Crossing the Next Insurance Frontier: P&C.

Since the breakdown of the Glass-Steagall wall separating banking from other financial services, banks have made significant inroads into securities and most types of insurance. Still to be conquered, however, is the property and casualty insurance business, and just when some banks have started to crack that segment by acquiring product specialty firms, the prices of these agencies are at their highest in years.

"Early on, banks weren't convinced that acquiring agencies was the right strategy, but some have now found that offering insurance is critical to their better commercial customers," said John Wepler, an executive vice president at MarshBerry, a consultancy that advised on 23 property and casualty deals in 2003.

The greatest challenge for banks pursuing an acquisition strategy may lie in maintaining P&C's spectacular recent performance. Revenue has grown impressively in recent years due to greater commissions on rising premiums. But new business eventually will have to be brought in the door to keep revenue growing. …