ACQUISITION FRENZY? HAH! INSURERS COLD-SHOULDERED: BANKS PREFER SELLING POLICIES TO UNDERWITING RISKS

All those acquisition rumors spurred by bank deregulation are about as overhyped as a Mike Tyson title match.

Truth is — with Citigroup Inc. the glaring exception, of course — most banks won’t want to take on the risks and low returns of underwriting insurance, say analysts. They’d rather let insurers do that, and then take a cut of revenues by selling policies through branches.

Also, while major insurance companies likely want to ramp up their brokerage operations, and securities outfits want to beef up their banking services, some analysts say many have already established thrift charters to offer their services from scratch.

“I don’t think there’s an interest in buying commercial banks because firms can do everything banks can and commercial lending is not an attractive business,” says Raphael Soifer, a bank analyst with Brown Brothers Harriman & Co. in New York.

Maurice “Hank” Greenberg, chairman and chief executive of American International Group Inc., has said he doesn’t want to enter the banking business.

The country’s two biggest life insurers — Prudential Life Insurance Co. of America in Newark, N.J., and New York’s Metropolitan Life Insurance Co. — are poised for blockbuster deals once they demutualize, but they’ll more likely seek brokerages and money management, at least initially.

Prudential already has a banking charter and Met Life has said it isn’t interested in the business, says Lawrence Mayewski, an analyst at A.M. Best & Co., an insurance rating company in Oldwick, N.J. “Met Life has said ‘we can do what we need to do without the acquisition of a bank,” he says. “Longer term, they would bring that up for consideration.”

Most regional banks likely won’t pursue insurance companies because they lack the scale and distribution system to make such acquisitions pay off, says Ken Hemauer, an analyst for Robert W. Baird in Milwaukee.

“I don’t expect a lot of movement on the regional side,” he says. Such an acquisition is “not a strategic need.”

Of course, analysts aren’t ones to never say never. They suggest that banks and insurers may make small-scale acquisitions to test the waters; also banks might be interested in firms with substantial presences in investment businesses like variable annuities. Analysts offered up some deals they wouldn’t bet against.

One much discussed scenario posits the marriage of two Boston companies, acquisitive FleetBoston FinancialCorp. and the demutualizing John Hancock Mutual Life Insurance Co. Besides their close proximity, they are well-versed in each other’s businesses.

Wells Fargo & Co. of San Francisco stands out as another potential acquirer. It already is one of the major sellers of insurance among banks through its Norwest Insurance unit, and may want to try underwriting as well.

“Wells Fargo has made an effort to be ready,” says Michael Ancell, an analyst for Edward Jones in St. Louis, noting that the bank is licensed to sell insurance in all 50 states.

Of course, commercial banks are now salivating over the high revenues that come from investment banking, which is why Chase Manhattan Corp. has been fawning over Merrill Lynch.

Mr. Soifer says Merrill, rather than marrying a big commercial bank, would more likely prefer to develop trust services on its own or through another deal.

Two banks aggressively trying to expand their business lines through acquisition, Bank One Corp. of Chicago and First Union Corp. of Charlotte, N.C., are slumping, so they likely will have to wait to make major purchases.