Data Acquisition (Input)Structured data acquisition is critical to perform all subsequent data-related functions in an efficient and integrated manner. Data that is unstructured and not collected in databases is likely to create vacuums in data analysis. In today's insurance industry, data acquisition happens in five different broad segments:
Customer data: Customer relationship management, customer self service portals, new business management systems and other customer touch point systems are the sources for acquiring this data. It comprises of customer's personal data such as family, contact, activities, complaints, service requests, financial, health, campaign offers, policies, loans and benefits info. This group of data is generally administered in CRM, customer portals, and IVRS.
Distribution data: Distribution administration, sales & service management, compensation, compliance and other distribution touch point systems are the sources for acquiring this data. This group of data is generally administered in Distribution or Channel management systems, IVRS, FNA, quotation, applications and compliance management systems.
Policy administration data: New business, underwriting management, claims, accounting and actuarial data are the sources for acquiring this data. It comprises of financial needs analysis, quotes, new business applications, cashier entries, lock/collection boxes, accounting, valuation, loss ratios, document images, turn around time, underwriting, claims and policy services info. This group of data is generally administered in legacy policy administration, claims, accounting and actuarial systems; however, there could be number of separate systems for underwriting, policy services and new business support systems.
Product administration data: Product administration and pricing are the sources for acquiring this data. It comprises of product setup & management, profiling, pricing, profitability and product performance. A very few industries maintain market research data too. This group of data is generally administered in product management systems, actuarial systems, DWH and data marts.
Employee data: It comprises of employee personal details such as contacts, activities, payroll, education qualifications, certifications, credentials, job history, training and development info. This group of data is generally administered in HRMS; however, in some cases there may be separate payroll and training & development systems.
Missing, unstructured or disintegrated data acquired in any of the above five categories would create a gap in the data management chain and hence it is recommended to fill up these gaps diligently.

Data Quality Management (Check)Data acquired through various systems and databases needs to be checked for desired quality before being exploited. Data quality errors could result from inadequate verification of data stored in legacy systems, non-validated data leaks from the front end, inadequate integration, redundant data sources / stores, direct back-end updates, etc. In today's insurance Industry, data quality management is mostly ignored. Where implemented, it is done in one of the two ways described below.
Unstructured approachMost enterprises rely on a few batch programs to check some portions of the data acquired, and most of the times, these programs are triggered by a serious problem identified in customer or financial data. Some enterprises schedule these batch runs and some still pursue to run only on demand. Such intermittent and unorganized batch runs can neither help to scale or integrate, nor make an impressive improvement to the overall data quality of the enterprise.
Structured approachStructured data quality management, greatly contributes to scale up, integrate and thus create a big impact to the overall enterprise data quality. A structured data quality management model would pass through the following stages:
Extraction of data from source and/or target systems.
Run quality checks for identifying data transfer errors, data link/reference errors and domain integrity errors.
Create a data quality mart to keep all the error records and all error-related details, to help in tracking and monitoring the aging of the problem and to do other analyses.
Integrate the data quality errors into problem/incident trackers so that closures can be tracked.
Provide online data quality error reports to the data owners along with its aging so that they can be fixed by them.
The data volume, sensitivity/criticality and the data quality error exposure risks play a vital part in designing the right frequency to run, level of follow up and escalations settings, etc.
The data quality errors are critical to be fixed & prevented in time so that businesses can stop revenue/opportunity losses, cut additional recovery expenses and build confidence of all stakeholders in the value chain. (There would be a separate paper discussing in detail on the evaluation of the existing data quality management along with gaps to help insurance industries to implement a proper data quality management system.)
Data Exploitation (Output)Data acquired and checked thoroughly, is ready for exploitation. Data exploitation is the key stage which, if properly done, will help to reap the benefits of efficient data management. In other words, this is the value generation stage - which includes revenue growth, cost savings, operational efficiency gains, risk controls, etc, which are very critical for any business. This stage is also viewed as the information management stage. In Insurance industry today, the data exploitation which is the Output stage of the data management, is done in one of the two ways described below:
Legacy approachMost enterprises extract data or information required on an ad hoc basis from their operational systems and use their applications or batch programs to generate some reports to help in decision making. This method is not sustainable when the demand grows or multi-dimensional needs come up or when data becomes voluminous. Moreover, data users need to trail behind a big Q number which might render it too late to initiate desirable action on an issue for which data was originally extracted.
Structured approachWith the advantages of structured information management already reinforced in the last couple of paragraphs, an enterprise would be easily able to adapt to any volume or time challenges, thus creating a big impact to the overall information needs that are critical to the functioning and growth of the enterprise. Structured information management implementation can be done as laid down below:
Enterprise Data Ware House (EDWH): Most enterprise data, which is called universe, needs to be extracted, loaded and transformed for information needs, and then segmented for summaries and details.
Data Marts: Specific business functions (for example � accounting, compliance, etc) can have their data marts to address the key business problems in their functions.
Reporting Needs: Detail lists and structured (authored and custom) reports can be published from DWH, data marts and operational data stores.
Analysis Needs: Summaries need to be done with appropriate dimensions and measures to enable multi-dimensional analysis from DWH and data marts.
Information management should be viewed from the perspective of enterprise needs that would cover all functions of the enterprise that would minimally or majorly impact the business. All functions of the enterprise can be seamlessly integrated through suitable enterprise information management systems.
Frequency of refreshing the EDWH and data marts, extent of data integration, efficiency summaries depend on the business need or pace; hence, they need to be worked out during the design stage. The data needs to be exploited by creating data marts, reports and analysis to bring value to the enterprise.
ConclusionIt is recommended that Insurance industries do a stock check of their data management implementation at all three stages: data acquisition, data quality management and data exploitation. The value of data management should be clearly understood and structured approaches need to be adopted at all stages. With these implemented, an enterprise can make informed decisions, refrain from information starving, remain highly integrated and scalable, and most importantly, stay ahead of competition.

MOYNIHAN TO HEAD BANK OF AMERICA

Bank of America (B of A) Consumer and Small Business Banking President Brian T. Moynihan will replace Kenneth D. Lewis as Bank of America President and CEO when Lewis retires on December 31, 2009. Moynihan joined B of A as Global Wealth and Investment Management President in 2004, when B of A acquired FleetBoston Financial. Moynihan served in this position until 2007, when he was appointed president of B of A’s Global Corporate and Investment Management, a post he held until August 2009. B of A Chairman Walter Massey said, “Brian’s wide range of experience, his relationships inside and outside the company and his demonstrated ability to understand business dynamics and effect constructive change made him the best person for the position.” Moynihan said, “This company has a long tradition of operational excellence and strong execution. My goal is to refocus our efforts and attention to those core capabilities that will make us the best financial services firm in the world.” Moynihan is 50 years old and chairs B of A’s Global Diversity and Inclusion Council.

