Since the laws barring joint insurance and banking operations were abolished in 1999, the manifestations of the concept of integrated financial services firms lag the promise. A new report from Hartford, Conn.-based Conning Research & Consulting, analyzes the performance of these combined entities during the crisis and recession.
“Even before the financial crisis, the notion of financial supermarkets that had gained currency following the repeal of Glass-Steagall had begun to fade in the face of discouraging early results,” says Terence Martin, an analyst at Conning. “Wholesale integration of large-scale banking and insurance operations had proven both complicated and ultimately distracting, and early experiments began to unravel.
Yet the study, “Life Insurance and Banks: All About Focus,” points out that strategies for less-ambitious combinations have begun to emerge.
“In our review of the performance of insurance-banking combination strategies we identified two key determinants of success,” says Stephan Christiansen, director of research at Conning. “Scale mattered, as larger combined players performed well, while small insurers with small bank units underperformed as they tried to manage these two very complex businesses. Most importantly, successful players seemed to be those who retained a primary market focus in either insurance or banking, and established the secondary service offerings to deepen the relationship with their core clientele.”
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