U.S. DISTRICT JUDGE GRANTS CLASS ACTION STATUS IN SUIT AGAINST WELLS FARGO & QBE OVER FORCE-PLACED INSURANCE

Judge Robert Scola of the U.S. District Court for the Southern District of Florida has ruled that Florida homeowners who were charged premiums for force-placed property insurance coverage underwritten by Melbourne, Australia-based QBE on properties mortgaged through Wells Fargo & Co. qualify for class certification in a lawsuit brought against the two corporations. Plaintiffs Roy Williams, et. al. brought the suit alleging Wells Far-go and QBE “colluded in a scheme to artificially inflate the premi-ums charged to homeowners for force-placed insurance on prop-erty, after the homeowners’ self-placed policies had lapsed.” In their complaint, plaintiffs presented evidence that over 20,000 such policies were force-placed from 2009 through April 7, 2011. Additionally, QBE admitted in deposition that the force-placed premiums were not actuarily-based but reflected a 20% hike over property premiums charged by other insurers. In his opinion in favor of a class action suit going for-ward, Judge Scola wrote that the case concerns whether Wells Fargo and QBE secretly colluded in bad faith to develop a force-placed insurance policy scheme involv-ing excessive premiums, kickbacks and commissions that was “organized and implemented uniformly and across the board.” Scola concluded, “This case can proceed efficiently, moving from initial pleading stage to class certification, conducting significant discovery in a relatively short period of time.” Scola warned Wells Fargo not “to retaliate against any home-owner seeking to avoid the alleged excessive and inflated force-placed insurance premiums through litigation.” To read Judge Scola’s Order, click here.

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Michael White Associates is pleased to distribute BankInsurance.com News, a monthly publication that distills the most important news stories in the bank insurance and investment marketplace. Visit BankInsurance.com regularly for timely industry news and analysis, as well as up-to-date information about MWA consulting products and services. No other site offers as much information, knowledge and understanding of the bank insurance and investment market as www.BankInsurance.com.

Who U.S. Customers Say They Want To Buy More Products From

What Drove Investment Program Income Higher at Community Banks

What 1/3 of U.S. Adults Say They Fear Most About Retirement

SPECIAL BONUS ARTICLE:

Debt Protection and Credit Insurance Industry Trends

In This Issue:

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U.S. INSURANCE CUSTOMERS READY TO BUY

MORE PRODUCTS FROM A HANDS-ON &

TRUSTED PROVIDER Almost two-thirds (65%) of U.S. insurance customers say they are not at all likely or not very likely to change their insurer over the next five years, and 52% say they are interested in buying more than one prod-uct from the same provider, but only 11% have done so. At the same time, 43% of insurance customers say insurers do an insufficient job of rewarding loyalty, ac-cording to Ernst and Young’s Global Con-sumer Insurance Survey 2012. The vast majority (82%) of U.S. life in-surance and annuity customers believe it is important to personally interact with and receive expert advice from someone offering these products, but 44% of these customers use online comparison shop-ping to help them in their decision mak-ing. While life and annuity customers are most concerned about personal interac-tion at the point of sale, property and cas-ualty insurance purchasers say they are most interested in personal interaction when making a claim (82%), dealing with customer service issues (78%) and ex-tending coverages (71%), according to the survey. Customers aged 33 and younger (“Millennials”) say the financial stability of the insurance carrier is the number one factor they consider in making their deci-sion to buy a life/annuity product (48%) and property/casualty insurance (43%). In fact, Millennials say they are willing to pay higher premiums for a brand they trust, Ernst and Young found. For more on the 2012 survey, click here. To review another component of the sur-vey dealing with the Americas, click here.

0-45 AGE GROUP ACCOUNTS FOR OVER HALF

OF U.S. LIFE INSURANCE APPLICATIONS

Individuals aged 0-44 accounted for 54.2% of U.S. applications for individually underwritten life insurance in 2011; indi-viduals aged 45-59 accounted for 29.1%, and individuals aged 60 and older ac-counted for 16.7%, with applications among the last group growing at the high-est rate among all age sets, according to the MIB Life Index compiled by Braintree, MA-based MIB Group.

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CENTENARIAN AGENT WINS AXA ADVISORS’

HIGHEST AWARD AXA Advisors has named Centenarian Theodore Krause, CLU the winner of its 2011 National Honor Associate Award. AXA Advisors Vice Chairman Bucky Wright said, “Even at 100, Ted’s dedica-tion to his clients, the profession and his community is unwavering. AXA Advisors Divisional Executive Vice President David Karr added, “He takes pride in all he does and continues to serve his clients and his community everyday.” Krause and his 101 year-old wife Sarah reside together in Vineland, NJ, where Krause studies the Bible and swims six laps each day. Krause said, “I am grateful to have been surrounded by wonderful people personally and professionally.”

AGENCY ACQUISITION PAYS OFF AT

FIRST DEFIANCE Defiance, OH-based, $2.07 billion-asset First Defiance Financial Corp reported commissions tied to the July 2011 acqui-sition of Payak-Dubbs Insurance Agency (PDI) drove fourth quarter 2011 insur-ance and investment brokerage fee in-come up 50.8% to $1.96 million from $1.30 million in fourth quarter 2010. At the same time, trust income dipped 0.7% to $134,000, down from $135,000, and income from bank-owned life insurance (BOLI) slipped 1.3% to $226,000, down from $229,000. Combined insurance and investment brokerage earnings, trust and BOLI income comprised, respectively, 24.9%, 1.7%, and 2.9% of noninterest earnings, which rose 4.4% to $7.88 mil-lion, up from $7.55 million in fourth quar-ter 2010. Net interest income on a 3.83% net interest margin in fourth quarter 2011 grew 10.9% to $13.42 million, up from $12.10 million in fourth quarter 2010, driv-en by a $1.82 million cut in interest ex-pense and a $1.55 million drop in loan loss provisions to $4.10 million. Net in-come after dividends more than doubled to $3.52 million, up from $1.76 million in fourth quarter 2010. For year 2011, insurance and invest-ment brokerage fee income climbed 38.3% to $7.11 million, up from $5.14 million in 2010; and trust earnings grew 18.1% to $599,000, up from $507,000 in 2010; while BOLI income fell 19.2% to $929,000, down from $1.15 million.

Combined insurance and investment fee income, trust earnings and BOLI income comprised, respectively, 25.8%, 2.2% and 3.4% of noninterest income, which slipped 0.3% to $27.52 million, down from $27.59 million in 2010, when de-posit service fees were $1.35 million higher. Net interest income on a 3.86% net interest margin in 2011 climbed 22.3% to $57.45 million, up from $46.99 million in 2010, reflecting an $8.52 million cut in interest expenses and a $10.74 million drop in loan loss provisions to $12.43 million. Net income after dividends surged 121.8% to $13.51 million, up from $6.09 million in 2010. First Defiance Financial Chairman, President and CEO William Small said, “First Defiance continued to show im-provement in our core operating metrics in the fourth quarter and full year…. Non-interest income increased driven by insur-ance revenues and solid fee income, which are part of our core operating strat-egy. The insurance acquisitions in 2010 and 2011 have had an immediate positive impact.”

TRUST & INVESTMENT MANAGEMENT REVENUE

DOMINATES NONINTEREST INCOME AT S.Y. BANCORP

Louisville, KY-based, $2.05 billion-asset S.Y. Bancorp, parent of Stock Yards Bank & Trust Co., reported trust and in-vestment management (TIM) income in fourth quarter 2011 fell 11.3% to $3.30 million, down from $3.72 million in fourth quarter 2010; brokerage commissions and fees declined 7.1% to $606,000, down from $652,000, while income from bank-owned life insurance (BOLI) rose 2.0% to $258,000, up from $253,000. TIM, brokerage commissions and BOLI income comprised, respectively, 35.8%, 6.6% and 2.8% of noninterest earnings, which decreased 3.7% to $9.23 million, down from $9.58 million in fourth quarter 2010. Net interest income on a 3.91% net interest margin in fourth quarter 2011 benefited from an $846,000 cut in interest expense and a $595,000 drop in loan loss provisions to $3.10 million and in-creased 9.5% to $14.92 million, up from $13.63 million in fourth quarter 2010. Net

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income rose 4.8% to $6.34 million, up from $6.05 million in fourth quarter 2010. For year 2011, trust and investment management (TIM) income rose 4.4% to $13.84 million, up from $13.26 million in 2010; brokerage fee income rose 3.7% to $2.22 million, up from $2.14 million; and BOLI income rose 2.5% to $1.02 million, up from $995,000. TIM, brokerage and BOLI income comprised, respectively, 41.6%, 6.7% and 3.1% of noninterest income, which slipped 1.5% to $33.24 million, down from $33.74 million in 2010, when the company recorded $159,000 in gains on the sale of securities. Net interest income on a 3.99% net interest margin in 2011 rose 4.9% to $58.13 million, up from $55.41 million in 2010, despite a $1.13 million increase in loan loss provisions to $12.60 million, as interest expense was cut by $3.96 million, and interest revenue remained basically stable at $86.04 million compared to $86.15 million in 2010. Net income in-creased 2.8% to $23.60 million, up from $22.95 million in 2010. Looking ahead, S.Y. Bancorp Chairman and CEO David Heintzman said, “Our company is well-prositioned with attrac-tive geographic diversification and a strong line-up of banking and trust ser-vices…. Considering our company’s strong capital base, S.Y. Bancorp re-mains attractively positioned to take ad-vantage of acquisitions in an evolving banking environment, if and when pru-dent opportunities arise.” In 2010, S.Y. Bancorp’s securities bro-kerage income comprised 6.1% of its noninterest income. The company ranked 37th in securities brokerage income among bank holding companies with as-sets between $1 billion and $10 billion, according to the Michael White Bank Wealth Management Fee Income Report.