AUTO INSURERS SATISFY CUSTOMERS MORE THAN HOME INSURERS

Insured Americans are more satisfied with their auto insurance claims experience (842 on a 1,000-point scale) than they are with their homeowners claims experience (828 on a 1,000-point scale), according to J.D. Power & Associates. J.D. Power & Associates Senior Director of Insurance Practices Jeremy Bowler said, “By thoroughly explaining the limitations of the policy coverage and fully managing customer expectations, insurance companies may be able to lower the number of negotiations and improve claimant satisfaction considerably.” During the first notice of loss process, 81% of auto claimants said their insurer provided them an explanation of their policy coverage, while less than 75% of homeowner claimants received the same information.

FINANCIAL CRISIS EXPECTED TO HELP DRIVE TORT COSTS UP 3% IN 2009

Litigation associated with employment practices, medical malpractice and professional services errors and omissions associated with the financial crisis are expected to drive U.S. tort costs up 3% in 2009, up an additional 4% in 2010 and up an added 6% in 2011, according to a recent study completed by Stamford, CT-based Towers Perrin. Since 1950, annual growth in tort costs has exceeded gross domestic product (GDP) growth by an average of 2%, the 2009 Update on U.S. Tort Cost Trends reveals. In 2008, the U.S. tort system cost $254.7 billion or $838 per person, up from $252 billion, or $836 per person in 2007.

COLI, TOLI, NQDCs & SERPs

Eighty-five percent of U.S. companies offer nonqualified deferred compensation plans (NQDC), and 67% offer supplemental executive retirement plans (SERPs), according to Executive Benefits – A Survey of Current Trends, a study completed by Dallas, TX-based Clark Consulting, a subsidiary of The Hague-based AEGON. While the number of companies that informally fund their NQDC plans has climbed to 71%, up from 62% in 2007, the number informally funding their SERPs has dropped to 39%, down from 48% in 2007. Corporate-owned Life Insurance (COLI) and Trust-owned Life Insurance (TOLI) remain the most commonly used funding vehicles for both NQDCs (61%) and SERPs (68%). Increasingly, companies are turning to third party administrators or a combination of in-house/third party administrators to manage NQDC plans, leaving only 3% relying on in-house administrators, compared to 15% in 2007. In contrast, 32% administer their SERPs in house, up from 30% in 2007, but down from 44% in 2005. Turning to outside administrators, Clark Consulting said, “may reflect a need for more sophisticated administration in light of the requirements of the Internal Revenue Code section 409A.

U.S. PROPERTY-CASUALTY INSURERS SEE NET INCOME JUMP 268% IN FIRST NINE MONTHS

U.S. property-casualty insurers reported net income for the first nine months of 2009 jumped 268.2% to $16.2 billion, up from $4.4 billion in the first nine months of 2008, but tumbled 67.3% compared to $49.6 billion earned during the same period in 2007, according to Jersey City, NJ-based ISO and the Property Casualty Insurers Association of America (PCI). Net underwriting losses dropped to $3.2 billion, down from $19.8 billion in 2008, driven by a $26.5 billion drop in claims costs, and the combined ratio improved to 100.7% compared to 105.5% a year ago. Despite the negative 49.6% annualized return rate posted by mortgage and financial guaranty insurers, property-casualty insurers achieved an overall annualized return rate of 4.5%, up from a 1.2% annualized return rate a year ago, but almost half the average annualized return rate of 8.9% achieved during the past 24 years. Commenting on the industry’s performance, PCI President and CEO David Sampson said, “Property-casualty insurance failures remain extremely rare events, but, year-to-date through December 19, regulators had seized 140 banks. Insurers’ superior performance reflects the strength of their balance sheets. Combining insurers’ $490.8 billion in policyholders’ surplus at September 30, 2009, with their $552.4 billion in loss and loss adjustment expense reserves and their $204.7 billion in unearned premium reserves, insurers had more than $1.2 trillion in funds available to fulfill their promises to consumers.”

GREAT AMERICAN FINANCIAL SETTLES ANNUITY ISSUES WITH MINNESOTA AG

Cincinnati-based Great American Life, Annuity Investors Life and Loyal American Life, subsidiaries of Great American Financial Resources (GAFRI), have reached a settlement with the Minnesota Attorney General regarding annuity sales to the state’s senior citizens. The GARFI subsidiaries have agreed to notify all their Minnesota customers who were 65 and older when they purchased deferred annuities between January 1, 2001, and August 1, 2008, that they may submit a claim for a penalty-free refund of their premiums. If it is determined that the annuity sold to a customer was unsuitable or based on misrepresentations, the annuity providers will both refund the premiums without penalty and pay 4.15% annually compounded interest on the premiums paid. In addition, the GAFRI subsidiaries have agreed to enhance their suitability requirements for annuity sales to seniors, determining whether the senior has sufficient liquid assets and income to pay for living expenses and emergencies. Minnesota Attorney General Lori Swanson estimates that refund claims could be submitted for 2,000 policies worth a combined $50 million. Swanson said, “Many senior citizens face economic difficulty in this troubled economy, and this settlement provides a vehicle for them to obtain funds.” GAFRI Chief Operating Officer Charles R. Scheper said, “We have engaged in comprehensive and good faith efforts to reach out to our annuity contract owners and respond to any issues or concerns they had with their product or sales process … and we are willing to continue to work with [the Attorney General’s] office to address any issues that have yet to be brought to our attention.”

NORTHEAST BANK INSURANCE GROUP SELLS RUMFORD, ME-BASED AGENCY

Berwick, ME-based Northeast Bank Insurance Group (NBIG), a unit of Lewiston, ME-based, $604 million-asset Northeast Bancorp, has sold Rumford, ME-based Mexico Agency to Falmouth, ME-based United Insurance. The acquired agency will merge into United Insurance’s Rumford office, bringing with it about $900,000 in annual premiums and one long-time agent. The agency’s other two agents will remain with NBIG and work from NBIG’s offices in Bethel and Livermore, ME. Northeast Bank President and CEO Jim Delamater said, “Our goal is to continue to grow our insurance line of business, though we regularly review market opportunities as well as our ‘bricks and mortar’ strategy to ensure we are maximizing our capital and resources.”

