Acquisitions have helped propel Eastern Bank Corp., a $6.9 billion-asset mutual thrift company in Boston, into the ranks of the top sellers of insurance among banks.
Eastern bought Allied American Insurance from Arbella Insurance Group in Quincy, Mass., on Dec. 31, 2002, and renamed it Eastern Insurance in October of 2003. Its insurance business has doubled its revenue over the past five years and is on course to post revenue of $57 million for 2008, said Hope Aldrich, the president and chief executive officer of Eastern Insurance.
Much of that growth has come through acquisition — Eastern Insurance has bought 10 insurance agencies in the past five years, Ms. Aldrich said.
Top management's support of the insurance program has also helped, as has cross-selling. About 20% of Eastern Bank's commercial clients have at least one of its insurance products, said Robert Rivers, the bank's president.
Mr. Rivers, who has direct oversight of the commercial banking and insurance units, said the bank gives incentives to its commercial, mortgage, business bankers, and others to present insurance as a core product.
"We don't think of this as an add-on or an afterthought, but as a critical component of meeting our clients' financial needs," he said.
Thanks in part to the new pool of clients from the bank, Eastern Insurance posted 2003 revenue of $27 million. Its insurance brokerage fee income of $40.7 million in 2007 ranked it 11th among U.S. bank holding companies, according to the Michael White-Symetra Bank Fee Income Report.
The first quarter of this year looked even better: The 190-year-old bank's $15.2 million of insurance brokerage income bumped it up to 10th place, according to the report.
The insurance business accounts for a good chunk of the bank's profit. In the first quarter Eastern's insurance brokerage income contributed 19% of net operating revenue — ranking the bank first among those with assets of $1 billion to $10 billion, the Michael White-Symetra report found.
Eastern, which picked up 21 offices and 75,000 customers when it bought Allied American, is using acquisitions to press its advantage. In April it announced a deal for MacIntyre, Fay & Thayer Insurance Agency of Norwell, Mass., which would give it a strong position among businesses in the state's South Shore and Cape Cod areas.
Eastern announced in May that it had agreed to buy Anderson Insurance Services Inc. of Marchfield, Mass., which sells a range of commercial and personal lines but specializes in insuring musical instruments. Eastern continues to scout for commercial and personal-lines agencies to buy, the executives said.
The insurance market has been slackening for three years, with rates down nearly 30% from May 2005 to May 2008, noted Michael White, the president of Michael White Associates LLC in Radnor, Pa. That means now is a good time to buy agencies, he said.
"The soft market does make it a buyer's market, since smaller agencies are more likely to be hurt by … lower commission revenues on the same pieces of business that commanded higher commissions a few years ago," Mr. White said.
Yet the same market conditions may prompt the owners of independent agencies to hold off on selling until revenues recover and they can command a higher price, he said.
Eastern's growing scale has enabled it to compete on price and product range with national, regional, and local brokers, Mr. Rivers said.
Ms. Aldrich said that the insurance unit's revenue has grown about 15% each of the last 24 years.
The bank's relationship with Allied American goes back to 1999, when the companies formed a marketing partnership to provide property and casualty insurance to Eastern's personal and business customers.
After approvals from Massachusetts bank and insurance regulators, Eastern began to offer everything from individual auto and homeowner insurance to commercial property and casualty, employee benefits, and surety bonds.
Eastern says it is the largest personal-lines agency in Massachusetts. Such products account for a third of its business, Ms. Aldrich said.