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Greater Buffalo Savings may branch out Thrift has been approached about adding insurance products

Greater Buffalo Savings Bank is considering getting into the sale of insurance and health savings accounts, but is delaying any action until after it completes a pending merger with a California company, executives said.

The Buffalo-based thrift has been approached by "a number of people" about setting up a joint venture to sell insurance products, but has not had more than preliminary talks with anyone, said president and CEO Andrew W. Dorn Jr.

In the meantime, he said the savings bank is still trying to determine if it should limit itself to such a cooperative effort to boost fee income somewhat, or just buy a full-service insurance agency, as rivals like First Niagara Financial Group, M&T Bank Corp., and Evans Bancorp have done.

After a series of rapid-fire deals, First Niagara now owns the largest insurance agency in upstate New York, while both M&T and Evans have also made multiple purchases to grow their insurance businesses.

"We will take a good hard look at offering insurance products when we get done with our merger," Dorn said. "It is to early to say which way we will proceed, but at this time we have not had any formal conversations with any

Greater Buffalo is merging with Bay View Capital Corp. of San Mateo, Calif., giving the Buffalo savings bank more than $100 million in new capital, three experienced bankers added to its board, and a listing on the New York Stock Exchange. Greater Buffalo's management will remain intact and will control the company, which will still be based here. The deal is expected to close in April.

Banks have been aggressively getting into the insurance sales business for years as a way of increasing their noninterest income, cross-selling more products, and strengthening customer relationships. Boosting fee income has become critical for banks as a way of countering the instability inherent in interest income from lending.

In fact, aside from giant brokerage firms like Marsh & McLennan Companies, Aon Corp. and Willis Group Holdings Ltd., the two largest independent insurance agencies today are owned by banks Wells Fargo & Co. and BB&T Corp.

Dorn said Greater Buffalo is also interested in offering health savings accounts, taking advantage of the increasing interest in the products since President Bush cited and praised them in his State of the Union address.

HSAs are tax-exempt savings accounts in which consumers can set aside money for approved healthcare expenses. Created as part of the Medicare reform legislation in 2003 and first available in 2004, the accounts must be paired with a high-deductible health plan, with the savings used to pay the deductible. Together, the two components are the primary features of consumer-driven health plans that are designed to make employees more cautious consumers of health care.

Unlike previous versions of medical savings, HSAs are managed by banks and other financial firms, not by health insurers or employers. As a result, a number of banks large and small -- including First Niagara -- have been rushing to launch their own products to capitalize on the movement.

More than 800,000 U.S. residents have HSAs today, and that number is expected to jump to at least 15 million by 2010, with $75 billion in assets, according to reports by Kaiser Family Foundation and DiamondCluster International.

"We are very interested in offering HSAs and they are on our to-do list but [we] have not progressed very far," Dorn said by e-mail.


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