MARSH & MCLENNAN AGENCY EXPANDS REACH WITH NIA GROUP ACQUISITION

New York City-based March & McLennan Agency, a Marsh & McLennan Companies’ subsidiary focused on serving the insurance needs of mid-sized businesses, has acquired Paramus, NJ-based The NIA Group (NIA) and its New York City office, Kornreich-NIA (K-NIA). NIA’s 400 employees generate about $62 million in annual revenue offering property and casualty insurance, employee benefits, personal insurance and life insurance/estate planning from offices in New Jersey, New York, Connecticut and Florida. Marsh & McLennan Agency Chairman and CEO David Eslick said, “The addition of The NIA Group and Kornreich-NIA to our firm gives us a strong operation in the New York City metropolitan area and Florida.” The acquisition fits with Marsh & McLennan Agency’s plan to acquire similar agencies focused on mid-sized companies across the country.

INVEST Names Dowden CEO

INVEST Financial Corporation (Tampa, FL) announced that it has named Steve Dowden president and chief executive officer. Dowden succeeds Lynn Niedermeier, who retired in July after serving as the firm’s president and CEO since 2001.
Dowden, 48, joins INVEST from CUNA Mutual Group, an investment and insurance company serving the credit union industry. As senior vice president of distribution and president and CEO of CUNA Brokerage Services, Inc., he led a sales force of 550 advisers and was responsible for all sales within CUNA’s Asset Accumulation division.
Prior to joining CUNA, Mr. Dowden served as president of the investment and insurance program at IBM Mid America Federal Employee Credit Union. (October 12, 2009)

Lynn Niedermeier Retires as CEO of INVEST Financial

INVEST Financial Corporation today announced that Lynn Niedermeier has decided to retire and will resign her position as president and CEO of the firm.
Ms. Niedermeier has served as INVEST’s president and CEO since 2001. “I am fortunate to have worked with a talented group of individuals who shared my vision for INVEST and helped build an innovative company that is a leader in the industry,” said Niedermeier. “My decision to retire was a difficult one to make, but I feel it is necessary to focus my energy on certain personal issues at this time. NPH and Jackson have always been thoroughly supportive of me, my management team and the firm’s independent culture. I am leaving the company and our reps in extremely capable hands, and I am confident that INVEST will continue to thrive.”
Jim Livingston, president of the National Planning Holdings, Inc. (NPH) broker-dealer network, which includes INVEST Financial, will assume Ms. Niedermeier’s responsibilities on an interim basis. (July 6, 2009)

J.J. Hudock Joins ICA’s New Business Development Team

Investment Centers of America, Inc. (ICA) today announced (August 20) that J.J. Hudock has joined the firm as vice president of new business development. In this role, Mr. Hudock is responsible for marketing ICA’s business capabilities to independent offices and financial institutions. He is based in Charlotte, N.C.
Mr. Hudock joins ICA from UVEST Financial Services, where he served as vice president of business development since 2002. His 13 years of experience in the industry also includes positions in insurance sales management and mortgage lending. Mr. Hudock is a graduate of George Washington University and holds FINRA Series 6 and 63 registrations, as well as life and health insurance licenses.
“J.J. brings a wealth of industry experience and a proven track record of building mutually beneficial relationships across multiple markets to our senior management team,” said Greg Gunderson, president and CEO of Investment Centers of America (Bismarck, ND). “He understands and embraces ICA’s philosophy, which is to help our representatives provide the best possible service to their clients. J.J. will play a key role in positioning ICA as a valuable business partner for independent advisers, banks and credit unions.” (August 20, 2009)

Bank Insurance Brokerage Second-Quarter Income Drops Nearly 7%

Bank holding company 2009 second-quarter insurance brokerage income fell 6.5 percent to $3.02 billion compared to 2008 second-quarter income of $3.23 billion, according to a consulting firm.
A Michael White-Prudential Bank Insurance Fee Income Report noted that the 2009 second-quarter income is essentially flat from the 2009 first-quarter income of $3.03 billion.
For the first half of 2009, BHC insurance brokerage income fell 6 percent to $6.05 billion compared to the record 2008 first-half income of $6.44 billion. A decline in insurance brokerage income for a handful of companies was responsible for the drop, the report said.
According to the report, 62.1 percent of large top-tier BHCs engaged in insurance brokerage activities in the first half of 2009.
Among the top-12 listed bank institutions, Calif.-based Wells Fargo & Company led the way with respect to first-half year-to-date income at $995,000, up nearly 7 percent from its 2008 first-half income of $931,000.

SENATE BILL THREATENS GRAMM-LEACH-BLILEY

U.S. Senators Maria Cantwell (D-WA) and John McCain (R-AZ) introduced a bill into the Senate on December 16, 2009, that would basically repeal the Gramm-Leach-Bliley Act of 1999 and reinstate the Glass-Steagall Act of 1933. Senate bill 2886, aka the “Banking Integrity Act,” would prohibit commercial banks from engaging in insurance activities and disallow affiliations between commercial banks and investment banks. Banks engaged in these activities or relationships would be forced to divest themselves of the disallowed operations within one year after the passage of the bill.