GROWING INSURANCE BROKERAGE & TRUST EARNINGS

COMPRISE 58% OF ARROW FINANCIAL’S

NONINTEREST INCOME Glens Falls, NY-based, $1.96 billion-asset Arrow Financial reported the Febru-ary and August 2011 acquisitions of two property and casualty insurance agencies drove fourth quarter 2011 insurance bro-kerage fee income up 153.0% to $2.10 million from $830,000 in fourth quarter 2010. At the same time, trust and invest-ment management (TIM) income grew 10.4% to $1.49 million, up from $1.35

million in fourth quarter 2010. Insurance brokerage and TIM income comprised, respectively, 33.9% and 24.0% of nonin-terest earnings, which climbed 30.8% to $6.20 million, up from $4.74 million in fourth quarter 2010. driven by growth in insurance brokerage income. Net interest income on a 3.25% net interest margin in fourth quarter 2011 slid 3.6% to $14.05 million, down from $14.57 million in fourth quarter 2010, reflecting a $2.30 million decrease in interest revenue and a $103,000 increase in loan loss provisions to $280,000, which were not overcome by a $1.88 million cut in inter-est expense. Net income, driven by in-creased noninterest income, especially insurance brokerage revenues, rose 4.6% to $5.43 million, up from $5.19 mil-lion in fourth quarter 2010. In year 2011, insurance brokerage income rose 2.2% to $8.03 million, up from $7.86 million in 2010, and TIM in-come grew 13.4% to $6.11 million, up from $5.39 million in 2010. Insurance brokerage and TIM income comprised, respectively, 26.8% and 20.4% of nonin-terest income, which jumped 56.8% to $29.93 million, up from $19.09 million in 2010. Net interest income in 2011 declined 3.8% to $57.72 million, down from $59.98 million in 2010, despite a $5.02 million cut in interest expense and a $457,000 drop in loan loss provisions to $845,000, as interest revenue fell by over $8 million. Net income, bolstered by “a substantial increase in our noninterest income for the fourth quarter, reflecting primarily our strong growth in insurance commissions and an increase in fee in-come from fiduciary activities [TIM]” ticked up 0.2% to $21.93 million, from $21.89 million in 2010, Arrow Chairman, President and CEO Thomas Hoy said. Hoy added, “We, like all banks, face challenges, particularly the threat to earnings posed by the Federal Reserve’s determination to maintain interest rates at historically low levels for an extended period of time.” In 2010, Arrow Financial’s insurance brokerage income comprised 17.0% of its noninterest income and 3.8% of its net operating revenue. The company ranked 51st in insurance brokerage earnings among BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE BROKERAGE & TRUST-RELATED REVENUES

ACCOUNT FOR 45% OF PEOPLES’ NONINTEREST EARNINGS

Marietta, OH-based, $1.96 billion-asset Peoples Bancorp reported insurance bro-kerage fee income in fourth quarter 2011 dipped 1.0% to $1.94 million, down from $1.96 million in fourth quarter 2010. In-come from bank-owned life insurance (BOLI) fell 32.7% to $76,000, down from $113,000, while trust and investment management (TIM) income rose 5.1% to $1.43 million, up from $1.36 million. Insur-ance, BOLI and TIM income comprised, respectively, 23.4%, 0.9% and 17.2% of noninterest income, which increased 2.3% to $8.29 million, up from $8.10 mil-lion in fourth quarter 2010. Net interest income on a 3.49% net interest margin in fourth quarter 2011 doubled to $14.26 million, up from $7.11 million in fourth quarter 2010, driven by a $1.63 million cut in interest expense and a $473,000 recovery in loan loss provi-sions, which contrasted with $8.00 million in provisions in fourth quarter 2010. Net income after dividends surged to $3.50 million and contrasted with net income of $55,000 in fourth quarter 2010, when net interest income was $7 million lower. For year 2011, insurance brokerage fee income increased 4.7% to $9.27 million, up from $8.85 million in 2010. TIM in-come rose 3.7% to $5.55 million, up from $5.35 million, while BOLI income dropped 42.3% to $351,000, down from $608,000. Insurance brokerage, TIM and BOLI earn-ings comprised, respectively, 28.1%, 16.8% and 1.1% of noninterest income, which rose 4.1% to $32.94 million, up from $31.63 million in 2010. Net interest income in 2011 jumped 39.4% to $45.98 million, up from $32.99 million in 2010, driven by an $18.92 mil-lion plunge in loan loss provisions to $8.00 million and an $8.28 million cut in interest expense, which more than made up for a $14.20 million drop in interest revenue. Net income more than tripled to $11.21 million from $3.53 million in 2010, when the company recorded a $3.63 mil-lion loss in debt extinguishments and $3.17 million in OREO losses. Peoples President and CEO Chuck Sulerzyski said he was please with the “meaningful improvement in earnings” and said, “As we move into 2012, we are focused on continuing the improvement in asset qual-ity, while at the same time intensifying our pursuit of profitable growth.” Toward that

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end, Peoples bought back its TARP (Troubled Assets Relief Program) shares in December 2011. In 2010, Peoples Bancorp’s insurance brokerage fee income comprised 31.2% of the company’s noninterest income and 10.0% of its net operating revenue. The company ranked 17th in insurance bro-kerage earnings among U.S. BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE BROKERAGE FEES TOP DEPOSIT SERVICE CHARGES

AT GERMAN AMERICAN Jasper, IN-based, $1.87 billion-asset Ger-man American Bancorp reported fourth quarter 2011 insurance brokerage fee income slipped 3.2% to $1.22 million, down from $1.26 million in fourth quarter 2010, but bested revenue from service charges on deposit accounts by $200,000, making insurance revenue the top fee contributor to the company’s non-interest earnings. Trust and investment management (TIM) income trailed insur-ance earnings, but climbed 30.4% to $584,000, up from $448,000. Bank-owned life insurance (BOLI) income grew 19.5% to $264,000, up from $221,000 in fourth quarter 2010. Insurance brokerage, TIM and BOLI earnings comprised, re-spectively, 18.4%, 8.8%, and 4.0% of noninterest income, which surged 60% to $6.64 million, up from $4.14 million in fourth quarter 2010, bolstered by $1.98 million in net gains on securities. For year 2011, insurance brokerage revenue remained the largest contributor to noninterest earnings, growing 9% to $5.82 million, up from $5.35 million in 2010. Additionally, both TIM and BOLI income climbed 36%, with TIM climbing to $2.15 million from $1.58 million and BOLI growing to $1.10 million from $806,000. Insurance brokerage, TIM and BOLI comprised, respectively, 27.0%, 10.0% and 5.1% of noninterest income, which grew 27% to $21.58 million, up from $16.94 million in 2010, helped by $3.02 million in net gains on securities sales. German American reported its fourth consecutive quarter and fourth consecu-tive year of record earnings, marked in 2011 by the January 1 acquisition of Ev-ansville, IN-based, $340.3 million-asset American Community Bancorp. Fourth quarter 2011 net income surged 77% to

this record level of performance over the course of the past four years during an extremely difficult economic period places German American among a very elite group of financial institutions nationwide.” In 2010, German American’s wealth management income comprised 9.3% of its noninterest income and 2.4% of net operating revenue. The company ranked 143rd in wealth management income

$5.57 million, up from $3.15 million in fourth quarter 2010, and year 2011 net income jumped 50.7% to $20.2 million, up from $13.4 million in 2010. German American Chairman and CEO Mark Schroeder noted that the company’s record performance in 2011 was driven by both organic growth and expansion into the Evansville, IN market by acquisi-tion. Schroeder said, “The achievement of

among U.S. bank holding companies with assets between $1 billion and $10 billion, according to the Michael White Bank Wealth Management Fee Income Report. In 2010, German American’s insurance brokerage income comprised 31.2% of its noninterest income and 8.1% of its net operating revenue. The company ranked 31st in insurance brokerage earnings among BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

BRYN MAWR BANK’S WEALTH MANAGEMENT ASSETS

& EARNINGS CLIMB Bryn Mawr, PA-based, $1.77 billion-asset Bryn Mawr Bank Corp., parent of Bryn Mawr Trust, reported the May 2011 ac-quisition of the Private Wealth Manage-ment Group (PWMG) of the Hershey Trust Company contributed to a $1.42 billion increase in assets under manage-ment, administration, supervision and brokerage in its Wealth Management Division in 2011 compared to 2010. With those assets reaching $4.83 billion, the company reported $6.3 million in fourth quarter wealth management revenue, up 54.5% from $4.1 million in fourth quarter 2010. In contrast, income from bank-owned life insurance fell 15.6% to $114,000, down from $135,000. Wealth management and BOLI income com-prised, respectively, 66.3% and 1.2% of noninterest income, which rose 2.5% to $9.50 million, up from $9.27 million in fourth quarter 2010, despite a $1.70 mil-lion drop in gains on mortgage loan sales. Net interest income on a 3.91% net interest margin in fourth quarter 2011 grew 8.5% to $14.86 million, up from $13.69 million in fourth quarter 2010, re-flecting an $85,000 increase in interest income, a $633,000 decrease in interest expense and a $455,000 decline in loan loss provisions to $1.06 million. Net in-come, after increased noninterest ex-pense, slid 7.2% to $5.17 million, down from $5.57 million in fourth quarter 2010. For year 2011, wealth management revenue climbed 39.8% to $21.67 million, up from $15.50 million in 2010, and BOLI jumped 73.7% to $462,000, up from $266,000. Wealth management and BOLI income comprised, respectively, 63.5% and 1.4% of noninterest income, which grew 16.2% to $34.15 million, up from $29.38 million in 2010.

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Net interest income on a 3.96% net interest margin in 2011 soared 34.0% to $56.69 million, up from $42.30 million in 2010, driven by a $9.64 million climb in interest income and bolstered by a $3.77 million drop in loan loss provisions to $6.09 million and a $985,000 cut in inter-est expense. Net income more than dou-bled to a record $19.71 million, up from $9.17 million in 2010. Bryn Mawr Trust Chairman and CEO Ted Peters said, “Our record earnings, which were primarily attributed to steady loan growth and en-hanced Wealth Management revenue, made 2011 a very good year for the cor-poration.” He warned, however, “The cur-rent low level of interest rates and the continued softness in the economy pro-vide challenges for all banks, including Bryn Mawr Trust.” In 2010, Bryn Mawr Bank Corp.’s wealth management income comprised 47.3% of its noninterest income and 15.8% of its net operating revenue. The company ranked 34th in wealth manage-ment income among bank holding com-panies with assets between $1 billion and $10 billion, according to the Michael White Bank Wealth Management Fee Income Report.

WEALTH MANAGEMENT EARNINGS ON THE RISE AT FIRST M&F

Kosciusko, MS-based, $1.57 billion-asset First M&F Corp. reported insurance broker-age fee income in fourth quarter 2011 de-clined 7.6% to $798,000, down from $864,000 in fourth quarter 2010, while wealth management income climbed 27.5% to $153,000, up from $120,000. Insurance brokerage and wealth manage-ment income comprised, respectively, 13.5% and 2.6% of noninterest income, which grew 19.2% to $5.91 million, up from $4.96 million in fourth quarter 2010, bol-stered by a $1.13 million net gain on the sale of five branches during the quarter. Net interest income on a 3.64% net interest margin in fourth quarter 2011 rose 2.7% $10.36 million, up from $10.09 million in fourth quarter 2010, reflecting a $15.7 million cut in interest expense, as loan loss provisions remained steady and $2.28 million and interest income de-clined by $1.30 million. Net income after dividends basically doubled to $530,000, up from $267,000 in fourth quarter 2010. First M&F Corp. Chairman and CEO Hugh Potts said, “While loan demand has been tepid at best and loan channels

have fallen, newer channels of growth are beginning to gain traction.” For the year 2011, insurance brokerage fee income slipped 4.5% to $3.64 million, down from $3.81 million in 2010, while wealth management income increased 11.0% to $584,000, up from $526,000 in 2010. Insurance brokerage and fiduciary earnings comprised, respectively, 16.9% and 2.7% of noninterest income, which

rose 2.8% to $21.57 million, up from $20.52 million in 2010. Net interest income on a 3.68% net interest margin in 2011 reached $42.14 million, up 9.2% from $38.58 million in 2010. Net income of $2.58 million dropped 82.9% from $15.07 million in 2010, when the company recorded a $12.87 million gain on the exchange of preferred stock.

