Insurance agencies may want to dust off their “for sale” signs, as BB&T may be gearing up for another round of dealmaking.
BB&T Chairman and CEO Kelly King said Tuesday that he likes the insurance business because it reduces the $221 billion-asset bank's overall risk profile. Insurance makes up about 15% of BB&T’s total revenue and King said his goal is for it to eventually account for 20% of revenue.
“It does not correlate with lending risk. It does not correlate with natural economic risk. It correlates to disasters, which is an entirely different set of correlations,” King said at the Morgan Stanley Financial Services conference. “There’s nothing about growing the insurance business that bothers me.”
BB&T’s insurance arm generated $458 million in noninterest income in the first quarter, a 9% increase from the same period last year.
The insurance business also helps BB&T with its capital management, he said, as banks are not required to hold as much capital against insurance assets.
BB&T, of Winston-Salem, N.C., has purchased 21 insurance agencies in the past decade, though it hasn’t made an acquisition in more than a year. But when BB&T gets busy on the M&A front, it can be one of the most active players in any market segment. BB&T bought nine insurance agencies in 2008 alone. Since 1990, it has acquired more than 100 insurance agencies.
King also did not rule out a possible return to bank M&A. BB&T made two big acquisitions in Pennsylvania in 2015 and 2016, buying Susquehanna Bancshares in Lititz and National Penn Bancshares in Allentown. But it took a break from deal making while it integrated the two banks and made technology upgrades, King said.
“We’re heading into the period where you shouldn’t expect the pause to … last too much longer,” he said.
BB&T would be most interested in acquisitions within its existing markets, where it could close branches and generate cost savings, King said.
BB&T will also prioritize targets that have a high concentration of commercial-and-industrial loans, as well as targets that derive a large portion of deposits from rural markets.
“We’ve done extraordinarily well by investing in places like Kentucky, Tennessee and West Virginia,” King said. “The dynamics of branch decline is not as exaggerated in the more rural markets as it is in the urban markets.”