Austin-Round Rock, Texas, Most Secure Large Metro Area

The central Texas area of Austin-Round Rock is the most secure U.S. community among large metropolitan areas (population of 500,000 or greater) in which to live, ccording to the sixth annual Most Secure U.S. Places to Live rankings from Farmers Insurance Group of Companies.
The Fargo, N.D.-Moorhead, Minn., area is the most secure mid-size U.S. city (population between 150,000 and 500,000), while the Lewiston, Idaho-Clarkston, Wash., area ranks as the most secure small town (population less than 150,000).
The rankings, compiled by database experts at www.bestplaces.net, took into consideration crime statistics, extreme weather, risk of natural disasters, housing depreciation, foreclosures, air quality, terrorist threats, environmental hazards, life expectancy and job loss numbers in 379 U.S. municipalities. The study divided the communities into three groups: large metropolitan areas, mid-size cities and small towns.
"In today's fast-paced world, citizens look for a strong local government to make their communities secure, and especially desirable for individuals and families to live, work and grow," said Robert Woudstra, Farmers CEO.
The Austin-Round Rock area, which was 15th among large metropolitan areas in the 2008 Farmers study, is a center for technology and business and is attracting more and more pharmaceutical and biotechnology companies. Such Fortune 500 companies as Dell Inc., Whole Foods Market and Freescale Semiconductor are headquartered there, with Austin serving as the state capital and home to the University of Texas. A high job growth rate and minimal housing depreciation contributed to its top rating in the study.
The Fargo-Moorhead area, ranked 14th among mid-size cities in 2008 and sixth in 2007, is a hub for healthcare, manufacturing and higher education. The area is home to three universities and several smaller, private colleges. Its No. 1 ranking in the 2009 Farmers study is largely due to a low unemployment rate, few violent crimes, minimal housing depreciation, high air quality and a long life expectancy among residents.
The Lewiston-Clarkston area, with a population of just under 59,000, jumped from sixth place among small towns in the 2008 study to the top spot in 2009. The area's access to the Pacific Ocean through a network of river, rail and highway transportation facilities provides an excellent business climate for what is regarded as the most inland seaport in the Western United States. It scored high in the study due to excellent job growth, low crime and minimal housing depreciation.
Following are the Farmers Insurance Group's Most Secure U.S. Places to Live for 2009:
Large Metro Areas (500,000 or more residents)
1. Austin-Round Rock, Texas2. Des Moines-West Des Moines, Iowa3. Madison, Wis.4. Bethesda-Gaithersburg-Frederick, Md.5. Rochester, N.Y.6. Honolulu, Hawaii7. Syracuse, N.Y.8. El Paso, Texas9. Portland-South Portland-Biddeford, Maine10. Nassau-Suffolk Counties, N.Y.11. Minneapolis-St. Paul-Bloomington, Minn.12. McAllen-Edinburg-Mission, Texas13. Portland-Beaverton, Ore.-Vancouver, Wash.14. New Haven-Milford, Conn.15. Bridgeport-Stamford-Norwalk, Conn.16. Pittsburgh, Pa.17. Seattle-Bellevue-Everett, Wash.18. Colorado Springs, Colo.19. Denver, Colo.20. Scranton-Wilkes-Barre, Pa.
Mid-Size Cities (150,000 - 500,000 residents)1. Fargo, N.D.-Moorhead, Minn.2. Olympia, Wash.3. Sioux Falls, S.D.4. Bellingham, Wash.5. Rochester, Minn.6. Kennewick-Richland-Pasco, Wash.7. Lynchburg, Va.8. St. Cloud, Minn.9. Duluth, Minn.-Superior, Wis.10. Las Cruces, N.M.11. Bremerton-Silverdale, Wash.12. Killeen-Temple, Texas13. Charlottesville, Va.14. Provo-Orem, Utah15. Fayetteville-Springdale-Rogers, Ark.16. Green Bay, Wis.17. Fort Collins-Loveland, Colo.18. Boulder, Colo.19. Yakima, Wash.20. Yuma, Ariz.
Small Towns (Fewer than 150,000 residents)1. Lewiston, Idaho-Clarkston, Wash.2. State College, Pa.3. Bismarck, N.D.4. Logan, Utah5. Ithaca, N.Y.6. Wenatchee, Wash.7. Corvallis, Ore.8. Morgantown, W.Va.9. Eau Claire, Wis.10. Rapid City, S.D.11. Midland, Tex.12. Sioux City, Iowa13. Harrisonburg, Va.14. Billings, Mont.15. Grand Forks, N.D.-Crookston, Minn.16. Grand Junction, Colo.17. Blacksburg-Christiansburg-Radford, Va.18. Wausau, Wis.19. Mount Vernon-Anacortes, Wash.20. La Crosse, Wis.-Winona, Minn.

Judge Rules for Lloyd's In Dispute Over Stanford's Insurance

A federal judge in Houston found accused swindler Allen Stanford and his attorneys in contempt of a court order Wednesday over their attempts to collect insurance policy proceeds to pay defense costs.
No sanctions were imposed, according to the judge's order.
U.S. District Judge David Godbey in Dallas, who oversees the civil fraud case, granted the motion filed by insurer Lloyd's of London, which issued Stanford's directors and officers policy.
The defendants and Lloyd's are battling over the payment of defense fees in federal courts in both Dallas and Houston.
Kent Schaffer, Stanford's lawyer, could not immediately be reached for comment.
In November, the insurer said it was denying payment of defense costs after Aug. 27, the day Stanford's former chief financial officer, James Davis, pleaded guilty to fraud.
Lloyd's, which has so far advanced a total of $4.2 million in legal fees to Stanford defendants, declined to provide additional coverage because claims resulting from money laundering are excluded under the policy, according to court records.
U.S. District Judge David Hittner, who presides over the criminal case, is expected to take up the defense fee issue at a hearing Thursday.
Stanford, 59, is accused of leading a Ponzi scheme centered on certificates of deposit issued by his Stanford International Bank Ltd, his offshore bank in Antigua.
The former billionaire has been in jail since his arrest on criminal charges in June. He has denied any wrongdoing.
The civil case is SEC v Stanford International Bank et al, U.S. District Court, Northern District of Texas, No. 3:09-cv-00298-N. The criminal case is USA v. Stanford et al, U.S. District Court, Southern District of Texas, No. 4:09-cr-00342.
(Reporting by Anna Driver; Editing by Richard Chang)

HOYER: REPEAL MAYBE A MISTAKE

Neither the House reform bill, nor legislation being debated in the Senate, would reinstate Glass-Steagall.
But House Democratic Leader Steny Hoyer told reporters Tuesday at his weekly news conference that such a move was ''certainly under discussion ... As someone who voted to repeal Glass-Steagall, maybe that was a mistake.''
The 1933 Glass-Steagall laws were adopted at the same time the Federal Deposit Insurance Corp was set up. Both reforms came in the Great Depression, when thousands of banks collapsed, wiping out the savings of millions of Americans.
Glass-Steagall was largely repealed in 1999 under the Gramm-Leach-Bliley Act during the Clinton administration amid lobbying pressure from bankers, including those keen to merge the financial firms that later came to comprise Citigroup.
Today, supporters of stronger regulation of Wall Street and the banks say it is no coincidence that America has suffered a series of financial crises since deregulators gained the upper hand politically in Washington in the 1980s.
"The repeal of Glass-Steagall has exposed the U.S. economy to a level of risk that is simply unacceptable,'' Hinchey said
"Congress ignored history in 1999 when it repealed the Glass-Steagall Act and the American people have been forced to pay the price while bailing out these mega-banks, which should have never existed in the first place,'' he said.
Opponents dispute this and say restoring Glass-Steagall might not have prevented last year's crisis or others.
Citigroup, JPMorgan Chase and Morgan Stanley declined to comment. No immediate comment was available from Goldman Sachs and Wells Fargo.
(Additional reporting by Juan Lagorio and Jonathan Spicer in New York; Editing by Dan Grebler)