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In 2010, First M&F’s insurance broker-age income comprised 22.0% of its non-interest income and 5.9% of its net oper-ating revenue. The company ranked 44th in insurance brokerage earnings among BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE BROKERAGE & TRUST EARNINGS DOMINATE 87% OF

ENCORE BANCSHARES’ NONINTEREST INCOME

Houston, TX-based, $1.5 billion-asset Encore Bancshares reported insurance brokerage earnings in fourth quarter 2011 grew 13.4% to $1.27 million, up from $1.12 million in fourth quarter 2010, while trust and investment management (TIM) fees slipped 1.0% to $5.07 million, down from $5.12 million. Insurance brokerage and TIM fees comprised, respectively, 17.5% and 69.9% of noninterest income, which fell 26.5% to $7.25 million, down from $9.86 million in fourth quarter 2010, when the company reported a $2.57 mil-lion gain on the sale of branches. Net Interest income on a 3.35% net interest margin in fourth quarter 2011 grew 15.2% to $9.79 million, up from $8.50 million in fourth quarter 2010, driv-en by a $1.40 million cut in interest ex-pense and a $699,000 decline in loan loss provisions to $1.90 million. Net in-come of $1.94 million contrasted with a net loss of $1.46 million in fourth quarter 2010. For year 2011, Encore Bancshares Chairman and CEO James D’Agostino said he was “pleased with solid noninter-est income from wealth management and insurance.” Insurance brokerage fee in-come rose 1.2% to $5.84 million, up from $5.77 million in 2010, and TIM fees grew 6.1% to $20.12 million, up from $18.97 million. Insurance brokerage and TIM comprised, respectively, 20.4% and 70.2% of noninterest income, which de-clined 9.7% to $28.66 million, down from $31.74 million in 2010, when the compa-ny recorded a $3.68 million gain on branch sales. Net interest income in 2011 more than quadrupled to $38.54 million, up from $9.33 million in 2010, driven by a $27.92 million drop in loan loss provisions to $7.25 million and a $6.11 million cut in

interest expense, which more than made up for a $5 million decline in interest reve-nue. Net income of $1.31 million contrast-ed with a net loss of $26.45 million in 2010. Looking ahead D’Agostino said, “Our strong capital position and a positive outlook for the local economy, position us for significant growth potential in our [Houston] market area.

MARCH 5 - 11, 2012

U.S. BANKS REPORT CLIMBING EARNINGS

AS LOSS PROVISIONS DROP U.S. banks and savings institutions (“banks”) reported aggregate net in-come in fourth quarter 2011 grew 23% to $26.3 billion, up from $21.4 billion in fourth quarter 2010, driven by a 40% drop in loan loss provisions to $19.5 billion, which compensated for a 2.3% slide in operating revenue, as servicing income fell 30% and gains on loan sales tumbled 53%, the Federal Depos-it Insurance Corporation (FDIC) re-ports. Almost two-thirds (63%) of U.S. banks reported increased net income; 16% re-ported stable earnings, and 19% reported net losses, down from 27% in fourth quar-ter 2010. Eighteen banks failed in the fourth quarter, but the number of problem institutions declined from 844 to 813. Overall, the average return on assets (ROA) rose to 0.76% from 0.64% in fourth quarter 2010. For year 2011, U.S. banks’ net income climbed 39.8% to $119.5 billion, up from $85.5 billion in 2010, again driven by re-ductions in loan loss provisions, which fell by $81.1 billion. At the same time, net interest income on an average 3.60% net interest margin posted its first full year decline since 1971, down 1.7% from 2010. Additionally, noninterest income slid 2.3%, reflecting an $8 billion drop in servicing income, a $4.8 billion decline in gains on loan sales and a $2.1 billion decrease in service charges on deposit accounts. About two-thirds (67%) of U.S. banks reported improved earnings in 2011; 17.6% reported steady net income, and 15.5% reported net losses, down from 22.1% in 2010. Average ROA increased to 0.88% from 0.65% in 2010, and the number of institutions that failed hit 92, the FDIC said.

WHOLE & UNIVERSAL LIFE DRIVE GROWING

U.S. INDIVIDUAL LIFE SALES & PREMIUM

U.S. new individual life insurance premi-um increased 4% in 2011 compared to 2010, as the number of policies sold rose 2%, according to Windsor, CT-based LIMRA. While term life insurance com-prised nearly 40% of all new individual life insurance policies sold, that number was down 4% from 2010, impacting new term annualized premium, which declined 6% compared to 2010. In contrast, the number of whole life insurance policies sold grew 5%, helping bolster whole life new annualized premi-um 9% compared to 2010, driving the rise in overall individual life performance. Variable universal life (VUL) insurance was the second highest driver of individu-al life premium growth, as new premium climbed 22%, despite a 9% drop in the number of VUL policies sold. Universal life (UL) new premium rose 2%, and the number of UL policies sold grew 8%, driv-en by a 38% jump in indexed UL new premium and a 30% climb in indexed UL sales. In contrast, the number of lifetime UL policies sold fell 7%. Commenting on the driving force of whole life sales on rising individual life insurance sales and premium in 2011, LIMRA Senior Analyst Ashley Durham said, “With the economy continuing to struggle, consumers are attracted to the premium and cash-value guarantees along with lifetime coverage, which whole life offers.”

BANK SWITCHING RISES WITH FEES & POOR SERVICE

Less than 10% (9.6%) of U.S. bank cus-tomers switched banks in 2011, but that percentage was up from 8.7% the year before, according to J.D. Power & Associ-ates’ 2012 U.S. Bank Customer Switching and Acquisition Study. Fees were the main cause customers cited in their deci-sion to change banks, but poor service acted as a secondary catalyst. While 19% of customers who switched banks said they were induced to do so by the promotions or cash incentives offered by their new banks, only 32% of those customers said they would definitely not change banks again over the next 12 months. In contrast, about 50% of cus-tomers who switched banks because of

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the better customer service said they definitely would not move to another bank over the coming year. While big banks, regional banks and mid-size banks lost 10% to 11% of their customers in 2011, small banks and cred-it unions lost only 0.9%, J.D. Power found in its survey of 5,062 bank customers conducted in November and December 2011. J.D. Power Banking Services Di-rector Michael Beird said, “Regardless of bank size, more than one-half of all cus-tomers who said fees were the main rea-son to shop for another bank also indicat-ed that their prior bank provided poor service.” For more on the J.D. Power’s survey, click here.

U.S. SMALL BUSINESS OWNERS UNPREPARED

FOR RETIREMENT One-third of women and a quarter of men who own small businesses in the U.S. have not estimated how much income they will need when they retire, according to research completed by the State Farm Center for Women and Financial Services (SFCWFS) at Bryn Mawr, PA-based The American College. Among the 67% of female and 75% of male small business owners who have estimated their retire-ment needs, 50% did so with the help of a financial planner. Yet, 77% of women and 74% of men who own small businesses have no written financial plan for retire-ment, perhaps reflecting the fact that 63% of these women and 62% of these men do not believe their retirement planning needs are complex. Considering the fact these percentages pertain to the heads of the nation’s 27.5 million small businesses, SFCWFS Direc-tor Mary Quist-Newins said, “The lack of retirement planning by so many people is stunning, especially since business own-ers have no one else to rely on.” She added, “The mean age of our respond-ents is just over 50, and you have to won-der, ‘What are these individuals waiting for?’”

CONGRESSMAN ASKS NAIC TO CLARIFY ITS FUNCTION

U.S. Representative Edward Royce has written a letter to National Association of Insurance Commissioners (NAIC) Presi-dent Michael McCarty and NAIC CEO Therese Vaughn asking them to clarify whether the NAIC is a trade association

with no regulatory authority or if it is a formal part of “the national system of state-based insurance regulation in the U.S.” Royce asked the questions in light of the NAIC’s recent contradictory state-ments in favor of both positions. But, as Royce notes in his letter, if the NAIC is, as it on one hand describes itself, “a 501 (c)(3) non-profit corporation … not sub-ject to Open Meetings or ‘Sunshine’ Laws, … not a government or public body … but … a private group,” it cannot, by law, “regulate in the field of interstate commerce,” as stated in the McCarren Ferguson Act. If, on the other hand, the NAIC is, as it described itself last year, integral to help-ing “form the national system of state-based insurance regulation in the U.S.” as a “standard-setting organization,” it must lose its private, non-profit group status and become subject to govern-ment accountability, including appropria-tions oversight, open meeting laws and the Freedom of Information Act, Repre-sentative Royce said in his February 28, 2012 letter.

U.S. HEALTHCARE LEGISLATION NEGATIVELY IMPACTS

MEDICAL PRACTICE Almost two-thirds (65%) of U.S. physi-cians believe U.S. healthcare legislation is ineffective when it comes to dealing with rising healthcare costs, especially since it fails to address the underlying cost of defensive medicine, a national survey recently completed by The Doc-tors Company reveals. Almost as many doctors (60%) believe that the increased patient volume that will result from the legislation will negatively impact the level of care they can provide, and 51% believe this will adversely affect their patient-doctor relationships. Because of these and other pressures arising from the legislation, 90% of U.S. physicians are unwilling to recommend healthcare as a profession and 43% are considering leaving medicine within the next 5 years. Commenting on the state of U.S. healthcare, former American Medical Association President Donald Palmisana, M.D. said, “For years, the medical profes-sion has been predicting a shortage of

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In 2010, Summit Financial’s insurance brokerage income comprised 68.3% of its noninterest income and 10.1% of its net operating revenue. The company ranked 36th in insurance brokerage earnings among BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

VIST FINANCIAL REPORTS GROWING INSURANCE EARNINGS

Wyomissing, PA-based, $1.43 billion-asset VIST Financial reported insurance brokerage fee income in fourth quarter 2011 grew 12.1% to $3.05 million, up from $2.72 million in fourth quarter 2010. Wealth management fee income fell 29.7% to $121,000, down from $172,000, and income from bank-owned life insur-ance (BOLI) slipped 1.6% to $120,000, up from $122,000. Insurance brokerage, wealth management and BOLI income comprised, respectively, 65.9%, 2.6% and 2.6% of noninterest earnings, which rose 1.3% to $4.63 million, up from $4.57 million in fourth quarter 2010. Net interest income in fourth quarter 2011 ticked up 0.5% to $8.74 million from

million, which more than made up for an 11% decline in interest revenue. Net in-come climbed 59% to $1.33 million, up from $836,000 in fourth quarter 2010. For the year 2011, insurance brokerage fee income slid 6% to $4.46 million, down from $4.74 million in 2010, and, as the larg-est contributor to noninterest income, com-prised 80.4% of that revenue, which dropped 28% to $5.55 million, down from $7.74 million in 2010, reflecting an almost doubling of write-downs on foreclosed prop-erties and a $1.66 million increase in other-than temporary securities impairments. Net interest income on a 3.08% net interest margin in 2011 jumped 59% to $29.84 million, up from $18.80 million in 2010, driven by a 53% drop in loan loss provisions to $10.00 million and a 21% cut in interest expense, which made up for an 11% decline in interest income. Net income of $3.70 million contrasted with a year 2010 net loss of $2.27 million. Sum-mit Financial President and CEO H. Charles Maddy III said, “Progress in re-gard to dispositions of foreclosed proper-ties remains difficult as the return of our real estate markets to more normal levels continues to be frustratingly slow.”

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healthcare professionals. Today, we are perilously close to a crisis.” The Doctors Company Chairman and CEO Richard Anderson, M.D. added, “Current legisla-tion will likely have a negative impact on the practice of medicine and will not ad-dress the scourge of defensive medicine in America.”

