BB&T Insurance Services Inc. in Raleigh has seen its revenue grow rapidly as it became a prodigious dealmaker in recent years, and along the way the company has experimented with ways to present products to customers and with business lines to cultivate organic growth.
Wade Reece, the president of the BB&T Corp. unit, discussed in a recent interview its evolving strategy and tactics, and recalled one deal that didn't work out as planned. He said about one-third of the agency's new business last year came from referrals, and noted that while customers like to buy insurance over the telephone, the company has yet to find a way to get them to purchase it online.
Though it has been in the business since 1922, the unit of BB&T Corp. does not view insurance as a "mature" business, Mr. Reece said. "We are the largest fee-based contributor to BB&T, and the expectations have not decreased at all. It will continue to grow for BB&T."
BB&T Insurance is the sixth-largest agency in the United States, and Mr. Reece estimated its 2004 revenue at about $675 million, or 78% more than in 2003. "We have had a lot of growth. In 1990, we had $6 million in annual revenues."
Organic growth will be essential to maintaining revenue success, he said. "We have made a lot of acquisitions, but our organic sales numbers have been phenomenal. We will grow from acquisition, but the reason we make acquisitions is to get to organic growth. An acquisition is to get us on the ball field with the best team," he said.
In a January meeting, Mr. Reece added, BB&T Insurance looked back across seven years and found it had 48% compounded annual growth on its top line. Of that, a bit more than one-quarter - 12.9% - was organic growth.
Mr. Reece has bought roughly 75 agencies since he joined BB&T Insurance in 1990. This is the bulk of the company's agency dealmaking, and the pace slowed a little last year to enable the insurance unit to integrate its biggest deal.
"Last year, we did about eight [agency deals], and we average about 10 a year," Mr. Reece said. "If it was a little bit less, there was good reason." In February 2004, BB&T bought the agency McGriff, Seibels & Williams in Birmingham, Ala., for $350 million, plus potential earn-out payments of up to $102 million, and "we had to make sure our largest acquisition was executed perfectly." He declined, however, to say whether McGriff Seibels was meeting its earn-out goals.
The McGriff Seibels deal was not only BB&T's biggest but also the second-largest bank-agency deal ever.
Mr. Reece acknowledges a misstep in his acquisition campaign but not on the agency side. Getting into the third-party administration business [by buying Piedmont Administrators LLC of Greensboro, N.C.] was a mistake, he said, because it was outside his unit's expertise.
"We got in the TPA business," he said, and though "it was profitable and performed fine, the returns were not as good as the core retail agency, so we sold it off two years ago." Piedmont was sold to MedCost, a Winston-Salem, N.C., company, in 2003.
"We could take that capital and deploy it in another way," he said. "We found that we were not experts in the TPA market. While it was not a negative for our business, it didn't add very much."
Though BB&T Insurance's acquisition policy is aggressive, it is quite disciplined, Mr. Reece said. "Our process is that we look at whether it is a wholesale acquisition or a retail strategy," he said. "The bulk of deals are done on the retail side on the bank's footprint because of operational cost advantages," he said. "We can tie in costs to the bank and get a huge cross-sell list for existing clients."
"Once we understand the strategy, that will lead you to some geographic parameters. We analyze the counties and do demographic analysis," he said, explaining that Pinehurst, N.C., for example, has more wealthy clients, making personal lines an easier sale, but that Raleigh might produce more commercial opportunities.
"Then it leads to what is the prospect's culture. They have to have the professionalism, the skill level, and a good sales program. They must be dynamic and growing," Mr. Reece said, "And being around a long time, we know if we go to X-Y-Z city, we know who we're dealing with."
BB&T Insurance distributes 100% through its agencies, Mr. Reece said, and markets "insurance any way the client wants to buy it. Having a local agency system puts us in close proximity of clients."
The agency also makes centralized telemarketing centers available to clients. Some want to buy term life or other personal lines of insurance by telephone, he said. "And we played around with how much clients want to deal with the Internet. We found that most don't want to buy off the Internet but want some level of service."
In the next five years, Mr. Reece said, he expects BB&T Insurance to generate $1 billion of annual revenues. Further acquisitions and fresh cross-selling opportunities will help achieve that goal, he said.
Regarding cross-selling, he said, last year one-third of new business came from referrals from within the bank. "We have very high cross-sell expectations," he said. "P/c clients get cross-sold with employee benefits."
"We are the sixth-largest insurance broker in the U.S. We can bring markets and products and services that others don't have. Acquisitions help us get the right people to get these tools and deploy them," Mr. Reece said.
"Our core strategy has been to grow the company and still take a very entrepreneurial spirit. To bring them into to our culture and keep them engaged in their own agency - granted, on our platform and in our markets - but they still get to dictate how they touch the client," he said.
Asked about the recent hard market in property/casualty insurance, Mr. Reece said, "We are a long-term player and have to adjust to market conditions. Our five core businesses - p/c, employee benefits, construction, title insurance, and life insurance - help balance things out."
"Last year p/c rates had been on a hard market swing, employee benefits were still fairly hard, title was going through a transition between markets, and we had a good year in life insurance," he said. This demonstrates the benefit of diversified product lines, he added.