Congress Weighs Restoring Wall Between Banking, Insurance

Financial giants such as Goldman Sachs Group could be broken up under two bills introduced in the U.S. Congress Wednesday, one with the backing of former Republican presidential nominee John McCain.
Both would reinstate the 1930s-era Glass-Steagall laws that barred large banks from affiliating with securities firms and engaging in the insurance business. Those limits were largely repealed in 1999, a high-water mark for deregulation.
"It is time to put a stop to the taxpayer financed excesses of Wall Street ... This country would be better served if we limit the activities of these financial institutions,'' McCain said in a statement with Democratic Senator Maria Cantwell.
Passage of the Cantwell-McCain bill would force firms at the center of last year's financial crisis -- such as Goldman, Morgan Stanley, Citigroup, JPMorgan Chase and Wells Fargo -- to spin off investment and insurance operations, said Demos, a progressive think tank in New York.
A similar measure was offered Wednesday by six House Democrats, including Representatives Maurice Hinchey, Peter DeFazio, Jay Inslee and John Tierney.
The bills come as Congress debates a sweeping overhaul of financial regulation more than a year after a severe banking and capital markets crisis rocked economies worldwide.
"Restoring Glass-Steagall may have populist appeal, but it is hard to see how one finds 60 votes for it'' to win passage in the Senate, said financial services policy analyst Jaret Seiberg, at investment firm Concept Capital.
"This will be painted as a jobs killer, especially for New York. Plus, conservatives in both parties will balk at having the government forcibly break up private companies,'' he said.
The House approved a regulatory reform bill last Friday that would empower a new systemic risk regulator to order the break-up of risky financial firms in extreme circumstances.

Third Quarter 2009

In an effort to streamline the financial reporting process and provide the Board with more timely and meaningful financial information, the finance team consolidated and redesigned most of the financial reports being forwarded to the Board. Specifically, in the past, the Board received three separate quarterly reports, often at different intervals:
Investment Portfolios Status Report — investment activities and results for the DIF and the National Liquidation Fund;
Financial Analysis Report (FAR) — financial statements for the DIF and FRF; and
Budget Variance Report — year-to-date budgeted vs. actual results, broken out both by major categories of expenditures as well as by divisions and offices. While these reports provided a good deal of useful information, there was no attempt to integrate this information and provide it at a more summary level. By doing so, we believe that the Board will have a better sense of what our overall financial results imply about our performance as a financial steward. As a result, we believe that the attached consolidated financial report will be much more useful to the Board in that regard and we welcome your comments on what we view as a work-in-progress.
Printable version - Third Quarter 2009 CFO Report to the Board - PDF 165k (PDF Help)

Bank Brokerage Index Advances 5 Percent in 3rd Quarter

The Index is an average based on quarterly brokerage revenues at 20 operating banks (see table above) with established retail investments programs. It sets 2007 1st quarter as a baseline (100). The index rose from 98 in the second quarter of 2009 to 103 in the third quarter of 2009. Aggregate brokerage revenue of the 20 banks covered increased 9 percent—from $156.56 million to $173.17 million. Fourteen of the 20 banks in the Index improved their brokerage performance in the 3rd quarter.
Big gains were notched by Compass Bank (up 46 percent), First National Bank of Omaha (up 26 percent), KeyBank (up 23 percent), and Branch Banking & Trust (up 18 percent).
“Aggregate securities revenue increased 13 percent in the quarter, following a gain of 13 in the previous quarter,” said Heywood Sloane, Managing Director of the Bank Insurance and Securities Association. “Annuity revenues increased 9 percent.”
Brokerage revenues are comprised of two groups: annuities (“fees and commissions from sales of annuities”) and securities (“fees and commissions from securities brokerage activities”) as reported to the FDIC. (December 3, 2009)

BANK OF AMERICA EXITS TARP

Charlotte, NC-based, $2.39 trillion-asset Bank of America Corp. (B of A) sent the U.S. Treasury $45 billion last week to repurchase all shares the government had acquired under the Troubled Asset Relief Program (TARP). B of A President and CEO Ken Lewis said of the December 9, 2009 repurchase, “Now that we have cleared this significant hurdle, which demonstrates the strength of our company, we look forward to continuing to play a key role in the economic recovery and helping to meet the challenging needs of our customers and clients.”

WELLS FARGO ACQUIRES TWO MORE AGENCIES

Chicago-based Wells Fargo Insurance Services (WFIS), a unit of San Francisco-based, $1.2 trillion-asset Wells Fargo & Co., has acquired Tampa, FL-based commercial insurance agency iLeader Risk Management Solutions and Mercer Island, WA-based employee benefits agency Orca Bay Benefits. Both agencies will merge into WFIS, which operates 200 offices in 37 states. WFIS President and CEO Neal Aton said, “We will continue this deliberate strategy to seek acquisition opportunities that bring meaningful value to customers and deepen Wells Fargo’s nationwide commitment to insurance brokerage.” In 2008, Wells Fargo & Co. reported $1.6 billion in insurance brokerage income, which comprised 9.8% of its noninterest income. The company ranked first in insurance brokerage earnings among all U.S. bank holding companies (BHCs) engaged in significant banking activities, according to the Michael White-Prudential Bank Insurance Fee Income Report. (These figures do not include results of Wachovia Corporation, which Wells Fargo bought on December 31, 2008, because neither Wachovia nor Wells Fargo filed income statement figures for Wachovia for year-end 2008.)