SET-ASIDE TIED TO INAPPROPRIATE PPI SALES

DRIVES NET LOSS AT LLOYDS London-based Lloyds Bank Group report-ed it set aside GBP 3.2 billion ($5.1 bil-lion) in 2011 to cover the potential costs of reimbursing customers whom it inap-propriately sold payment protection insur-ance (PPI). The set-aside drove a year 2011 net loss of £2.8 billion ($4.4 billion), which contrasted with a net loss of £320 million ($509.1 million) in 2010, when the company took a £70 million ($111.4 mil-lion) charge tied to its July 2010 decision to stop offering PPI products. PPI policies are intended to make loan payments for borrowers who lose their jobs or become disabled after they pur-chase the insurance. Lloyds and other United Kingdom banks, however, inap-propriately sold the policies to ineligible self-employed and unemployed individu-als who were, in turn, refused payments on submitted claims. In 2011, Lloyds paid out £1.05 billion ($1.66 billion) of the £3.2 billion ($5.1 billion) set aside to redress affected customers.

INSURANCE DOMINATES SUMMIT FINANCIAL’S

NONINTEREST INCOME Moorefield, WV-based, $1.45 billion-asset Summit Financial Group reported Summit Insurance Services generated $1.00 mil-lion in insurance brokerage fee income in fourth quarter 2011, down 7.6% from $1.09 million in fourth quarter 2010. Insur-ance brokerage income remained the largest contributor to noninterest earn-ings, however, comprising 50.3% of that revenue, which jumped 128% to $1.99 million, up from $871,000 in fourth quarter 2010, when write-downs on foreclosed properties and securities impairments were higher. Net interest income on a 3.03% net interest margin in fourth quarter 2011 rose 3% to $7.66 million, up from $7.44 million in fourth quarter 2010, driven by a 16% million cut in interest expense and a 33% drop in loan loss provisions to $2.00

quarter 2011 insurance brokerage fee income continued to dominate noninterest earnings despite a 2.6% slip to $2.06 million, down from $2.12 million in fourth quarter 2010. In contrast, trust and invest-ment management (TIM) income rose 6.1% to $380,000, up from $358,000 in fourth quarter 2010. Insurance brokerage and TIM earnings comprised 51.2% and 9.5% of noninterest income, which ticked up 1.80% to $4.02 million from $3.95 mil-lion in fourth quarter 2010. Net interest income on a 3.60% net interest margin in fourth quarter 2011 fell 10.4% to $5.80 million, down from $6.47 million in fourth quarter 2010, despite a 9.1% cut in interest expense and a 10.4% decline in loan loss provisions to $5.80 million, as interest revenue decreased by 9.4% ($1.3 million). Net income, hit addi-tionally by increased noninterest ex-pense, dropped 62% to $325,000, down from $850,000 in fourth quarter 2010. For year 2011, insurance brokerage fee income declined 7.5% to $9.36 million, down from $10.11 million in 2010, while TIM income rose 4% to $1.56 million, up from $1.50 million. Insurance and TIM earnings comprised, respectively, 54.0% and 9.0% of noninterest income, which slid 4% to $17.32 million, down from $18.04 million in 2010, impacted by de-creased insurance brokerage and service charge revenue. Net interest income on a 3.74% net interest margin in 2011 declined 5.7% to $20.29 million, down from $21.52 million in 2010, despite a 7.8% decrease in loan loss provisions to $20.29 million and a 13% cut in interest expense, which did not make up for a $4.5 million (8.3%) fall in interest revenue. A year 2011 net loss of $879,000 contrasted with $1.67 million net loss in 2010. Shore Bancshares CEO W. Moorehead Vermilye said, “We were disappointed to show a loss for the full year of 2011, but encouraged that the loss narrowed to about half the amount we reported for the full year 2010.” Vermi-lye added, “It is important to note that our capital levels remain strong.” In 2010, Shore Bancshares’ insurance brokerage income comprised 58.2% of its noninterest income and 16.8% of its net operating revenue. The company ranked 16th in insurance brokerage earnings among BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

Net interest income in 2011 climbed 22.1% to $37.27 million, up from $30.53 million in 2010, reflecting increased inter-est revenue, decreased interest expense, and a $1.17 million drop in loan loss pro-visions to $9.04 million. Net income rose 2.3% to $5.29 million from $5.17 million in 2010. VIST Financial President and CEO Robert Davis said, “Our company contin-ued to make measurable progress in our core earnings in 2011.” In 2010, VIST Financial’s insurance brokerage income comprised 62.3% of its noninterest income and 19.9% of its net operating revenue. The company ranked 14th in insurance brokerage earnings among BHCs with assets between $1 billion and $10 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE COMPRISES OVER 50% OF SHORE BANCSHARES’

NONINTEREST INCOME Easton, MD-based, $1.16 billion-asset Shore Bancshares reported that in fourth

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$8.70 million in fourth quarter 2010, de-spite a $919,000 increase in loan loss provisions to $2.99 million, as interest income rose and interest expense de-clined. After a non-cash goodwill impair-ment charge of $25.07 million, reflecting the company’s fair market value in light of its pending acquisition by Tompkins Fi-nancial, net income fell 29.2% to $984,000, down from $1.39 million in fourth quarter 2010. For year 2011, insurance brokerage fee income rose 2.3% to $12.20 million, up from $11.92 million in 2010. BOLI income increased 8.0% to $457,000 from $423,000, while wealth management earnings fell 17.2% to $610,000 from $737,000. Insurance brokerage, BOLI and wealth management income com-prised, respectively, 74.2%, 2.8% and 3.7% of noninterest income, which dipped 13.1% to $16.45 million, down from $18.93 million in 2010, when customer service and mortgage sales earnings were higher and net credit impairment losses were lower.

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INSURANCE REVENUE SUPPORTS RECORD EARNINGS

AT EVANS BANCORP Hamburg, NY-based, $741 million-asset Evans Bancorp reported fourth quarter 2011 insurance brokerage fee income inched ahead to $1.36 million, up from $1.34 million in fourth quarter 2010, and income from bank-owned life insurance (BOLI) grew 12.8% to $123,000, up from $109,000. Insurance brokerage commis-sions and BOLI earnings comprised, re-spectively, 47.6% and 4.3% of noninter-est income, which ticked up 1.1% to $2.86 million from $2.83 million in fourth quarter 2010. Net interest income on a 4.03% net interest margin in fourth quarter 2011 climbed 29.5% to $6.06 million, up from $4.68 million in fourth quarter 2010, re-flecting a $579,000 drop in loan loss pro-visions to $825,000, a $131,000 cut in interest expense and a $674,000 in-crease in interest revenue. With improved performance overall, net income almost tripled to $1.34 million, up from $484,000 in fourth quarter 2010. For the year 2011, insurance brokerage fee income slipped 1.3% to $6.90 million, down from $6.99 million in 2010; and BOLI income slid 3.0% to $454,000, down from $468,000. Insurance broker-age and BOLI earnings comprised, re-spectively, 55.5% and 3.7% of noninter-est earnings, which dipped 1.6% to $12.43 million, down from $12.63 million in 2010, when deposit service charges were higher. Net interest income on a 3.97% net inter-est margin in 2011 grew 14.4% to $23.50 million, up from $20.55 million in 2010, driven by a $1.34 million increase in inter-est income, a $200,000 slip in interest ex-pense and a $1.5 million drop in loan loss provisions to $2.48 million. Net income climbed 27.1% to a record $6.1 million, up from $4.8 million in 2010. Evans Bancorp President and CEO David Nasca attributed the record results to Evans’ “community banking approach” and “comprehensive suite of products and services.” In 2010, Evans Bancorp’s insurance brokerage income comprised 56.4% of its noninterest income and 18.8% of its net operating revenue. The company ranked 4th in insurance brokerage earnings among BHCs with assets between $500 million and $1 billion, according to the Michael White-Prudential Bank Insurance Fee Income Report.

INSURANCE-RELATED INCOME DOMINATES OVER 75% OF

ONEIDA’S NONINTEREST INCOME Oneida, NY-based, $663.7 million-asset Oneida Financial reported fourth quarter 2011 insurance-related fee income gen-erated by Bailey, Haskell & LaLonde Agency, Benefit Consulting Group and Workplace Health Solutions grew 12.5% to $5.13 million, up from $4.56 million in fourth quarter 2010, and comprised 77.1% of noninterest income, which in-creased 8.5% to $6.65 million, up from $6.13 million in fourth quarter 2010, de-spite declining service charges on deposit accounts. Net interest income on a 3.40% net interest margin grew 8.6% to $4.82 mil-lion, up from $4.44 million in fourth quar-ter 2010, driven by a $250,000 drop in loan loss provisions to $50,000 and a $359,000 cut in interest expense, which more than made up for a $233,000 de-cline in interest revenue. Net income grew 9.9% to $1.66 million, up from $1.51 million in fourth quarter 2010. For year 2011, insurance brokerage-related fee income climbed 11.0% to a record $19.42 million, up from $17.50 million in 2010, and comprised 78.8% of noninterest income, which grew 7.7% to $24.65 million, up from $22.89 million, driven by insurance earnings, as service charges and other noninterest revenue declined. Net interest income on a 3.41% net interest margin in 2011 grew 13.71% to $18.71 million, up from $16.45 million in 2010, reflecting a slight increase in inter-est revenue, a $1.66 million cut in interest expense and a $600,000 decline in loan loss provisions to $1.05 million. Net in-come, despite increased expense tied to salaries and benefits, climbed 52.4% to a record $5.73 million in 2011, up from $3.76 million. Oneida Financial President and CEO Michael Kallet said, “Oneida Financial Corp. continues to deploy busi-ness strategies which position us as a diversified banking and financial services company.” In 2010, The Oneida Savings Bank’s insurance brokerage income comprised 46.4% of its noninterest income and 25.8% of its net operating revenue. The company ranked 1st in insurance broker-age earnings among banks with assets between $500 million and $1 billion, ac-cording to the Michael White-Prudential Bank Insurance Fee Income Report.

SOUTHWEST GEORGIA REPORTS GROWING INSURANCE

BROKERAGE INCOME Moultrie, GA-based, $305.7 million-asset Southwest Georgia Financial reported fourth quarter 2011 insurance brokerage fee income grew 22.4% to $339,000, up from $277,000 in fourth quarter 2010, and securities brokerage fee income rose 5.6% to $76,000, while trust earnings declined 7.4% to $50,000, down from $54,000. Insurance, securities brokerage and trust earnings comprised, respective-ly, 27.3%, 6.1% and 4.0% of noninterest income, which ticked up 0.8% to $1.24 million from $1.23 million in fourth quarter 2010, despite a $39,000 decrease in ser-vice charges on deposit accounts. Net interest income on a 4.29% net interest margin in fourth quarter 2011 increased 8.4% to $2.58 million, driven by increased interest revenue and a cut in interest expense, while loan loss provi-sions increased by $46,000 to $204,000. Net income climbed 30% to $396,000 from $304,000 in fourth quarter 2010. For year 2011, insurance brokerage fee income grew 12.4% to $1.27 million, up from $1.13 million in 2010; securities bro-kerage revenue increased 8.0% to $324,000, up from $300,000; while trust income declined 11.2% to $214,000 from $241,000. Insurance, securities broker-age and trust fees comprised, respective-ly, 24.6%, 6.3% and 4.1% of noninterest income, which declined 4.3% to $5.16 million, down from $5.39 million in 2010, when service charges on deposit ac-counts were higher. Net interest income on a 4.11% net interest margin in 2011 rose 4.2% to $9.93 million, up from $9.53 million in 2010, despite a $384,00 increase in loan loss provisions to $984,000, as interest income rose by $97,000 and interest ex-pense was cut by $694,000. After $861,000 in increased noninterest ex-pense tied to new office staffing, howev-er, net income fell 21.5% to $1.46 million, down from $1.86 million in 2010. South-west Georgia Financial President and CEO DeWitt Drew suggested noninterest expense going forward should be stable and said, “We … are completely staffed for our new banking center.” In 2010, Southwest Georgia’s insurance brokerage fee comprised 22.2% of nonin-terest income, according to the Michael White-Prudential Bank Insurance Fee Income Report.

