Wells Fargo & Company WFC is likely to expand its insurance business, in an effort to boost revenues as low interest rates weigh on the banking giant’s lending business. The company has recruited over 50 officials to the insurance division in recent months.
The hiring comes in line with the company’s plan to “increase cross-sell, attract new business, enhance customer service and leverage industry expertise.” The hiring includes several key positions including business development officers, national practice managers and market leaders.
Per Laura Schupbach, head of Wells Fargo Insurance, “Wells Fargo Insurance will continue to recruit team members who bring leading industry and bank expertise as we grow the business and serve the insurance needs of more customers.”
Wells Fargo Insurance, which includes Insurance Brokerage and Consulting (IBC) and Personal and Small Business Insurance (PSBI), offers an array of products and services. IBC is engaged in catering to middle market, large corporate and high net worth clients with risk management solutions, including property and casualty, professional risk and life products. PSBI caters to retail and small business customers, offering personal and business insurance products including auto, home, renters and small business insurance.
Currently, Wells Fargo Insurance writes $11 billion of property, casualty, benefits, international, personal lines, and life products premiums annually. As of Mar 31, 2015, Wells Fargo insurance division contributed 4% of the bank’s non-interest income.
Wells Fargo also remains focused on attracting more of its banking customers to foray into insurance. The insurance division covers around 10% of the bank’s wholesale customers. In a recent conversation with The Wall Street Journal, Ms. Schupbach stated that she expects the number to climb to 20% to 30% of the bank’s wholesale customers.
Bottom Line
As the banking industry faces revenue pressure from the low interest rate environment, stricter regulatory conditions and higher capital requirements, banks are continuously looking out for alternative sources of revenues. We believe Wells Fargo is likely to benefit from its insurance business.
The insurance industry is currently healthy and promising. As the U.S. economy is gaining stability gradually, the pricing structures in the industry is also expected to improve. Moreover, GDP growth is likely to aid revenue growth, payrolls, and property values, which contribute to insurance premiums. Despite a low interest rate environment, favorable trend in the industry will keep the influx of new capital uninterrupted. Hence, we remain encouraged by the California based bank’s efforts to fortify its insurance business.
Wells Fargo carries a Zacks Rank #3 (Hold). Some better ranked stocks in the finance space include The Bank of New York Mellon Corp. BK, Northern Trust Corp. NTRS and Investment Technology Group Inc. ITG. While Investment Technology sports a Zacks Rank #1 (Strong Buy), both Bank of New York Mellon and Northern Trust carry a Zacks Rank #2 (Buy).
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