INSURANCE AT PEOPLES BANCORP (OH) COMPRISES OVER 28% OF NONINTEREST INCOME

Marietta, OH-based, $2 billion-asset Peoples Bancorp reported third-quarter lower property and casualty insurance commissions impacted third quarter insurance brokerage fee income, which decreased 8.6% to $2.23 million, down from $2.44 million in third quarter 2008, but remained the second highest contributor to noninterest income behind deposit and account service charges, comprising 28.3% of noninterest income. Trust and investment income declined 6.3% to $1.19 million, down from $1.27 million to comprise 15.1% of noninterest income, and income from bank-owned life insurance (BOLI) fell 35.0% to $254,000, down from $391,000, to comprise 3.2% of noninterest earnings. Noninterest income, reflecting declines in all sources of noninterest earnings except mortgage banking, slid 3.3% to $7.89 million, down from $8.16 million a year ago. Net interest income on a 3.45% net interest margin fell 38.4% to $5.3 million, down from $8.61 million, as loan loss provisions climbed by $4.17 million to $10.17 million. With an additional $5.93 million in other than temporary impairment losses on investment securities, Peoples reported a third quarter net loss of $4.6 million compared to net income of $3 million a year ago. Peoples Bancorp President and CEO Mark Bradley said, “Our third quarter results were impacted by losses caused by combined weakness in commercial real estate values and the general economy.” In 2008, Peoples Bancorp reported $9.9 million in insurance brokerage income, which comprised 30.1% of its noninterest income. The company ranked 18th in insurance brokerage earnings among U.S. bank holding companies with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

FIRST DEFIANCE REPORTS DECLINE IN INSURANCE & INVESTMENT SALES COMMISSIONS

Defiance, OH-based, $2.02 billion-asset First Defiance Financial Corp. reported third-quarter insurance and investment sales commissions slipped 4.2% to $1.13 million, down from $1.18 million in third quarter 2008. Income from bank-owned life insurance (BOLI) dipped 1.03% to $201,000, down from $224,000, and trust income declined 11.4% to $101,000, down from $114,000. Insurance and investment sales commissions, BOLI and trust income comprised respectively, 20.3%, 3.6% and 1.8% of noninterest income, which grew 34.3% to $5.56 million, up from $4.14 million a year ago. Net interest income on a 3.88% net interest margin fell 16.9% to $9.52 million, down from $11.46 million, as loan loss provisions climbed by $3.04 million to $8.05 million. But, net income inched ahead 2.2% to $329,000, up from $322,000 a year ago. First Defiance Chairman, President and CEO William Small said, “The impact of the economic environment continues to be reflected in our results for the third quarter. In light of the continued environment of unemployment, as well as the continued uncertainty of the commercial real estate market, we believe it is prudent to build general reserves.”

INSURANCE, BOLI, TRUST & INVESTMENT MANAGEMENT FEES COMPRISE 21% OF NONINTEREST INCOME AT CITY HOLDING

Charleston, WV-based, $2.6 billion-asset City Holding Company reported new business pushed third quarter insurance commissions up 17.5% to $1.21 million, from $1.03 million in third quarter 2008. Bank-owned life insurance (BOLI) income rose 3.5% to $794,000, up from $767,000. In contrast, trust and investment management fee income fell 7.8% to $590,000, down from $640,000. Insurance brokerage commissions, BOLI income and trust and investment management fees comprised, respectively, 9.8%, 6.4% and 4.8% of $12.34 million in noninterest fee income, which a year ago showed a $12.76 million net loss tied to $27.5 million in securities losses. Net interest income on a 4.09% net interest margin decreased 8.1% to $21.98 million, down from $23.93 million, despite a $675,000 reduction in loan losses to $1.675 million. In contrast to a net loss of $2.6 million a year ago, City Holding reported $10.5 million in third quarter net income. City Holding CEO Charles Hageboeck said, “City continues to be one of the most profitable, most liquid and best capitalized publicly traded banks in the U.S., and we look forward to growing with and for our shareholders and customers.” In 2008, City Holding reported $4.2 million in insurance brokerage income, which comprised 7.1% of its noninterest income. The company ranked 41st in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INCREASED INSURANCE INCOME AT TOMPKINS FINANCIAL OFFSETS DECLINE IN INVESTMENT SERVICES

Ithaca, NY-based, $3.1 billion-asset Tompkins Financial Corp. reported third-quarter insurance brokerage fee income rose 4.9% to $3.2 million, up from $3.05 million in third quarter 2008, enough to “partially offset declining trends in investment services fees and service charges on deposit accounts, both of which have been impacted by the current weak economic climate,” the company said. Investment services income decreased 5.7% to $3.29 million, down from $3.49 million, and comprised 28.4% of noninterest income, which rose 1.8% to $11.6 million, up from $11.4 million, with insurance earnings comprising 27.6% of that revenue. Net interest income grew 9.5% to $24.65 million, up from $22.52 million, as loan loss provisions increased by $612,000 to $2.127 million, and net income rose 6.6% to $8.5 million, up from $7.9 million a year ago. Tompkins Financial President and CEO Stephen Romaine said, “It is especially rewarding to report on such positive results in today’s difficult economic environment. In addition to our record quarterly earnings, we continue to see solid business growth trends.” In 2008, Tompkins Financial reported $11.6 million in insurance brokerage income, which comprised 25.5% of its noninterest income. The company ranked 15th in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

RENASANT CORP. REPORTS RISING INSURANCE SALES

Tupelo, MS-based, $3.64 billion-asset Renasant Corporation reported insurance commissions and fees in the third quarter rose 3.2% to $949,000, up from $920,000 in third quarter 2008, while trust revenue fell 16.1% to $501,000, down from $597,000. Insurance earnings and trust revenue comprised, respectively, 6.8% and 3.6% of noninterest income, which rose 2.3% to $13.95 million, up from $13.64 million. Net interest income on a 3.22% net interest margin dropped 28.5% to $17.84 million, down from $24.94 million, as provisions for loan losses more than doubled, jumping by $4.35 million to $7.35 million, impacting net income, which dropped 44.0% to $4.23 million, down from $7.56 million a year ago. Renasant Chairman and CEO E. Robinson McGraw said, “Based on our concerns with the economy and our volume of past due loans, we continued to increase our allowance for loan losses. This is consistent with our historical practice of providing for losses in our loan portfolio as we identify potential weaknesses.” In 2008, Renasant Corporation reported $3.9 million in insurance brokerage income, which comprised 7.4% of its noninterest income. The company ranked 43rd in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE & SECURITIES BROKERAGE DOWN AT HEARTLAND FINANCIAL