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GROWING TRUST & INVESTMENT MANAGEMENT EARNINGS BEAT DEPOSIT FEES AT SALISBURY

Lakeville, CT-based, $609.3 million-asset Salisbury Bancorp reported trust and in-vestment management (TIM) fee income was the largest contributor to noninterest earnings in fourth quarter 2011 and grew 15.3% to $686,000, up from $595,000 in fourth quarter 2010, comprising 40.6% of noninterest income, which rose 4.3% to $1.69 million, up from $1.62 million in fourth quarter 2010. Net Interest income on a 3.48% net interest margin in fourth quarter 2011 rose 2.5% to $4.16 million, up from $4.06 million in fourth quarter 2010, driven by a cut in interest expense, as loan loss pro-visions grew by $200,000 to $580,000 and interest revenue declined by $171,000. Net income rose 5.4% to $1.18 million, up from $1.12 million in fourth quarter 2010. For year 2011, TIM fees climbed 21.4% to $2.55 million, up from $2.10 million in 2010, and remained the largest contribu-tor to noninterest income (45.1%), which increased 6.6% to $5.66 million, up from $5.31 million in 2010. Net interest income on a 3.51% net interest margin in 2011 increased 5.5% to $17.05 million, up from $16.16 million in 2010, driven by a $1.33 million cut in in-terest expense, as interest revenue de-clined by $412,000 and in loan loss provi-sions increased by $440,000 to $1.44 million. Net income rose 13.8% to $3.64 million, up from $3.20 million in 2010. Salisbury Bancorp President and CEO Richard Cantele attributed the results to “rigorously managed expenses” and “growth in each of our business units.”

MARCH 12 - 18, 2012

UNDISCLOSED CONTINGENT COMMISSIONS OKAYED BY

MISSOURI SUPREME COURT The Missouri Supreme Court ruled last week in Emerson Electric Co. vs. Marsh & McLennan Cos., et. al. that insurance brokers have no fiduciary duty to find their customers the lowest-priced insurance available, nor do they breach their fiduci-ary duties when they receive commissions on insurance sales. Furthermore, the re-ceipt of undisclosed contingent commis-sions for steering business to a particular insurer does not break common law. In fact, Supreme Court Judge Laura Denvir Stith wrote for the Court, “Missouri stat-

utes specifically authorize a broker to re-ceive commissions from the insurer, with-out distinguishing between types of com-missions,” and no Missouri law requires that a broker disclose to the insured that it receives contingent commissions. The Court also ruled that a broker acts as a fiduciary to the insurer when he de-posits premiums in an account pending their payment to the insurer. The law does not require the broker to segregate those premiums from other funds, nor does it prohibit the broker from receiving interest on those premiums pending their transfer to the insurer. The broker “holds any premium for the benefit of the insur-er, not the insured,” Judge Stith wrote, and has no “duty to pay interest on premi-ums to the insured or to disclose to the insured that it receives such interest.” To read the Missouri Supreme Court decision, click here.

N.Y. SUPREME COURT AFFIRMS REGULATION 194

New York Superintendent of Insurance James Wrynn had the authority to issue Regulation 194 on “Producer Compensa-tion Transparency” and, therefore, the

Regulation stands as codified in New York State insurance law 11 NYCRR Part 30, the Appellate Division of the Supreme Court of New York Third Department ruled last week in Sullivan Financial Group vs. James J. Wrynn as Superinten-dent of Insurance. The Regulation requires insurance brokers in New York to disclose (1) a description of their role in the sale of insurance, (2) whether they will receive compensation from the insurer or a third party for the sale, (3) factors that may affect their compensation, and (4) any other information about compensation that the potential customer wants to know. The Independent Insurance Agents and Brokers of New York (IIABNY) expressed its disagreement and disappointment with the decision and affirmed its position that Regulation 194 is a “burdensome and unnecessary regulation” that “places un-precedented obligations on law-abiding insurance producers without providing any benefit to consumers.” To read the New York Appellate Divi-sion’s decision, click here.

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CADENCE BANCORP TO BROADEN HOUSTON FOOTPRINT

WITH ENCORE ACQUISITION Houston, TX-based, $3.9 billion-asset Cadence Bancorp has agreed to acquire Houston-based, $1.6 billion-asset Encore Bancshares in a cash-for-stock deal val-ued at $250 million. Cadence Bancorp CEO Paul Murphy said the deal positions Cadence “as a major player in the valued Houston market, where we plan to contin-ue to grow and expand.” He added, “Encore’s profitable Lincscomb & Williams wealth management and trust groups … as well as Town & Country Insurance will be strong assets for our customers and will provide additional opportunities for us to expand in those segments.” The acquisition will add 5 insurance agency locations and 12 banking offices in the Houston region to Cadence’s 100 banking locations in Alabama, Florida,

Georgia, Mississippi, Tennessee and Texas, when the deal closes in the se-cond half, pending shareholder and regu-latory approval.

U.S. INDIVIDUALLY UNDERWRITTEN LIFE INSURANCE APPLICATIONS

CONTINUE UP U.S. applications for individually under-written life insurance grew 5.5% in Febru-ary compared to February 2011 and climbed 7.5% over January applications, according to the MIB Life Index. Applica-tions among individuals aged 0-44 and aged 45-59 were both up basically 4% at, respectively, 4.0% and 3.9%, while appli-cations among individuals 60 and older continued to surge (+13.4%). Year to date, applications among all groups com-bined were up 7.0% compared to the same period in 2011, Braintree, MA-based MIB Group found.

U.S. COMMERCIAL INSURANCE RATES RISE 2% IN FEBRUARY

U.S. composite commercial insurance rates rose 2% in February, according to Dallas, TX-based MarketScout. Commer-cial property and workers’ compensation rates grew 3%, driving the rise by cover-age class, followed by 2% increases in business owner policies (BOP), general liability and umbrella excess insurance rates, while professional liability, directors and officers liability, crime and employ-ment practices liability insurance (EPLI) rates ticked up 1%, and fiduciary and surety rates remained flat. All rates by account size rose, with small, medium and large accounts up 2% and jumbo accounts up 1%. Rates by industry class were also higher across the board, led by contracting (+3%), followed by 2% increases in the manufacturing, habitational and transportation industries and 1% rises in service, public entity and energy sector rates, MarketScout found based on surveys conducted by the Na-tional Alliance for Insurance Education and Research. Commenting on what could be a hard-

ening of commercial insurance rates, MarketScout CEO Richard Kerr said, “We have continued to see evidence of a slowly turning market with the composite rate zero percent for Oc-

tober, a 1% increase for November 2011, through January 2012 and now a 2% increase in February.”

RETIREMENT SALES CLIMB 51% AT ONE AMERICAN

Indianapolis, IN-based One American Finan-cial Partners an-nounced its retire-ment business achieved record re-sults in 2011 in 401(k) sales, employer-

sponsored not-for-profit sales, total assets and

increasing and retaining plan participants. Overall retirement sales climbed 51% over 2010 results, driven by a 67% jump in 401(k) sales. Almost all existing busi-ness (95%) was retained and an even higher percentage (98.6%) of the compa-ny’s tax-exempt healthcare business stayed on the books. Existing plans grew 20%, and both assets under management

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and the number of plan participants reached record levels. One American Retirement Business President Bill Yoerger said, “We serve four markets from smaller to larger plans as well as for profit and not-for-profit busi-nesses. Our growth is consistent and balanced across all these markets.”

FEMA CLARIFIES ITS FLOOD INSURANCE GUIDANCE

The Federal Emergency Management Agency (FEMA) has advised all U.S. banking regulators, banking trade associ-ations and all federal governmental bod-ies involved in regulating or providing credit to flood-risk properties that the guidelines set forth in FEMA’s Mandatory Flood Insurance Purchase Guidelines “are not meant to be exclusive.” In a memo sent to these groups, Deputy As-sociate Administrator for Federal Insur-ance Edward Connor said, “If a lender is satisfied that a private [flood insurance] policy adequately protects its security for a loan … it is within his authority to ac-

cept the private policy.” The flood insur-ance guidance that FEMA set forth, Con-nor said, “is to be regarded solely as ad-visory and not regulatory in nature,” espe-cially since “FEMA has no authority to rule on the acceptability of private insur-ance policies.” To read the undated memo originally sent to the Federal Financial Institutions Examination Council, click here.

OKLAHOMA INSURANCE COMMISSIONER CHALLENGES

THE CONSTITUTIONALITY OF FIO Oklahoma Insurance Commissioner John Doak has asked the Oklahoma Attorney General’s Office to investigate whether the Federal Insurance Office created un-der the Dodd-Frank Act is constitutional. The McCarren-Ferguson Act granted states, not the federal government, au-thority to regulate insurance, Doak said and added, “The Federal Office of Insur-ance is something I view as duplicative and another overreach of the federal gov-ernment,” bestnews.com reports.

HSBC TO SELL GENERAL INSURANCE BUSINESSES

TO AXA & QBE London-based HSBC Group and Hong Kong-based Hang Seng Bank have agreed to sell their general insurance businesses in Hong Kong, Singapore, Argentina and Mexico in two separate transactions to Paris-based AXA Group and Sydney, Australia-based QBE Hold-ings. Additionally, the company has en-tered into bancassurance relationships with both buyers. HSBC Group CEO Stuart Gulliver said the deals will not only “enable HSBC to focus capital and resources on … the building of our broader wealth manage-ment capabilities,” but they will also “broaden and strengthen the suite of gen-eral insurance products available to our retail banking and commercial banking customers in Hong Kong, Mainland Chi-na, Singapore, India, Indonesia, Mexico and Argentina.” AXA Group has agreed to pay HSBC $494 million to acquire the aggregate

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$444 million-asset general insurance busi-ness of Hong Kong-based HSBC Insur-ance (Asia) Limited, Singapore-based HSBC Insurance (Singapore) Pte Limited and Mexico City, Mexico-based HSBC Seguros, S.A. de C.V., Grupo Financiero. Also included in the payment price is a 10-year bancassurance agreement whereby AXA will become the exclusive provider of general insurance products distributed by HSBC units in Hong Kong, Mainland Chi-na (excluding Hang Seng Bank and HSBC’s Chinese Rural Bank), Singapore, India and Indonesia (excluding PT Bank Ekonomi Raharga Tbk). In Mexico, AXA will be the exclusive provider of property and casualty products distributed by HSBC companies in Mexico. AXA also will pay commissions on product sales and make profit-related payments to all HSBC units involved. AXA Chairman and CEO Henri de Cas-tries described the deal with HSBC as “another milestone in our strategy of accel-erating profitable growth in Asia and Latin America.” De Castries said, “AXA has been a Preferred Strategic Partner for HSBC for some years, and this agreement strengthens our relationship still further.” The deal is expected to close in the se-cond half, pending regulatory approval. In a separate transaction, QBE Holdings agree to pay HSBC Group and its 62%-owned subsidiary Hang Seng Bank $420 million to acquire the aggregate $784 mil-lion-asset general insurance business of Buenos Aries, Argentina-based HSBC La Buenos Aires Seguros S.A. and Hong Kong-based Hang Seng General Insur-ance. The purchase price includes a 10-year bancassurance agreement whereby QBE will become the exclusive provider of general insurance to HSBC banking units in Argentina and Hang Seng Bank in Hong Kong and Mainland China, paying sales and profit-related commissions and fees to the participating HSBC and Hang Seng Bank units. QBE Holdings CEO Frank O’Halloran said, “The acquisition of these profitable businesses and the 10-year distribution agreements with these highly respected banks fit well with our strategic objectives of profitable growth in the fast-growing economies of Asia and Latin America.” QBE expects the deals to generate $450 million in gross written premiums in Ar-gentina and $75 million in Hong Kong within a year after the deal closes in the second half, pending regulatory approval.

