Clark Troy's  Instablog

The news last Friday (2/3/12) that North Carolina-based BB&T (BBT) would acquire Roseland, New Jersey based the Crump Group for $570 million signals a further heating of the already warm space of insurance distribution M&A. Already the nation's second largest bank-owned insurance broker, BB&T Insurance Services becomes the largest independent U.S. wholesale distributor of life insurance and a strong number two in wholesale P&C insurance after acquiring Crump.

Bank insurance has been something of a sleepy domain in the United States, which has never seen "successful" bancassurance behemoths like ING or Fortis (whoops!) take root. All of Sanford Weill's wiles could not keep the banking and insurance components CitiBank (C) together. Even in the shadow of Dodd-Frank and the Durbin Amendment, as banks have struggled to replace revenue streams lost to regulation, there have not been major moves to bring banking and insurance under one roof, until today. Around the banking and insurance world, it was rumored that BB&T and Wells Fargo (WF), the bank with the largest insurance brokerage, were working to increase their ability to cross-sell banking and insurance products through their reciprocally complementary channels, which was rational but not that dramatic. Today's news changes the game.

What's next? To compete, will Wells Fargo feel compelled to make a bid for another big life brokerage like National Financial Partners (NFP), which rose today in line with the broader markets? Time will tell.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Is it just me, or does it strike anyone else as ironic that health insurers Aetna and Humana have reported results for the 3rd quarter that benefit from consumers' lower utilization of healthcare services, even while there's a debate as to whether or not Steve Jobs' failure to seek proper treatment for his cancer allowed it to spread and hastened his demise?

To return to the first point, the Wall Street Journal today reported that "Humana's medical-cost ratio, the percentage of premium revenue used to pay medical bills, fell to 80.7% from 81.6% a year earlier and 82.2% in the second quarter. Health insurers have benefited as economic turbulence has slowed traffic in doctors' offices and operating rooms, leaving insurers fewer bills to cover."  Now, it's possible this can be put down as demonstrating that the promise of consumer-driven healthcare is being realized, and that consumers are thinking about costs -- deductibles, prescription drugs -- before traipsing off to the doctor for procedures they don't need.

I don't know. I think most people don't like to go to the doctor or get tests that may call into question their own vitality and perhaps mortality, and that much of the low utilization of medical services over recent quarters reflect consumers' kicking their own plump cans down the road, as so many like to say in connection with recent debt debates. I think the short-termism of fhe quarterly earnings game is likely being reflected in short-termism with regard to health.  Until we get better insight into the specifics of the types of treatments patients have foregone over recent quarters, it's probably best to withhold judgment over Aetna and Humana's results. For all we know, deferred visits to the doctor may yet balloon into bigger costs down the road.

Chronic conditions such as heart disease, cancer, strokes, diabetes, and chronic pulmonary diseases contribute an estimated 75% of the US's $2.4 trillion in annual healthcare spend.  That's the real number we need to worry about.  It is improbable that consumers' going to the doctor less will materially impact that, however nicely it may tweak an insurer's quarterly earnings.

In 2003 Steve Jobs made his own decisions about delaying treatment for the rare pancreatic cancer that afflicted him, and it spread to his liver. In an economy that has at times seemed to be driven disproportionately by Apple, it's hard to book this as a gain.  Maybe his proximity to death spurred Jobs not just to a great graduation speech at Stanford, but to double down in his quest for immortality as reflected in the paradigm-shifting products that followed, the iPhone and the iPad. Or maybe he would have done the same and more had he gone to the doctor and perhaps managed his cancer better.  We'll never know.

In any case, it's probably best over time for both the insurers themselves and for consumers that Americans seek treatment prudently rather than defer visits to the doctor based on cost.  Deferred maintenance has not been a successful strategy with America's infrastructure, and it's unlikely to be a boon to our collective health or the costs associated with it.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

GEICO's new "Epic Journey" gecko-based commercial was a little bit of a shocker for me. Accompanied by rising, inspirational music, our English-accented reptile friend proclaims himself to be on a journey, slowly makes his way through "amber waves of grain, from sea to shining sea," declaring his promise to save all Americans loads of money on car insurance. And then, shockingly, he finds himself at the edge of a road, and it turns out that he's been going through some brown grass at the edge of a GEICO office parking lot.



But look where the Gecko's standing. The curb itself is decrepit, not well maintained, looking pretty "shovel-ready" if you ask me. There are grass clippings in there from where the grass he had come through had been recently weedwhacked, but not cut. There are dandelions in there. Why isn't the grass cut?  Why isn't GEICO tending to its lawns?  And what's that car there on the left, the closest one to us?  A 2001 Buick LeSabre? What about that office building back there, a classic example of Mike Brady modernism? Maybe this all just demonstrates the fiscal prudence of GEICO's culture, where everybody meets the Oracle at the local Dairy Queen.

This is a witty, funny commercial, sure, but with very dark undertones. It is, in short, dystopian. The Gecko emerges from his "Epic Journey" into an environment that is decrepit and hostile.

This is not the sort of thing we expect from one of the most visible consumer brands of Warren Buffett, the man who, with his Burlington Northern acquisition, said he was making an "all-in wager on the future of the American economy."  Instead, it paints a pretty bleak picture of where we are: streets decaying, lawns under-maintained, car purchases deferred (that's not good for auto insurance!), office building upgrades not even considered.

The commercial represents, in short, a scare tactic. Don't save money because it's a prudent thing to do, save money because you have no choice. Which perhaps marks a new stage of the Great Recession, similar to where we got to in the 70s with pop culture like Sanford and Son or The Warriors, where the physical decline of the nation was an acknowledged part not just of reality but its representation.

And I haven't even begun to riff on the theme of the limitation of the American Dream implied by the commercial, if a few feet of parched and unkempt grass is all that our national mythos has to offer us. I suspect this commercial won't last long. Somebody within Berkshire Hathaway will see it and recognize it for the rare bit of negative realism that it represents, and it will be pulled.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.