Dubuque, IA-based, $3.9 billion-asset Heartland Financial USA reported third-quarter brokerage and insurance commissions fell 12.5% to $824,000, down from $942,000 in third quarter 2008, while trust fees decreased 5.8% to $1.95 million, down from $2.07 million. Income from bank-owned life insurance (BOLI) reversed its $247,000 loss a year ago and generated $297,000 in earnings in the quarter. Trust fees, brokerage and insurance commissions, and BOLI earnings comprised, respectively, 6.9%, 16.4%, and 2.5% of noninterest income, which climbed 51.1% to $11.91 million, up from $7.88 million, helped by $1.21 million in securities gains and $998,000 tied to the company’s FDIC-sponsored acquisition of Elizabeth, IL-based The Elizabeth State Bank. Net interest income on a 4.06% net interest margin slipped 0.5% to $22.69 million, down from $22.81 million, as loan loss provisions increased by $4.8 million to $11.9 million. Net income grew 20.7% to $3.5 million, up from $2.9 million a year ago, and Heartland Chairman, President and CEO Lynn Fuller said, “Third quarter results reflect very solid core earnings, aided by an exceptional net interest margin of 4.06%.” In 2008, Heartland Financial USA reported $753,000 in insurance brokerage income and $2.35 million in securities brokerage income, which comprised, respectively, 2.5% and 8.1% of its noninterest income. The company ranked 88th in insurance brokerage earnings and 33rd in securities brokerage income among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INVESTOR GROUPS MANEUVER TO ACQUIRE AIG’S TAIWANESE LIFE INSURER & DEVELOP BANCASSURANCE BUSINESS

Hong Kong-based China Strategic Holdings (China Strategic) has agreed to sell a 30% stake in Hong Kong-based Nan Shan Life Insurance to Taipei, Taiwan-based Chinatrust Financial Holding Company (Chinatrust) for NT$21.2 billion ($656.9 million), and Chinatrust has agreed to sell a 9.95% stake in itself through a private placement to China Strategic. After three years, the companies agreed that Chinatrust may increase its stake in Nan Shan, and China Strategic may increase its stake in Chinatrust. Chinatrust said it agreed to the deals “for the development of the bancassurance business.” These deals and the deal to sell AIG subsidiary Nan Shan Life Insurance Co. to the Hong Kong-based consortium led by Primus Financial Holdings and China Strategic (consortium) are now on hold. Taiwan’s Ministry of Economic Affairs Investment Commission said the consortium must submit more documents, and Taiwan’s Financial Supervisory Commission said Nan Shan’s buyers must show consistency related to long-term commitments to the Taiwanese market, BestWire reports

JPMORGAN CHASE TO TOTALLY OWN J.P. MORGAN CAZENOVE

New York City-based, $2 trillion-asset JPMorgan Chase & Co. has agreed to acquire the 49.99% stake in London-based J.P. Morgan Cazenove that it does not already own. J.P. Morgan Cazenove’s executives will remain in their key positions and continue to operate under the J.P. Morgan Cazenove name as a unit of J.P. Morgan Investment Bank, adding J.P. Morgan’s Cash Equities and Research operations in Europe, the Middle East and Africa to the business. The stock and cash deal valued at £1 billion ($1.67 billion) is expected to close in early 2010, pending Cazenove shareholder approval. In 2008, Cazenove reported £48.5 million ($80.4 million) in net income, and in the first nine months of 2009 had already surpassed that income by 34.8%, earning £65.4 million ($108.4 million).

BANCORP BANK PARTNERS TO OFFER INSURCARD TO FRANKLIN MUTUAL CLAIMANTS

Wilmington, DE-based, $1.7 billion-asset The Bancorp Bank subsidiary The Bancorp Bank Payment Solutions Group is partnering with InsurCard, a subsidiary of Service Network Design, to provide Branchville, NJ-based Franklin Mutual Insurance with the InsurCard Visa Prepaid Card (InsurCard). The InsurCard enables claims adjusters to make initial claims valuations and load that dollar amount via phone or Internet to InsurCard. InsurCard then activates a card with that value, and the claims adjuster gives the insured the debit card on the spot. Franklin Mutual said, “InsurCard enables access to critical needs such as food, shelter, and emergency repairs. As the recovery process continues, the card can be reloaded.” The Bancorp Bank Senior Vice President John Barbella said, “We believe that prepaid cards will revolutionize the way insurers make payments as insurers look for ways to control payments and drive cost savings while providing enhanced customer care.”

FINRA FINES METLIFE BROKER UNITS

The Financial Industry Regulatory Authority (FINRA) has fined New York City-based MetLife Securities and its New York City-based affiliates New England Securities Corp., Walnut Street Securities and Tower Square Securities $1.2 million for failing to establish an adequate supervisory system to review brokers’ email correspondence with the public, and for failing to establish adequate supervisory procedures to monitor brokers’ outside business activities and private securities transactions. Because of these failures, FINRA said, one broker stole nearly $6 million from his customers through private securities transactions. FINRA Executive Vice President Susan Merrill said, “Relying on brokers to provide copies of their own emails for supervisors to review is hardly an effective means to detect such misconduct.”

NY LIFE REPORTS LIFE INSURANCE SALES UP 8%

New York City-based New York Life Insurance announced that sales of its permanent and term life insurance products drove the company’s total life insurance sales up 8% in the first nine months over year ago numbers to their highest levels on record for the period. New York Life Executive Vice President Mark Pfaff said, “Having the best year on record is strong evidence that consumers want the comfort of guarantees from financially strong insurers… Last year, when the stock market declined 37% and real estate plunged over 11%, the cash value of whole life insurance from New York Life increased in value, as it has over the past 155 years. Americans increasingly value and appreciate this safety, security and stability.”

FINANCIALLY SECURE AMERICANS CONSERVATIVE & MODERATE RISK TAKERS

Almost half (49%) of working Americans with at least $500,000 in investable assets describe themselves as tentative or reluctant to invest in the stock market, while 6% characterized themselves as enthusiastic about investing, according to a September survey conducted by PNC Wealth Management, a unit of Pittsburgh, PA-based PNC Financial Services Group. One-third (34%) say they are more conservative, and 59% describe themselves as balanced or moderate risk takers. PNC Wealth Management Vice President Thomas Melcher said, “The survey results validate the value of an integrated wealth management model – one that combines estate, financial and tax planning with investment management.”

FEDERAL AGENCIES ISSUE FINAL MODEL PRIVACY NOTICE FORM

The Federal Deposit Insurance Corporation (FDIC) Board, the Board of Governors of the Federal Reserve System, the Commodity Futures Trading Commission, the Federal Trade Commission, the National Credit Union Administration, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, and the U.S. Securities and Exchange Commission have issued their jointly developed Final Model Privacy Notice Form (model form). The model form is designed to enable financial institutions to succinctly, comprehensibly and in an easy-to-read font notify consumers of their information-sharing practices. Institutions that use the model form will obtain a “safe harbor” and satisfy disclosure requirements. To access the Final Model Privacy Notice Form, click here.

