Four Ohio community banks and one in Indiana have teamed up to purchase 50% of an Ohio insurance company for $28 million.
Delaware County Bank and Trust, Eaton National Bank and Trust, Ohio Valley Bank, and Ohio Heritage Bank, along with Richmond, Ind.-based First Bank Richmond bought the property and casualty specialty lines group Century Surety Co. from Century Business Services Inc. of Cleveland.
Each bank owns 10% of Century Surety, which is based in Columbus.
"It's a good investment. It's another investment in our portfolio," said Tom Whitney, senior trust officer at $475 million-asset Delaware County. "We couldn't have done this ourselves - no community bank could have. But my belief is in the next 10 years, we'll have very big banks and community banks, and nothing in between, so if we want to be able to offer the same products we better work together."
Too many banks, Mr. Whitney said, go the route of buying agencies, only to end up at the mercy of insurance companies - because they are the ones that decide what lines an agency sells.
"The insurance agent is quoted his commission rate by the insurance company," he said. "Also, if the agent wants to sell credit life but the insurance company doesn't want to, the agent is out of luck. By owning the insurance company, we call all the shots. We sit at the board meetings and decide what lines are going to be sold."
Century Surety writes boutique insurance lines, including the business lines for auto shops, service centers, and day-care centers.
"They also write workers' compensation in some states," Mr. Whitney said. "Basically, they write a lot stuff the big boys don't write."
Stonehenge Holdings, a capital investment firm in Cleveland that works with small and midsize businesses, and the management group of Century Surety own the other half of the insurance company. The purchase was announced Tuesday.
This is not the first case of community banks banding to compete in insurance. Last month the Virginia Bankers Insurance Center, a 67-member consortium, announced a deal to buy Insurance Partners of Virginia, and it recently closed its purchase of Blue Ridge Insurance Group and its Ewald-Lester Life Agency of Wytheville. That deal was announced in August.