MARCH 19 - 25, 2012

ANNUITY SALES DRIVE RISE IN INVESTMENT PROGRAM INCOME

AT COMMUNITY BANKS Revenues of community bank investment programs in 2011 exceeded those in 2010, but revenue growth slowed in the third and fourth quarters, according to the 2012 Michael White - Securities America Report: Community Bank Investment Programs.

Sponsored by Securities America and issued by Michael White Associates, the report measures and benchmarks investment programs at community banks, i.e., banks with less than $4 billion in assets. The current report is based on data reported by 6,679 commercial and FDIC-regulated savings banks operating on December 31, 2011. The report particularly examines the 6,510 community banks among the 6,679 and further segments them into five asset classes whose performance is also analyzed.

“The 2011 revenues of community bank investment programs remained slightly ahead of those in 2010. While

2011 was the best year for program revenues since 2007 and second quarter was the highest quarter since first quarter 2008,” said Gregg H. Johnson, Senior Vice President at Securities America, “fourth quarter 2011 income was lower than that of fourth quarter 2010. Both the third and fourth quarters reflected a slide from program revenue in the second quarter.” Program Production

In 2011, 1,458 or 22.4% of community banks participated in investment program activities, producing $464.3 million in program income, up 1.7% from $456.5 million in 2010. Fourth quarter 2011 program income of $106.4 million declined 10.0% from $118.3 million in third quarter 2011, and it also was down 6.4% from $113.7 million in fourth quarter 2010.

These community banks achieved average investment program fee income of $318,456 in 2011, up 5.8% from $300,928 in 2010. This average production was helped upward as less productive banks exited the business or were merged. The number of community banks participating in investment program

$80.0

$90.0

$100.0

$110.0

$120.0

$130.0

$140.0

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q

2007 2008 2009 2010 2011

Mill

ions

COMMUNITY BANK INVESTMENT PROGRAM INCOME

SOURCE: Michael White - Securities America Report: Community Bank Investment Programs

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activities was down by 3.9% from 1,517 banks in 2010 to 1,458 banks in 2011, as the total number of community banks similarly fell 3.7% from 6,760 to 6,510 over the same period. Program Penetration

The Penetration of an investment program is measured as the amount of program revenue generated per million dollars of core or retail deposits. These deposits substitute as a measure of retail customers and the breadth of the customer relationship, since the data for retail customers or retail households are hard to obtain on a reliable, national, and standardized basis.

“In 2011, community banks earned mean investment program income of $752 per million dollars of retail bank deposits,” said Michael White, president of Michael White Associates and author of the report. “That Penetration Ratio was down 11.6% from $851 in the previous year, due in part to a heavy influx of retail deposits. In contrast, big banks with assets over $4 billion attained a higher mean Investment Program Penetration of $954 per million dollars of retail deposits. There is by comparison, then, room for continued improvement in program penetration and overall expansion of community bank investment programs.” Program Concentration

Program Concentration calculates the portion of total noninterest income attributable to investment program income. This ratio enables us to know how concentrated or meaningful bank investment programs are among their banks’ non-lending activities.

As a group, community banks achieved a mean Concentration of investment program income to noninterest income of 6.85% in 2011, down from 7.67% in 2010. Large banks, those with assets greater than $4 billion, had a lower mean Concentration ratio of 5.0%, reflecting the fact that, in their case, they tend to have more sources of noninterest income in larger volumes than just investment program income. Program Productivity

Investment Program Productivity measures the amount of program fee income per bank employee. Program Productivity enables us to assess the relative generation of income among bank employees, who are frequently the important human assets in generating customer referrals and the attendant fee income earned from those customer

relationships. In 2011, mean community bank employee Productivity was $2,302 per bank employee, up 5.2% from $2,189 in 2010. Program Density

Measured as the amount of program fee income per domestic banking office, Program Density evaluates the relative density of program income among banking locations, the critical physical assets in generating investment program income. Unadjusted mean density per domestic community bank office was $49,652 in 2011 versus $49,501 in 2010.

However, a number of banks with substantial securities brokerage production, including some commercial banks and bankers’ banks that provide specialized investment and correspondent banking programs to small community banks, also have or report only a handful of domestic offices, sometimes only one office. When that happens, this ratio can be susceptible to skewing on a large scale, so this tends to

be the ratio in which mean readings are more likely to be adjusted so as to get a more normal or typical reading. An adjusted reading for mean Program Density among community banks in 2011 produces a ratio of $33,609 per office, up from $29,573 in 2010. Revenue Mix – Securities Brokerage

In 2011, community banks earned securities brokerage fee income of $342.5 million, down 0.4% from $343.7 million in 2010. Fourth quarter brokerage revenues of $79.3 million were down 9.7% from $87.9 million in third quarter 2011.

Security brokerage revenues constituted 73.8% of total investment program income of $464.3 million in 2011, down from a revenue mix of 75.3% in 2010. Fourth quarter 2011 securities revenue mix rose to 74.5%, its highest point for the year.

Of the 1,458 banks with assets under $4 billion that reported earning investment program income, 1,281 banks

SOURCE: Michael White - Securities America Report: Community Bank Investment Programs

COMMUNITY BANK

SECURITIES BROKERAGE INCOME

4Q 2010 3Q 2011 4Q 2011

$87.5 MILLION

$87.9 MILLION $79.3

MILLION

COMMUNITY BANK

ANNUITY COMMISSIONS

4Q 2010 3Q 2011 4Q 2011

$26.3 MILLION

$30.4 MILLION

$27.1 MILLION

PERFORMANCE BENCHMARKS FOR COMMUNITY BANK INVESTMENT PROGRAM INCOME

PERFORMANCE MEASURES 2010 MEAN RATIO 2011 MEAN RATIO

PRODUCTION - Dollar Volume $300,928 $318,456

CONCENTRATION - % of Noninterest Income 7.67% 6.85%

PENETRATION – $ per Million Dollars of Retail Deposits $851 $752

PRODUCTIVITY - $ per Bank Employee $2,189 $2,302

DENSITY - $ per Domestic Office $49,501 $49,652

SOURCE: Michael White - Securities America Report: Community Bank Investment Programs

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or 87.9% reported earning commissions and fees from securities brokerage, and 627 banks or 43.0% reported earning securities brokerage fee income only. Revenue Mix – Annuities

Community banks earned annuity fee income of $121.8 million, up 8.0% from $112.8 million in 2010. Fourth quarter 2011 annuity revenues of $27.1 million were down 10.8% from $30.4 million in third quarter 2011.

Annuity commissions constituted 26.2% of community bank investment program income of $464.3 million in 2011. Annuity revenue mix in fourth quarter 2011 was down to 25.5%, down 2.2 points from its highest quarterly (second quarter) mark of the year. With 13.7% of fourth quarter program income and 14.8% of total 2011 program income from annuities, the bigger banks with assets in excess of $4 billion had a considerably lower mix of annuity commissions in their programs.

Of the 1,458 community banks that reported earning investment program

income, 831 banks or 57.0% reported earning annuity commissions, and 177 banks or 12.1% reported earning annuity income only. This latter finding of 177 banks reporting only annuity income may be indicative of banks that have only platform annuity or licensed bank employee (LBE) programs and not full-product or hybrid investment programs. The number of community banks reporting only annuity income rose from 175 banks in 2010. Leaders – Investment Program

In 2011, leaders in investment program fee income among big banks with assets under $4 billion were CenterState Bank of Florida (FL) with $26.30 million, down 22.4% from $33.91 million in 2010; North Shore Community Bank & Trust Company (IL) with $15.84 million in 2011, up 4.4% from $15.17 million in 2010; TIB The Independent Bankersbank (TX) with $13.10 million, up 13.7% from $11.52 million; BAC Florida Bank (FL) with $5.54 million, down 24.7% from $7.35 million in 2010; and The Washington Trust

Company of Westerly (RI) with $4.390 million, up 0.1% from $4.387 million. (Income in some investment programs is not all derived from activities conducted for retail customers. Institutions like CenterState Bank of Florida and bankers’ banks sell securities, particularly bonds, for other community banks. When bank lending is tight and there are higher deposits and fewer loans, the increased liquidity of banks’ balance sheets also increases

community banks’ demand for bonds.) Leaders – Annuities

In 2011, leaders in annuity fee income among banks under $4 billion in assets were Lake City Bank (IN) with $1.88 million, up 9.2% from $1.73 million; First Victoria National Bank (TX) with $1.85 million, down 6.3% from $1.97 million; Centier Bank (IN) with $1.69 million, up 11.1% from $1.52 million; Marquette Bank (IL) with $1.65 million, up 7.4% from $1.54 million in 2010; and United Bank (WV) with $1.55 million in 2011, down 28.5% from $2.17 million in 2010.

To find out more about the Michael White - Securities America Report: Community Bank Investment Programs, click here.

U.S. ANNUITY SALES GROW 7.7%, DESPITE

4TH QUARTER DECLINES U.S. total annuity sales grew 7.7% $231.1 billion, up from $214.6 billion in 2010, despite declining in the fourth quarter to $54.5 billion, down 1.3% from $55.2 bil-lion in fourth quarter 2010, and down 6.2% from $58.1 billion in third quarter 2011, according to variable annuity data compiled by Chicago, IL-based Morn-ingstar and fixed annuity data compiled by Evanston, IL-based Beacon Research. Variable annuity sales dominated U.S. annuity sales in both the year (67.2%) and the quarter (68.3%), driving the over-all sales trend. For the year, variable an-nuity sales grew 12.4% to $155.3 billion, up from $138.2 billion in 2010. In the fourth quarter, however, variable sales were down 1.1% to $37.2 billion from $37.6 billion in fourth quarter 2010, and down 4.9% from $39.1 billion in third quarter 2011. Variable annuity net assets reached $1.50 trillion in fourth quarter 2011, held

Measures and benchmarks community banks’ performance in generating securities brokerage and annuity fee income.

