With two insurance agency deals in the last four business days, Compass Bancshares Inc. is carrying out a plan to match its insurance business with the branch network across the southern tier of states, and it says it is not even close to being done.
"Oh, no, we are aggressively pursuing and will continue to purchase middle-market insurance agencies in Compass' major footprint," Leonard Kline, the president of Compass Insurance Services, said in an interview Thursday.
Compass chief financial officer Garrett Hegel said in an interview Monday that the deals in Tucson, Ariz., and Dallas would move the company closer to its goal for fee-based revenues. "In the fourth quarter, fee business was 34% of our total revenue. We'd like that to be at 40% in the next couple of years, and the insurance agency business is a good way to do that because of its recurring business."
Compass announced on Monday that it had bought Dallas-based Maxson-Mahoney-Turner Inc., a general lines agency with $5 million of annual revenues. It was the company's second agency purchase in Dallas, after a January 2000 deal.
"We've acquired two in Dallas with a combined $9 million in revenues, and we'd do another one there," Mr. Hegel said. "We'd like to have $15 [million] to $20 million of revenues in each of our major markets, and Dallas is one of them."
On Wednesday, Mueller & Associates in Tucson, Ariz., became Compass' second agency purchase in Arizona. It had bought the Schaefer-Smith-Ankeney Insurance Agency of Phoenix last year. The Mueller agency has $4 million of revenues from commercial and retail customers. Its book of business includes commercial property/casualty, employee benefits - including life insurance and qualified retirement plans - and high-end personal lines, Mr. Kline said.
Maxson-Mahoney specializes in property/casualty, personal, employee benefit, and surety lines of insurance products. Most of Mueller's business is commercial property/casualty coverage, added Ed Bilek, a senior vice president and director of investor relations at Compass.
These agencies exemplify the type of insurance business Compass wants to buy more of, company officials said.
"It's a good cross-sell to our banking base," Mr. Kline said. "The cross-sell works very well with our business customers, which include some small businesses, midsize business, and also larger middle-market businesses."
The $23.9 billion-asset Compass operates 352 branches from its Birmingham, Ala., base in Arizona, Colorado, Florida, Nebraska, New Mexico, and Texas. It has said it wants insurance agencies throughout its footprint and already has them in the two Arizona cities, San Antonio, Dallas, and Denver.
"We're looking in Jacksonville [Fla.], Birmingham, Houston, Albuquerque, and Austin [Tex.], all cities that we have a solid banking presence," Mr. Kline said. "But we'd also be receptive to making acquisitions in places we already own agencies. Denver, for instance, is a large market, and buying another agency there is not out of the question."
With this month's spate of deals, Compass' six agencies will have a combined $60 million of revenues. "That number actually includes the Tucson deal and the one we haven't announced yet," Mr. Kline said.
The $60 million revenue total would solidify Compass' position as one of the 10 largest bank-owned agencies, according to statistics compiled by Business Insurance, an industry publication, for its list of top 100 insurance agencies in 2001 (the most recent available).
Compass does not rebrand the agencies it buys. "They just become part of Compass Insurance," Mr. Kline said, "but these agencies, their names, go a long way in the community they're in."
Mueller & Associates had put itself on the market about nine months ago, said Thomas Linn, a senior vice president at Marsh, Berry & Co., the Concord, Ohio, broker with an expertise in bank-insurance agency acquisitions. Marsh Berry represented the agency in this deal.
"Compass has a big market share in Tucson; they're all over, so it seems like a natural fit," Mr. Linn said. "The middle-market commercial lines business interested Compass. I know Compass was very high on the commercial property and casualty business. Mueller has that."
Added Robert Mueller, the agency's president and chief executive officer, in a press release: "By uniting with Compass, we have enhanced our opportunities for growth as we offer a wide range of services to Compass' customers, as well as offer our clients access to Compass' banking products."
Mueller might have been on the block for nine months, but the deal came together quickly only after Compass showed interest.
"The average deal takes three months, from when you start to really get serious," Mr. Kline said. "This one came together pretty quickly. Maybe even faster than average."
