Washington —
The news comes following a deal facilitated by the
The Insurance Services group, the 12th-largest insurance brokerage according to
Citigroup's New York-based Citibank N.A. reported insurance brokerage earnings of $743 million through the first two quarters, the largest of any bank holding company, according to Radnor, Pa.-based bank insurance consultant
MWA President Michael White told BestWire that Wachovia's remaining insurance brokerage assets could provide a takeover target for other brokers or bank insurance operations, but that it would be difficult to assess the value of business until more details are available about how the break-up of brokerage and retail banking will play out.
"Part of the issue is, to what degree did so-called 'affiliated,' yet freestanding, insurance agencies owned by Wachovia have marketing agreements within Wachovia branches, and what the impact of those marketing agreements will be with the Wachovia banking apparatus sold to Citi," White said. "They had just sold off their one life insurance estate-planning operation, but to the extent that they have other free-standing operations, presumably, there's good value there."
According to MWA, bank insurance brokerage earnings through the first six months of 2008 were $2.12 billion, up 6.4% from $1.99 billion in the first half of 2007.
Hit hard by mortgage loan and credit-related losses, Wachovia forced former CEO Ken Thompson to resign in June 2008. Robert Steel, former under secretary of the U.S. Treasury for domestic finance, was named president and CEO the next month.
As part of the Wachovia sale, Citigroup also grants the FDIC $12 billion in preferred stock and warrants. The FDIC said Wachovia did not "fail" and that it does not anticipate claims against the deposit insurance fund.
"I agree with the FDIC and the Federal Reserve that a failure of Wachovia would have posed a systemic risk," Treasury Secretary Henry Paulson said in a statement. "The FDIC's actions help to mitigate potential systemic risk to our financial system. As I have said before, in this period of market stress, we are committed to taking all actions necessary to protect our financial system and our economy."
Source: TradingMarkets.com via A.M. Best