Roger Forystek, president of Fifth Third Insurance Inc., hates it when experts say banking companies cannot make money running insurance agencies.

Insurance agencies can add enormous value to a banking company by drawing upon the best of two worlds, he says: the bottom-line focus of banks and the well-entrenched sales culture of agencies. “You’ve got to grow income, not just revenue,” to be a successful financial services company, he said. “In the bank environment, that’s part of the challenge.”

Imposing that bottom-line focus on insurance agencies can be difficult, he said, but ultimately it is worthwhile because the common goal of earnings growth eases differences between bankers and agents and helps cross-selling.

“We all have our goals to meet,” Mr. Forystek said, so there is “less politics” about cross-selling efforts.

Fifth Third Insurance is a unit of Fifth Third Bancorp, a $44 billion-asset Cincinnati holding company that announced plans in November to buy Old Kent Financial Group, a $22.5 billion-asset banking company in Grand Rapids, Mich., for $4.9 billion of stock. The deal is expected to close in the second quarter.

If the deal goes through, Mr. Forystek would run one of the largest bank-owned agencies in the country since the transaction would wed two big insurance agencies — Fifth Third’s, with $11 million of revenue, and Old Kent Insurance Group, with $16 million.

With Old Kent, Fifth Third’s insurance operation would be tied for fifth-biggest among U.S. bank-owned agencies, according to Marsh, Berry & Co., a bank-insurance consulting firm in Concord, Ohio.

Mr. Forystek would be president of the combined agency, which would have 17 agency sites, some in bank branches and some standing alone.

“The agencies are pretty well aligned,” since they both strongly emphasize business insurance and personal property and casualty lines, Mr. Forystek said.

Timothy Willi, an analyst at A.G. Edwards & Sons, said “it’s pretty common knowledge” that Fifth Third Bank and Fifth Third Insurance have always met their earnings goals, which bodes well for the Old Kent deal.

Old Kent Insurance “will be a nice operation for Fifth Third,” he said. “There are a lot of positive attributes in combining these two operations.”

First Third Insurance has three business areas — business insurance and personal lines, which are sold through the insurance agency; institutional business, which includes title insurance, term life, and direct response insurance and is sold primarily by platform employees; and reinsurance underwriting of credit and private mortgage insurance, which the bank handles.

Old Kent Insurance sells all of the same lines, as well as health insurance in the state of Michigan.

Referral activity focuses on corporate clients, Mr. Forystek said. “Commercial bankers, and commercial P and C and employee benefits agents, really share notes on what kinds of customers we can help each other out on,” he said, with the two groups making introductions to each other’s clients.

The whole approach is solutions-oriented, which commercial customers like, he said. “They have goals they need to meet, and we can bring them better solutions.”

On the personal lines side, the bank allies itself with Fifth Third’s mortgage operation. “We really work leads from the mortgage company,” especially for homeowners insurance, Mr. Forystek said. “We primarily look at the homeowners relationship and try to cross-sell auto as an extension of homeowners.”

Fifth Third Insurance had the most success penetrating the bank’s lending base with homeowners insurance first, rather than auto, Mr. Forystek said. People are more willing to talk about their entire financial picture when buying a home than when buying a car, he said.

The insurance unit is also the product manager for life, title, and other insurance products sold by platform employees in the branches, he said.

Mr. Willi said the strength of the combined insurance operations would be only one example of the positive results of this deal. “Fifth Third, like any bank, continues to strive to be a full-service financial company, and you need to have insurance,” he said.

Mr. Forystek said he would not rule out acquiring more agencies but said his first priority would be incorporating Old Kent Insurance Group. “Before we go out and actively pursue additional acquisitions, we want to make sure the thing is merged together properly,” he said.

He said he expects the combined insurance operation to sustain the high level of earnings growth that Fifth Third Insurance was achieving before the deal was announced.

Fifth Third Bancorp is a relative newcomer to the insurance business. It entered early last year when it bought CNB Bancshares of Evansville, Ind. CNB’s holdings included Civitas Insurance Inc., which became Fifth Third Insurance. Mr. Forystek was chief executive officer of Civitas before Fifth Third bought CNB.

He said that, considering how well his firm has done, what really riles him is when he sees statistics that suggest bank-owned insurance agencies do not do well. His own agency has been beating the parent’s corporate targets each quarter since Fifth Third bought it, and it surpassed the earnings growth target of 20% last year.

In their first year of operation under bank ownership, the average agency’s revenue falls 0.3%, compared with average annual revenue growth for independent agencies of 5.2%, according to Marsh, Berry.

Mr. Forystek said it is more important to focus on earnings than revenue. Many bank-owned agencies lose sales in the first year because they are shedding unprofitable business lines and positioning themselves better for future profit growth, he said.

Fifth Third has sold its book of farm insurance and now only writes such policies through a partnership with an agency that specializes in them. Farm insurance “didn’t fit well with where we are going,” he said. “It’s highly paper-intensive and complex, and it was hard for us to grow.”

Selling that business line “cut down our top line but helped our bottom line,” Mr. Forystek said. “It was costing us way more to manage the business than we could ever make out of it.”

Such business decisions show that banks are managing agencies well, he said.


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