Uses innovative benchmarking ratios that give insight into community bank investment programs, including:

· Program Productivity · Program Density · Program Contribution · Program Concentration · Program Penetration

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primarily in equity accounts (41%), fol-lowed by fixed accounts (21.6%), alloca-tion accounts (23.2%), bonds (11.8%) and money market accounts (2.3%). Ad-ditionally, $25.6 billion of the $37.2 billion of fourth quarter annuity sales were quali-fied (68.8%) and $11.6 billion were non-qualified (31.2%), Morningstar found. Commenting on overall variable annuity performance, Morningstar Director of Insurance Solutions Frank O’Connor said, “Variable annuities are increasingly at-tracting new money versus generating sales through exchanges of existing con-tracts.” At the same time, fixed annuity sales in 2011 slipped 1.0% to $75.6 billion, down from $76.4 billion in 2010, as fourth quar-ter sales of $17.3 billion were down 1.7% from $17.6 billion in fourth quarter 2010 and down 7.0% from $18.6 billion in third quarter 2011. A 10.3% decline in non-market value adjusted (non-MVA) fixed annuity sales to $5.41 billion and a 1% dip in market value adjusted (MVA) sales to $1.35 billion drove the fourth quarter decline in total fixed annuity sales, while in-come annuity sales climbed 17.6% to a record $2.22 billion and indexed annuity sales remained stable at $8.35 billion. For year 2011, income annuity sales remained strong, growing 6.6% to $8.48 billion, while indexed sales dipped 0.3% to $32.98 billion, non-MVA slipped 3.1% to $28.12 billion and MVAs slid 5.5% to $6.00 billion, Beacon Research found. Allianz Life with its Master Dex in-dexed annuity remained the top fixed annuity provider ($1.49 billion), and Western National, with its non-MVA fixed annuities, dominated bank channel sales. Overall, indexed annuities provid-ed by Allianz Life, American Equity (two products) and Aviva comprised four of the top five fixed annuities sold. Only New York Life’s income annuity varied the trend, ranking second among the top sellers. Commenting on the record income an-nuity sales in 2011, Beacon Research CEO Jeremy Alexander said, “Income annuities generally provide the most re-tirement income bang for the buck. Sales results indicate that advisors and their clients are becoming aware of how these products can be used to create a person-al pension.”

U.S. INDEXED LIFE SALES JUMP 40% IN 2011

U.S. indexed life insurance sales in 2011 hit a record $973.9 million, up 40% from $695.6 million in 2010. A 45% jump in fourth quarter 2011 indexed life sales to $321.1 million, up from $221.4 million in fourth quarter 2010, and a 28% climb over $250.9 million in third quarter 2011 drove the increase, according to Annu-itySpecs.com’s Indexed Sales and Mar-

ket Report. New York City-based AXA Equitable, with its Athena Indexed Universal Life (IUL) product, maintained its position as the top indexed life insurance provider with a 16% market share. Pacific Life Companies, AEGON Companies and National Life Group followed, respective-ly. Sheryl Moore, President and CEO of Pleasant Hill, IL-based Moore Market Intelligence, parent of AnnuitySpecs.com,

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INSURANCE BROKERAGE FEE INCOME ANNUITY COMMISSIONS

TOTAL INSURANCE FEE INCOME MUTUAL FUND & ANNUITY FEE INCOME

INVESTMENT FEE INCOME INCOME FROM FIDUCIARY ACTIVITIES

INVESTMENT PROGRAM INCOME WEALTH MANAGEMENT FEE INCOME

SECURITIES BROKERAGE INCOME TOTAL NONINTEREST FEE INCOME

COMPARES, RANKS AND RATES BY PERCENTILE:

NATIONALLY FEE INCOME DOLLAR VOLUME

BY REGION AS A % OF NONINTEREST INCOME

BY STATE AS A % OF NONINTEREST FEE INCOME

BY ASSET-PEER GROUP AS A % OF NET OPERATING REVENUE

AS A % OF RETAIL DEPOSITS

AS A % OF ASSETS

PER EMPLOYEE

PER DOMESTIC OFFICE

BY COMPOUND ANNUAL GROWTH 1-3 YRS

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said, “Many more companies are on the verge of offering IUL (indexed universal life products).” Moore added, “Given the potential impact of Regulation AG 38, I’d predict that indexed life sales will not only continue to hit records for years to come, but that IUL sales will inch closer to pass-ing sales of ENLG (extended no-lapse guarantee) products.” In 2011, indexed life comprised 20% of total universal life sales.

METLIFE QUESTIONS FED’S BANK-CENTRIC EVALUATION

New York City-based MetLife said it is “deeply disappointed” in the Federal Re-serve’s assessment of its capital adequa-cy and its objection to the company’s plans to repurchase $2 billion in stock and increase its common stock dividend from $0.74 per share to $1.10 per share. MetLife Chairman, President and CEO Steven Kandarian said, “We do not be-lieve that the bank-centric methodologies used under the CCAR (Comprehensive Capital Analysis and Review) are appro-priate for insurance companies, which operate under a different model than banks.” According to the established risk-based capital ratios used to determine the capi-tal adequacy of insurance companies, Kandarian said, “MetLife is financially strong.” MetLife’s consolidated risk-based capital ratio measured 450% at the end of 2011, “well in excess of regulatory mini-mums,” and excess capital reached $3.5 billion, an amount that MetLife expects to double by year-end 2012, Kandarian said. MetLife made clear that it “continues on track with its plan to cease being a bank holding company by the end of the se-cond quarter of 2012.” By divesting itself of its banking business, MetLife will no longer be subject to bank-centric meas-urements and regulations.

FINRA ACTIONS & FINES HIT RECORDS IN 2011

The Financial Industry Regulatory Author-ity (FINRA) filed a record 1,488 discipli-nary actions in 2011, up 8% from 1,310 in 2010. Additionally, the regulator filed 97 formal complaints to the Office of Hearing Officers (for enforcement actions not set-tled through Letters of Acceptance, Waiv-ers or Consents), down 1.0% from 98 in 2010; barred 329 individuals from securi-ties activities, up 14.2% from 288 in 2010;

and levied a record $68 million in fines, up 51% from $45 million in 2010, accord-ing to the FINRA Sanctions Survey con-ducted by Washington, DC-based Suther-land, Asbill and Brennan. FINRA filed the greatest number of actions against suitability failures, which doubled to 106, from 53 in 2010, and levied $7.7 million in fines for those fail-

ures. Improper forms ranked second, jumping 35.8% to 91, up from 67 in 2010, driving fines up 355.2% to $6.6 million from $1.45 million. Improper advertising violations ranked third, doubling to 45, with fines soaring 344.2% to $21.1 million (the highest fines levied), up from $4.75 million in 2010. Auction rate securities violations more than tripled to seven,

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The Hartford Chairman, President and CEO Liam McGee said the company “will leverage its expertise in underwriting, distribution and claims management to improve returns and grow profitability” in its property and casualty and group bene-fits businesses. And, in what McGee de-scribed as the “high return” mutual funds business, the company will “accelerate sales growth with the expanded Welling-ton Management sub-advisory relation-ship.” McGee added, “With this portfolio and the actions we are taking, we are on the right path to unlock value and deliver superior, long-term returns for sharehold-ers.” New York City-based Paulson and Co. CEO John Paulson, whose company owns 8.5% of The Hartford, had urged the company to do “something dramatic” to boost its stock price. In response to The Hartford’s announced plans, Paulson said he does “not believe the positive actions [of divestiture and property-casualty focus] address the main problem with The Hartford’s undervaluation; [namely,] the lack of interest from proper-ty-casualty analysts and property-casualty investors in The Hartford’s best-

and investments, excluding the value of their primary home and any defined bene-fit plan, is less than $25,000, according to the 2012 Retirement Confidence Survey conducted by the Washington, DC-based Employee Benefit Research Institute.

MARCH 26 - APRIL 1, 2012

THE HARTFORD OPTS FOR PROPERTY-CASUALTY &

MUTUAL FUND FOCUS Hartford, CT-based The Hartford an-nounced it will stop selling annuities as of April 27, 2012, take a related after-tax charge of $15 million to $20 million in the second quarter, and place that individual annuity business in runoff. Additionally, the company is putting its Individual Life, Woodbury Financial Services and Retire-ment Plan businesses up for sale. These moves reflect management and the Board of Directors’ decision to focus on The Hartford’s property and casualty, group benefits and mutual fund business-es, which leadership described as having “competitive market position, strong capi-tal generating ability and lower sensitivity to capital markets.”

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drawing $1.75 million in fines for failures to disclose material facts to investors. Short-selling violations ranked fifth in number but second in fines, which reached $16.8 million, driven by a $12 million fine imposed on one firm for failing to properly supervise short sale orders, the FINRA Sanctions Survey reveals.

TOWERS WATSON’S CLIPS CONFIRMS “PRICING TURN”

IN COMMERCIAL RATES Data compiled by New York City-based Towers Watson’s Commercial Lines In-surance Pricing Survey (CLIPS) support results released last week by Dallas-based MarketScout regarding the rise in composite commercial insurance rates. According to Towers Watson, composite rates grew 3% in fourth quarter 2011, led by the third consecutive quarter of in-creases in commercial property insurance rates and an even longer upward trend in workers’ compensation rates. Towers Watson Property and Casualty Head Thomas Hettinger said, “We are now at a point where we can ‘call the pricing turn’ in the market.”

ONE-THIRD OF U.S. ADULTS FEAR THEY WILL OUTLIVE

THEIR RETIREMENT SAVINGS More than two-thirds (67%) of U.S. adults believe they are solely responsible to prepare for their financial futures, and the same percentage believes it is the gov-ernment’s responsibility to protect them from fraud and abuse, according to a Certified Financial Planner (CFP) Board survey of 1,015 conducted during the first week of March 2012. About half (49%) of those surveyed are concerned about their retirement savings, and 33% fear they will outlive their retire-ment assets. As a result, 60% surveyed believe they will need to continue working past age 65. Forty-four percent don’t feel any better about their financial security than they did a year ago; 23% feel worse, and 40% believe their financial security is more at risk than ever before, the survey conducted by KRC Research on behalf of the CFP Board found. For more on the Shifting Economy Survey, click here.

MOST U.S. WORKERS ARE SAVING FOR RETIREMENT, BUT NOT MUCH

Two-thirds of U.S. workers say they and/or their spouses have saved for retire-ment, and 60% of U.S. workers say the total value of their household’s savings

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in-class property-casualty business due to its affiliation with unrelated, low-return and complex businesses.” He added, however, that he expects the actions to “materially increase property-casualty investor interest in The Hartford.”

NAIC CLARIFIES ITS MISSION National Association of Insurance Com-missioners (NAIC) President and Florida Insurance Commissioner Kevin McCarty has clarified that the NAIC is neither a “regulatory body,” nor a “standard setter” nor a “trade association.” It is, instead, “as association of elected and appointed state regulatory officials charged with regulating the insurance industry under state law.” The NAIC, he said, provides a forum for those regulators “to establish regulatory policy, standards and best practices” which those state regulators may or may not choose to implement in their states. As a result, McCarty said in a letter to U.S. Representative Edward Royce, “The NAIC does play an integral role in the national system of state-based regulation as a forum for standard setting, but it is not a regulator.” Royce had asked McCarty and NAIC CEO Therese Vaughan to clarify the as-sociation’s mission, authority, non-profit tax status and freedom from federal gov-ernment oversight and accountability.

THE P&C MARKET “HAS NOT TURNED HARD,”

III PRESIDENT SAYS The property and casualty insurance mar-ket “has not turned hard,” according to Insurance Information Institute President Robert Hartwig. Four conditions must be in place for the market to turn, Hartwig told the Insurance Industry Challenges symposium meeting in Chicago last week. First, the industry must sustain large underwriting losses. Next, insurers must experience a material decline in capacity. Third, the reinsurance market must be tight, and, fourth, insurers must exert underwriting and pricing discipline. Hartwig noted that the last hard proper-ty and casualty insurance market began after six consecutive years of underwrit-ing losses, not after one year like the in-dustry experienced in 2011. Second, in-surers’ surplus reached a record high in 2011, indicating the opposite of de-creased capacity. Third, while a tighter reinsurance market has emerged in re-

cent disaster areas like New Zealand, Chile and Japan, it has been muted else-where. Fourth, the 3.5% growth in net insurance premiums in 2012 is basically in line with historical performance. Con-sidering these facts, Hartwig said, “There is nothing really in place to suggest that we have the factors in place that would bring us a robust hard market,” busi-nessinsurance.com reports.

