At a time when some banks are getting out of the insurance business, BancWest Corp. of San Francisco is expanding in it through acquisitions by its BW Insurance Agency Inc. unit.
The Fargo, N.D., subsidiary’s purchase of St. Paul Agency Inc. of Minnesota, announced Monday, was its sixth agency acquisition this year. The others have expanded its reach into Denver and Aurora, Colo., as well as Omaha, Bellevue, and North Platte, Neb.
Tom Anderson, BW Insurance Agency’s president, said it wants to expand in the same territories as BancWest, a unit of BNP Paribas SA of Paris. BancWest bought three banks — in North Dakota, California, and Nebraska — in 2004 and 2005.
“We want to be able to bring our full product set to all branch locations,” said Mr. Anderson, whose business is now in eight of the 19 states in which the $56 billion-asset Bank of the West operates.
BancWest entered insurance brokerage with its purchase of Community First Bankshares Inc. of Fargo in late 2004. Community First was itself an active agency acquirer, and acquisitions have fueled BW Insurance’s growth.
In the first half of this year the business had $14.4 million of insurance brokerage fee revenue, according to Michael White Associates reports sponsored by DFC Group Inc. and Symetra Financial. That ranked it 33rd among bank holding companies nationally.
Over the past two years BancWest’s insurance business has had compound annual growth 243%, versus 10.7% for banks in its asset class, said Michael White, whose consulting firm assembled the data.
Mr. Anderson said Bank of the West wants to be among a select group of banks “firmly committed to the insurance business.” A handful of large banks are in that category, and some community banks may carve successful niches as well, he said.
“I don’t think the middle tier is going to try and get in any more than they have already,” he said.
Banks with the biggest brokerage operations will command the best deals with insurance carriers, Mr. Anderson said. “It’s a scale business — as the industry consolidates, national carriers are looking to those who can provide them with volumes and premiums and growth.”
BancWest, like most others, is still trying to improve its insurance cross-selling, and that will be a focus for 2007, Mr. Anderson said.
“That’s one of the things that, by any measurement, all of us can do a better job with,” he said.
Kenneth Kehrer, a consultant based in Princeton, N.J., said that banks have increased insurance revenue largely through acquisitions but that there is little evidence they have had much success with cross-selling.
“I don’t see it as a growth business,” he said. “It’s kind of like a zero-sum game.”
Banks’ business clients often have insurance through other brokerages and are not motivated to change, he said. When they do want to, there are often obstacles. A company may want to get its health insurance through its bank, for instance, but making the move would leave employees with pre-existing conditions out in the cold, Mr. Kehrer said.
In addition, he said, insurance rates are going through a “soft” cycle for the first time since banks began buying insurance agencies. “Pro-formas aren’t panning out, because insurance prices are falling.”
Mr. Kehrer said that, despite the disappointment, he does not expect many banks to bail out of the insurance brokerage business. “They may pay less attention to it, and may not add agencies,” he said.
The St. Paul agency’s customer mix resembles that of BW Insurance, which has 67% of its business in commercial lines and 33% in personal lines, Mr. Anderson said.
BW’s products include everything from automobile and homeowner policies to workers’ compensation, life, health, and general liability insurance. It did not say what it spent to acquire the St. Paul agency.
