Source: ABIA Study of Leading Banks in Insurance
OWNERSHIP CHANGES
Banks and brokers purchase both specialist and generalist agencies
An indicator of banks' long-term appetite for the insurance business comes from the statements accompanying their first quarter financial results. Several banks pointed to strengthening insurance income as contributing positively to their overall performance, according to Michael White Associates, which compiles data on banks' insurance activity.
BB&T, the North Carolina-based bank, reported first quarter insurance revenues that were 39.5% ahead of the same period last year. Excluding recent acquisitions of insurance entities, BB&T's first quarter insurance commissions rose 10.1%.
Other banks reporting strong growth of insurance income for the first quarter include BankCorpSouth (which owns P-C agencies in Arkansas, Louisiana, and Mississippi) whose insurance commissions more than doubled in the first quarter; Harbor Florida Bancshares, where insurance commissions and fees jumped 44.4%; and Evansville, Indiana-based Old National Bancorp, where first quarter insurance earnings jumped 76.8%, reflecting "both internally generated revenue growth and the acquisitions made during 2003."
Annuities are banks' dominant overall source of insurance income, according to the 2003 American Bankers Insurance Association (ABIA) Study of Leading Banks in Insurance, conducted by Reagan and Associates (see graph). However, the ABIA study notes that commercial lines premiums grew from 10.1% of the banks' insurance revenues in 1997 to 16.6% in 2002. Over the same period of time, if annuities are excluded, banks' commercial premiums grew from 31.5% of insurance revenues to 52.8%.
In other words, if annuities are viewed as a close adjunct to banking (that is, an alternative to CD investments) the "regular insurance" business of banks is starting to look more like a traditional insurance agency--where commercial lines becomes the dominant income source and marketing focus. Bank acquisitions of P-C agencies are giving them an increasing toehold in the commercial lines market.
Recent acquisitions, by both banks and large brokers, include the following:
Associated Banc-Corp (www.associatedbank.com) acquires Jabas Group, Inc., a Wisconsin-based employee benefits firm, complementing its P-C and other insurance interests.
Jabas has 26 benefits consultants offering medical, dental, life, disability, vision, and prescription drug plans, along with benefits planning services. It has more than 1,000 business clients, and operates through seven offices throughout Wisconsin, including its headquarters in Kimberly. Jabas will operate as a northeast Wisconsin division of Associated Financial Group. Associated has been a client of Jabas for more than 20 years.
In April 2003, Associated acquired CFG of Minnetonka, Minnesota, a P-C, benefits and human resources services firm with more than 100 employees. That gave Associated a total of some $28 million in insurance revenues (at that time), including its already-established Associated Insurance Management Group (AIMG), which markets life insurance, annuities and personal lines P-C through bank employees.
Associated has more than 200 banking offices serving more than 150 communities in Illinois, Minnesota, and Wisconsin.
Bank of Smithtown, Smithtown, New York, buys Seigerman-Mulvey Co. of East Setauket, New York.
Seigerman-Mulvey Co. is a 30-year-old independent agency with annual revenues of more than $3 million. It is owned and operated by Barry Seigerman, John Mulvey and Joanne Bentivegna. The price to be paid by the bank will be determined over the course of three years on an "earn-out" basis. Seigerman has served on the board of directors of the bank for 10 years.
Four years ago, the bank entered into a joint venture with the agency to sell insurance. Bradley E. Rock, chairman of the Bank of Smithtown, said, "Although our insurance joint venture has not yet produced significant amounts of income for the bank, in the relatively small number of instances where we have sought to sell these products, we have had a very high rate of success."
Bank of Smithtown is a 95-year-old community bank; its parent company, Smithtown Bancorp, is a publicly held company.
Brown & Brown (www.bbinsurance.com) buys two specialist agencies--one insuring financial institutions (Proctor Financial Insurance), the other insuring real estate title agents (PayEase Financial).
Proctor Financial, founded in 1884, has annualized revenues of approximately $18 million, providing specialty insurance products to more than 1,500 financial institutions. It serves clients across the country, including the U.S. government, handling a cross section of the top 100 and small to mid-sized mortgage servicers.
Proctor's entire management team and staff will be joining Brown & Brown as a stand-alone operation at their offices in Troy, Michigan.
Title Pac, Inc., and PayEase Financial, L.L.C., provide professional liability insurance and premium financing products and services for real estate title agents and escrow agents nationwide. The company, based in Muskogee, Oklahoma, has combined annualized revenues of approximately $3.5 million.
Hilb Rogal & Hobbs (HRH) (www.hrh.com) acquires The Federau Group, Lansing, Michigan, an affiliated group of agencies.
The Federau Group generates more than $3.3 million in annual revenues, providing commercial property/casualty, risk management, and employee benefits services. Its 40 employees will continue from their present office under the direction of Bill Wesley, president, and John P. McGrath, HRH's Midwest regional director.
Hub International(www.hubinternational.com) acquires Bush, Cotton & Scott, LLC (BCS), of Seattle, Washington, a bonding specialist.
BCS, which has annual revenues of approximately $9 million, specializes in general insurance and surety bonding for construction firms in Washington. The company's five owners--Steven K. Bush, Michael Murphy, Dale Ahrens, James Doyle and Stephen Scott--will continue to operate the new hub with Bush as the operating CEO.
The purchase, for cash and Hub stock, will make BCS the Pacific Northwest hub of Hub International.
Larry Lineker, Hub's chief sales officer, said, "The BCS acquisition will also expand our cross-border capabili-ties, particularly for the construction sector in western Canada."
Peoples Bancorp (www.peoplesbancorp.com) of Marietta, Ohio, acquires The Putnam Agency of Kentucky and West Virginia.
The Putnam Agency is a 100-year-old agency with offices located in Ashland, Kentucky and Huntington, West Virginia. It had total revenues exceeding $4 million in 2003. Putnam provides property and casualty, life, and health insurance to both commercial and personal lines clients.
Peoples Insurance Agency will use a mix of cash and Peoples Bancorp stock to purchase substantially all of the assets and assume some of the liabilities of the Putnam Agency. The Putnam Agency will operate as a division of People's Insurance Agency.
"We look forward to joining forces with the Putnam Agency," said Mark F. Bradley, Peoples Bancorp's Chief Operating Officer. "We have been looking to expand our insurance operations, and the Putnam Agency will bring strong, professional sales expertise to our existing agency portfolio. In addition, Putnam's impressive list of insurance carriers will enhance our ability to further penetrate our existing client base."
All employees of the Putnam Agency, including key management and producers, will become employees and assume active leadership roles in the new organization.
Peoples Bancorp, a publicly owned firm, has 49 locations and 32 ATMs in Kentucky, Ohio, and West Virginia. *