Academic journal article ABA Banking Journal

Nurturing Your Insurance Agency Investment

Academic journal article ABA Banking Journal

Nurturing Your Insurance Agency Investment

Article excerpt

It is impossible to grow plants in a garden without seeds, water and fertilizer. Likewise, it can be difficult to grow your insurance business without a similar level of tender, loving care. I am pleased to report that the insurance business of many banks is blooming--and with a little more care, the investment can thrive.

While some financial institutions have divested their insurance operations, we have seen that other committed banks continue to acquire and focus on this line of business. However, bank acquisition activity has not recovered to pre-financial crisis levels. From the 65 announced transactions in 2006, the last several years have hovered around 20 per year, with 19 announced transactions in 2014, according to SNL Financial. As an alternative to buying an agency, many banks have purchased individual producer books from other organizations. These deals, often referred to as "lift-outs," can be a positive way to bring in new producers, but the hiring company must be comfortable with the past production record of the producer, their contractual relationships with their prior employer and any book of business the producer hopes to bring aboard.

Many bank-insurance ventures began with the acquisition of an existing agency and a focus on the cross-selling of insurance to bank customers and the growth of wallet share. As shown in the above chart, prior to the financial collapse, bank-owned agencies were growing at a rate faster than the average agency, but since 2011 have lagged the average.

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MarshBerry's studies show that the basis for strong organic growth is a well-managed producer staff, including investment in new producers. In our experience, due to post-transaction pressure, many bank-owned insurance organizations fail to grow and are not reinvesting in the next generation. …

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