LABOR DEPT. DROPS RULE ALLOWING DIRECT INVESTMENT ADVICE TO DEFINED CONTRIBUTION PENSION PLAN PARTICIPANTS

The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) has withdrawn the January 21, 2009 Final Rule under the Employee Retirement Income Security’s Act that implemented the Pension Protection Act exemption that would have allowed mutual fund company representatives to offer direct investment advice to defined contribution plan participants. The Final Rule was to have taken effect May 17, 2010. To read the notice withdrawing the Rule, click here.

OVERALL FIXED ANNUITY SALES DROP 21%

Third-quarter U.S. fixed annuity sales fell 21% to an estimated $21.9 billion, down from $27.7 billion in third quarter 2008 and second quarter 2009, according to Evanston, IL-based Beacon Research’s survey of fixed annuity providers. Book value products were the most popular fixed annuities sold, but their $9.9 billion in sales reflected a 30% drop from a year ago. In contrast, indexed annuity sales rose 6% to $7.3 billion to rank second. Market value adjusted (MVA) annuities ranked third but fell 37% to $2.7 billion, and fixed income annuities ranked fourth, declining 16% to $1.9 billion. Pacific Life was the number one issuer of book value annuities and the number one provider of fixed annuities to banks. Allianz led in indexed annuities; ING USA led in MVA sales, and New York Life continued to dominate in fixed income annuity sales, Beacon Research’s Fixed Annuity Premium Study shows. For more on the report, click.

NOVEMBER 23 - 29, 2009

U.S. indexed annuity sales in the third quarter grew 11.3% to $7.5 billion, up from $6.7 billion in third quarter 2008, with bank sales tripling to comprise 12.3% of all indexed annuity sales, according to AnnuitySpecs.com’s Advantage Index Sales and Market Report. Among carriers “some companies’ sales are up more than 75%, and others’ sales are down almost 60%,” AnnuitySpecs.com President and CEO Sheryl Moore said. Minnesota, MN-based Allianz Life ranked as the number one indexed annuity provider, followed by West Des Moines, IA-based American Equity, Radnor, PA-based Lincoln National, Lansing, MI-based Jackson National, and Des Moines, IA-based Aviva.

INSURANCE LARGEST CONTRIBUTOR TO NONINTEREST INCOME AT SHORE BANCSHARES

Easton, MD-based, $1.16 billion-asset Shore Bancshares reported third-quarter insurance brokerage fee income slipped 3.6% to $2.74 million, down from $2.85 million in third quarter 2008, and, as the largest contributor to noninterest income, comprised 58.1% of that revenue, which decreased 10% to $4.72 million, down from $5.25 million, as all other sources of noninterest income also declined. Net interest income on a 3.79% net interest margin dipped 3.4% to $8.73 million, down from $9.03 million a year ago, as loan loss provisions jumped 95% to $1.7 million, and net income dropped 37.1% to $1.95 million, down from $3.1 million a year ago, as the company repurchased stock sold to the U.S. Treasury under the Troubled Asset Relief Program (TARP). Shore Bancshares President and CEO W. Moorhead Vermilye said, “We have been diligently moving problem loans through the resolution pipeline and expect to continue focusing resources on this area to maintain our traditional high-quality conservative balance sheet.” In 2008, Shore Bancshares reported $12.1 million in insurance brokerage income, which comprised 58.3% of its noninterest income. The company ranked 14th in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE BROKERAGE EARNINGS COMPRISE 96% OF NONINTEREST INCOME AT VIST

Wyomissing, Pa-based, $1.28 billion-asset VIST Financial reported insurance brokerage fee income in the third quarter rose 6.8% to $3.26 million, up from $3.05 million in third quarter 2008, bolstered by the September 2008 acquisition of Fisher Benefits Consulting. In contrast, brokerage and investment advisory fee income fell 40% to $112,000, down from $186,000, and bank-owned life insurance (BOLI) dropped over 44% to $95,000, down from $171,000. Insurance, investment advisory and BOLI income comprised respectively, 95.9%, 3.3% and 2.8% of noninterest income of $3.4 million compared to a noninterest loss of $2.04 million a year ago, when the company took $7.09 million in impairment losses, compared to $2 million in impairment losses in third quarter 2009. Net interest income on a 3.24% net interest margin fell 10.7% to $7.64 million, down from $8.56 million, as loan loss provisions increased by $875,000 to $1.04 million. The company reported net income of $528,000, compared to a net loss of $4.61 million in third quarter 2008. VIST Financial President and CEO Robert Davis said, “Positive results continue to be significantly offset by additional credit provisioning and non-cash other-than-temporarily-impaired charges.” Increased non-performing loans are tied to two commercial construction and development projects, the company said. VIST announced it will be amending its 2008 through third quarter 2009 filings “to revise the fair value on certain Junior Subordinated Debentures and cash flow hedges related to those debentures.” Davis said all third-quarter balance sheet items reported remain unchanged. In 2008, VIST Financial reported $11.3 million in insurance brokerage income, which comprised 61.4% of its noninterest income. The company ranked 16th in insurance brokerage earnings among U.S. bank holding companies (BHCs) with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE “CORE REVENUE STREAM” AT FIRST M & F

Kosciusko, MS-based, $1.68 billion-asset First M & F Corporation reported insurance brokerage commissions in the third quarter slid 4.9% to $1.097 million, down from $1.153 million in third quarter 2008, but “remain strong” and a part of the company’s “core revenue stream,” First M & F Chairman and CEO Hugh Potts said. Insurance income was the second largest contributor to noninterest earnings, behind service charges on deposits, comprising 20.4% of that revenue, which slid 2.5% to $5.38 million, up from $5.52 million, helped by $441,000 in securities gains. Fiduciary and brokerage fee income rose 2.6% to $120,000, up from $117,000, to comprise 2.2% of noninterest income. Net interest income on a 3.40% net interest margin dropped 30.8% to $7.49 million, down from $10.83 million, as loan loss provisions more than doubled to $4.81 million, and the company reported a net loss of $580,000 compared to net income of $2.21 million in third quarter 2008. Chairman Potts said, “As we look ahead, we believe the recession is coming to an end, [but] the lagging clean up will extend to 2010. in looking at First M & F there are some trends which are improving, some trends are relatively stable, and some trends are still bothersome and troubling.” In 2008, First M & F Corp reported $4.04 million in insurance brokerage income, which comprised 20.7% of its noninterest income. The company ranked 42nd in insurance brokerage earnings among U.S. bank holding companies with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.