Commerce Bancorp, which recently stepped back into deal-making with its pending purchase of a Connecticut insurance brokerage, is eyeing the Middle Atlantic states, Connecticut, and South Florida for further agency deals, says Commerce Insurance Services' chairman and CEO George E. Norcross.
Banks and other financial services companies have been vying for a bigger slice of the insurance market since the Gramm-Leach-Bliley Act of 1999 removed legal obstacles to buying insurance distributors. But Commerce had largely stayed on the sidelines until it announced in late June its intention to buy BK International Insurance Brokers Ltd. in Greenwich, Conn.
New York, New Jersey, and the District of Columbia also are on Commerce's watch list for attractive insurance brokerage businesses, Mr. Norcross said. Commerce's insurance division already has a presence in those markets, making them logical areas for expansion, he said.
Ultimately, Commerce Insurance Services wants to match the footprint of its parent, Commerce Bancorp of Cherry Hill, N.J., he added. Commerce has bank branches in New York, New Jersey, Pennsylvania, and Delaware, as well as Connecticut, Maryland, Virginia, and Washington.
Commerce's insurance unit has a full-time division in Connecticut that analyzes as many as 40 acquisition targets at a time, Mr. Norcross has said. Lower price multiples prompted Commerce, which had been fairly quiet as a deal-maker since 2001, to jump on the acquisition bandwagon, he said.
Chief among the company's criteria for weighing potential targets is the quality of a brokerage's leadership, he added. Commerce favors brokerages with relatively young, aggressive, and entrepreneurial executives who are not simply looking for a preretirement buyout, he said.
The insurance division is also pursuing organic growth through an expansion of its product line, Mr. Norcross said. One area of potential growth is construction and real estate insurance, he said.
"We continually create new practice areas as our expertise develops, and we expand our services on a regular basis," he added.
Insurance brokerage generated $72 million of fees at Commerce last year, according to the "Fee Income Report" published by Michael White Associates, a consulting firm in Radnor, Pa.
Insurance revenues were 19.3% of the company's noninterest income - the sixth-best among agencies owned by banks with at least $10 billion of assets - and 5.2% of net operating revenue, the ninth-highest in its category.
The insurance division, which was established in 1997, offers both personal and business insurance products, including property, life, health, and auto coverage. The unit has grown through a combination of acquisitions and cross-selling.
"We started from zero and made favorable acquisitions along the way," Mr. Norcross said.
Commerce's geographical expansion has been a significant factor in the steady growth of both the parent and the insurance unit, said Gary Townsend, a senior analyst and vice president at Friedman, Billings, Ramsey & Co. in Arlington, Va.
"Like the rest of the company, the insurance division continues to grow at a pretty rapid pace," Mr. Townsend said.
Commerce Insurance Services is the 13th-largest bank-owned insurance brokerage in the Michael White firm's rankings. It has about 700 employees, and the parent company has $33 billion of assets.
