When Wachovia Corp. announced Thursday that it would buy DavisBaldwin Inc., a Tampa insurance agency, the North Carolina banking company was following a well-trodden path.

Ninety percent of the $300 million in premiums that DavisBaldwin managed last year were for commercial insurance. David Holton, president of Wachovia Insurance Services in Winston-Salem, said the deal "gives us a premier entree into the commercial property and casualty business."

DavisBaldwin "works with a client base that mirrors ours," Mr. Holton said. "They work with large regional and lower-end national corporations, as do we.

"It's a niche we like."

Banks are focusing heavily on agencies that offer commercial lines, according to a study of 14 bank-owned agencies prepared for American Banker by the insurance merger-and-acquisition consulting firm Marsh Berry, which either brokered or consulted on each of the deals.

In the one-year period before being purchased by a bank, the average agency in the study brought in $6.107 million of commercial, $1.338 million of life and health, and $576,000 of personal property and casualty commissions.

The study looked at "foundation" agencies, which the Concord, Ohio, firm defined as the largest and best in the banks' home markets, said John Wepler, a principal and senior vice president of mergers and acquisitions.

Banks should be looking for such agencies, but buying one does not guarantee success, Mr. Wepler said.

"Banks that do well in insurance buy a foundation agency and run it as a wholly owned subsidiary with a profit objective," he said. "Let the insurance experts run it. You've acquired experts. Let the people you have purchased run the agency."

James Overholt, a senior consultant and manager of financial services programs for Milliman & Robertson Inc. in Chicago, said banks have yet to find a successful way to integrate such agencies.

"Intuitively, it makes all the sense in the world to create a broader distribution system," he said. "But banks have done some real dumb things. I've seen them change compensation and guard their customer list. That's not going to help the agency run smoothly."

Carmen Effron, president of the bank and insurance consulting firm C.F. Effron in Westport, Conn., said that while the agencies are succeeding at commercial insurance, many banks are still finding bank branches are better for cross-selling life and health products. Buying a commercial agency is a move toward turning a bank into a complete financial supermarket, she said.

"Bank branches are selling life insurance, because many of the life products are developed so expertise is not needed to sell it," Ms. Effron said. "But I don't know of any banks that sell commercial insurance through the branch. It's too complicated. If you want to be able to access a variety of insurance lines, this is one way to go about it."

Though 76% of the commissions at the agencies in the study came from commercial lines, the average life and health agent hauled in more commissions for the agency - $509,000, versus $419,067 for the average property and casualty agent, who would have sold personal as well as commercial lines. The average firm had 15.9 property and casualty agents and 2.6 life and health agents.

Mr. Wepler predicted that the agencies would add life and health agents. "Historically the life and health agent conducted most of his or her business by taking in referrals from the commercial agent," he said. "Now I think many of those agents are going to go out and get their own business, making life and health insurance a bigger part of these agencies."

In fact, life and health commissions grew the most, 16.5%, in the year before banks bought the agencies. Commissions increased 10.1% on commercial lines and 7.1% on personal property and casualty lines .

"The commercial insurance is going to be the bulk of the agency's business," Mr. Wepler said. "But life and health is going to be a big player."


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