Wells Fargo Focuses on Insurance: Q&A

SAN FRANCISCO (TheStreet) -- As the U.S. economy continues to inch toward stabilization, U.S. banks have been branching out of their traditional loan-and-deposit businesses to find new avenues of growth.

As the biggest pure-play U.S. banking operation in the country, Wells Fargo (WFC) has been stepping deeper into several areas where it has room to grow - notably wealth management, investment banking and, more recently, insurance.

The company does insurance underwriting only selectively, mostly acting as a distributor for outside insurers to offer their wares to Wells Fargo customers. The acquisition of Wachovia gave Wells a broader footprint to offer customers insurance products - everything from auto and life and property and casualty insurance offered by third parties.

The relationships benefit Wells Fargo because it can broaden customer relationships and allow the bank to collect fees on the new business without taking on additional risk. It benefits insurers, because they can increase their market share in a less-costly manner by using Wells Fargo as a vehicle to pitch products to consumers and businesses.

Over the past several months, Wells has gotten more aggressive on the insurance front. In June, Saybrus Partners said it would be providing life insurance consulting services to Wells Fargo's financial advisors. At a conference in November, David Zuercher, who chairs Wells Fargo Insurance Services USA, predicted that Wells and many of its mid-to-large competitors would be acquiring small insurance companies.

And, sure enough, in January the bank announced two small deals to buy two employee-benefits insurance brokerage firms in Ohio and Kansas, called Prestige Professional Plans an JFK Consulting Group, respectively. During the bank's fourth-quarter conference call, CEO John Stumpf reiterated the firm's commitment to building out its insurance-distribution franchise.

Insurance consultant Dan Weedin, who runs the Poulsbo, Wash.-based firm Toro Consulting, says Wells Fargo has a standout among big banks stepping into the insurance realm. He points out that while an insurance product may come from Travelers (TRV) or AIG (AIG) or Liberty Mutual or MetLife (MET), Wells Fargo may be able to offer customers "a little bit of a better deal" for the same product because of cost efficiencies.