INSURANCE IS ABOUT TO ENTER ITS GOLDEN AGE, WILLIS CHAIRMAN SAYS

The insurance industry is on the cusp of a golden age, Willis Group Chairman and CEO Joe Plumeri told attendees at an I-Day meeting hosted by the Insurance Society of Philadelphia in that city last week. When asked by BestWeek Associ-ate Editor John Weber to expand on what he meant by that statement, Plumeri ex-plained that the exploding population is driving business expansion, and “businesses have got to be insured, and, as a result of that, the industry’s got to get bigger.” As the population increases, Plumeri said, so does the middle class and “bigger middle classes have to have jobs.” The companies that offer jobs “need insurance, they need risk manage-ment. It’s the golden age of insurance,” Plumeri said.

INVESTORS FEAR LOSING MONEY IF THEY SAVE

Almost half (47%) of U.S. investors say they have curbed their savings and in-vesting because they do not want to risk losing money. About an equal percentage (48%) say they save in order to provide for themselves and their families. A much smaller percentage (18%) says they save to grow assets; 9% save to preserve as-sets for future generations; 5% save to pay for children’s educations, according to a survey conducted in May and July of 2011 on behalf of Boston and Paris-based Natixis Global Asset Management.

JPMORGAN PAYS UP FOR VIOLATING CONTRACT

WITH AMERICAN CENTURY New York City-based, $2.27 trillion-asset JPMorgan Chase & Co. has paid $384 million plus interest to Kansas City, MO-based American Century Investment Management. The payout complies with the American Arbitration Association’s

decision that JPMorgan Asset Manage-ment violated its contractual agreement to promote American Century funds. The Arbitrators wrote, “JPMorgan breached the contract over and over again” with “one-sided sales and marketing support given to JPMorgan Asset Management and its funds.” JPMorgan said, “We strongly disagree with the arbitrators’ decision and award, because, among other things, it misinter-prets the contract.” American Century said, “Justice was served.” The Arbitrators issued their ruling on August 10, 2011. A Missouri Court con-firmed the award on December 6, 2011, and JPMorgan Chase paid the award plus interest as “non-client litigation” be-fore the end of the year. Also, in August, JPMorgan Chase sold its 41% stake in American Century to Canadian Imperial Bank of Commerce for $848 million. JPMorgan Chase disclosed the ruling and payment on March 22, 2012.

GRANT THORNTON IDENTIFIES FIVE KEY AREAS FOR

BROKER-DEALER SUCCESS Broker-dealers that focus on five key are-as and take appropriate action in those areas will maintain a competitive ad-vantage in the current challenging and uncertain regulatory and economic envi-ronment. According to Grant Thornton’s recent findings in Overcoming the Chal-lenges to Growth for Broker-Dealers, those five primary areas include revenue growth, regulatory response, risk man-agement, technology and operational effectiveness. For more detailed information on Grant Thornton’s Overcoming the Challenges of Growth for Broker-Dealers, click here.

FINRA FINES CITI INTERNATIONAL FINANCIAL

FOR EXCESSIVE MARKUPS & MARKDOWNS

The Financial Industry Regulatory Author-ity (FINRA) has fined New York City-based $1.87 trillion-asset Citigroup sub-sidiary Citi International Financial Ser-vices $600,000 and ordered it to pay more than $648,000 in restitution and interest to more than 3,600 customers it allegedly charged excessive markups and markdowns on corporate agency bond prices from July 2007 through September 2010.

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FINRA Market Regulation Executive Vice President Thomas Gira described the markups and markdowns, which ranged from 2.73% to over 10% as “outside the appropriate standards for fair pricing in debt transactions.” Gira said, “FINRA will continue to identify and address transac-tions that violate fair pricing standards, regardless of whether a markup or mark-down is above or below 5%.” Citi International Financial was ordered to revise its written supervisory proce-dures regarding markups, markdowns and the execution of fixed income transac-tions. Citi International neither admitted nor denied the charges, but agreed to pay the fine (which included monies for super-visory violations) and make the required restitution to its customers.

CITIGROUP MAY BE READY TO SELL ENTIRE STAKE IN

MORGAN STANLEY SMITH BARNEY New York City-based, $1.87 trillion-asset Citigroup is reportedly considering selling its total stake in Morgan Stanley Smith Barney to Morgan Stanley, if the price is right. Morgan Stanley has an option to purchase a 14% stake from Citigroup in May and the right to purchase all of Citigroup’s shares in the joint venture over the next two years. Currently, Mor-gan Stanley owns 51% and Citigroup owns 49% of the broker-dealer, which holds $1.65 trillion in client assets, bloom-berg.com reports.

NEW YORK AGENTS WON’T APPEAL REG 194 DECISION

The Independent Insurance Agents and Brokers of New York (IIABNY) and the Council of Insurance Brokers of Greater New York have decided not to appeal the New York State Supreme Court Appellate Division, Third Department’s ruling affirm-ing the New York Superintendent of In-surance’s authority to issue Regulation 194 and the validity of the regulations being codified into law. IIABNY Chair-man Christopher Brassard said, “The Board looked at the projected costs in terms of the time and resources that an appeal would entail and compared that to the probability that the court would rule in our favor [and] … concluded it would not be in our members’ best interests to con-tinue.” IIABNY will “focus it energy and resources on helping its members comply and on other issues that affect our mem-bers,” Brassard said.

RBC WEALTH MANAGEMENT TO ACQUIRE COUTTS’ PRIVATE BANKING BUSINESSES IN LATIN AMERICA, CARIBBEAN & AFRICA

Toronto, Canada-based Royal Bank of Canada unit RBC Wealth Management, has agreed to acquire the Latin Ameri-can, Caribbean and African private bank-ing businesses of Coutts, the wealth management division of the Royal Bank of Scotland. The transaction takes in over $2 billion in client assets and in-

cludes key private banking staff based primarily in Geneva, Switzerland. RBC Wealth Management CEO George Lewis said, “This business repre-sents an excellent opportunity to increase our market share with high net worth and ultra high net worth clients in key high growth markets while delivering very at-tractive returns.” Royal Bank of Scotland (Suisse) General Manager Karen Simp-son added, “Our Geneva-based business has built a reputation for serving the often complex needs of emerging market cli-ents. This acquisition will enable us to increase our client base significantly.” The deal is expected to close late in the second quarter, pending regulatory ap-proval.

ING PREPARED TO SELL 31% STAKE IN THAILAND BANK

Amsterdam, Netherlands-based ING Group is reportedly ready to sell its 31% stake in Bangkok, Thailand-based TMB Bank. ING bought the stake, which is currently valued at $775 million, in 2007 for $610 million and became a partner with the Thai government (26.1%) and TMB. The Thai government is reportedly also interested in selling its shares of the bank. Any potential buyer of either stake must offer to buy the entire company un-der Thai law, which also limits foreign ownership in domestic banks to 49%, Retuers reports.

MICHAEL WHITE ASSOCIATES, LLC IS HEADQUARTERED IN RADNOR, PENNSYLVANIA. PLEASE VISIT WWW.BANKINSURANCE.COM ON THE INTERNET OR CALL 610 -254-0440 FOR MORE INFORMATION.

Email: main@bankinsurance.com Phone: 610.254.0440 Web: www.bankinsurance.com

M I C H A E L W H I T E A S S O C I A T E S

B A N K I N S U R A N C E C O N S U L T A N T S

Relax. You can count on us.

S P E C I A L B O N U S A R T I C L E

CIMRO (Credit Industry Marketing Representative Organization)

is a non-profit trade organization that provides a

forum for the promotion of credit-related

products. In July of last year, CIMRO

embarked on an initiative to enhance

industry and company knowledge

about and growth in sales of credit

insurance and debt protection

products .

Last year’s survey covered

product offering, acceptance

rates, incentives, reporting,

and organizational struc-

ture. This year’s survey

will review these same

topics plus discuss the

impact of changes in

the regulatory environ-

ment and claims.

CIMRO is in the midst

of collecting data for the

2012 survey and will report

and review results at the Annual

Conference in Denver, CO on June 10-

12. Please visit www.CIMRO.org to par-

ticipate in the survey (10 to 15 minutes)

and to register for the conference.

Some key findings from last year’s

survey include:

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Debt Protection and Credit Insurance

Industry Trends

Incentives

1) 65% of respondents have payment protection as part

of their retail goals.

2) 100% of those offering incentives pay point of sale lenders.

3) The majority of incentives are a one-time payment as

opposed to a percentage of premiums/fees collected.

Reporting

1) 85.7% of respondents have some type of sales report-

ing for their group.

2) 64.3% track sales to the individual lender level.

3) 53.6% prepare reports in-house.

Organizational Structure

1) 37.9% of respondents report to consumer lending;

20.7% to retail lending; 20.7% to insurance.

2) Respondents identified three factors as having the

greatest impact on a successful sales program as Ef-

fective Training (73%), Individual Lender Accountability

(62%) and Senior Management Support (57%).

Could this type of information be helpful to you in developing a

new program or enhancing an existing program? To partici-

pate in this year’s survey and find out more about attending

the 20th Annual CIMRO Confer-

ence in Denver, CO, June 10-12,

please visit www.CIMRO.org.

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Product Offering

The following trends were observed in credit insurance / debt

protection products:

1) Credit insurance is offered more frequently on direct/

secured loans and unsecured loans than debt protec-

tion; the opposite is true for home equity lines of credit

(HELOC) and home equity loans (HELOANs), debt

protection is offered more frequently.

2) More than half of all respondents do not offer any form

of payment protection for first residential mortgages,

small business loans, credit cards and indirect lending.

3) Life (full cancellation) and disability were overwhelm-

ingly the most common protections offered.

Acceptance Rates

Most commonly based off the number of eligible loans

1) 2011 projections for acceptance rates were less opti-

mistic (0-10% range) than 2010 actual (16-30% range).

2) Half of the respondents do not offer payment protection

by phone or online channels; however those who do

experience a higher than average acceptance rate than

those who offer payment protection at the time of sale.

3) Closed end loans have a higher acceptance rate than

open end loans

Debt Protection vs. Credit Insurance

Direct/Secured Installment

Loans

Unsecured Personal

Loans/Lins HELOANS HELOCS First Res. Mortgages Credit Card Small Business Indirect

DP - 36% CI - 46% Both - 18% Neither - 0%

DP - 30% CI - 42% Both - 15% Neither - 12%

DP - 38% CI - 28% Both - 19% Neither - 16%

DP - 36% CI - 29% Both - 13% Neither - 23%

DP - 16% CI - 36% Both - 10% Neither - 39%

DP - 26% CI - 15% Both - 4% Neither - 56%

DP - 13% CI - 23% Both - 7% Neither - 57%

DP - 0% CI - 14% Both - 3% Neither - 83%

Key: Debt Protection Credit Insurance Both Neither

SOURCE: CIMRO Inc. Annual Survey Results - 2011

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MICHAEL WHITE ASSOCIATES, LLC IS HEADQUARTERED IN RADNOR, PENNSYLVANIA. PLEASE VISIT WWW.BANKINSURANCE.COM ON THE INTERNET OR CALL 610 -254-0440 FOR MORE INFORMATION.

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