With organic growth expected to stay in the single digits this year, BB&T Corp. is positioned to continue buying independent insurance agencies.
The Winston-Salem, N.C., company closed two agency deals on Dec. 31, giving it 11 such acquisitions for the year, up from three in 2007.
Last year, it expanded in Florida and in a key segment of its insurance business, the managing general agent business, said Wade Reece, the president of BB&T Insurance Services in Raleigh.
BB&T could have more buyout opportunities this year, because difficult economic conditions and a soft market for property and casualty policies have independent agencies under pressure to increase assets or sell, he said.
Analysts said banks as a group may have an edge this year over publicly traded insurance agencies that have used stock to buy other agencies. Elliott Kroll, the chairman of the insurance and reinsurance practice group at the law firm Herrick, Feinstein LLP, said insurance companies with depressed stock prices will have less leverage to use in acquisitions. "Banks have cash from depositors," he said. "They have a lot more opportunities."
By acquiring Tapco Underwriters Inc., a wholesaler serving small, hard-to-insure companies such as dry-cleaners, BB&T doubled its size by premium volume in the managing general agent business, Mr. Reece said.
Tapco, which has 175 employees and is known for handling high volumes of new business with its speedy, automated service, had about $200 million of premium volume last year. It is based in Burlington, N.C. and has offices in Clearwater, Fla., and Manassas, Va.
BB&T's purchase of J. Rolfe Davis Insurance, a Maitland, Fla., property and casualty and employee benefits specialist, expanded BB&T Insurance in Orlando, a market it entered when it bought Burkey Risk Services of Maitland and Boynton Beach in March of last year. J. Rolfe Davis was owned by Huntington Bancshares Inc. of Columbus, Ohio, until 2002, when Huntington pulled out of Florida and sold the agency to members of its management team. "We just kept courting" the agency "until they decided they'd join our team," Mr. Reece said. "This gives us a major, major operation in a significant metro area."
BB&T has used acquisitions to become one of the largest agencies nationally. As of June 30 it ranked fourth in insurance brokerage income, according to the Michael White Associates Insurance Brokerage Fee Income Ratings Report. From its stronghold in the Middle Atlantic and the Southeast, BB&T has expanded over the past several years into California, Texas, and Florida. Mr. Reece said BB&T expects to expand further in the Northeast.
Like other agencies, BB&T Insurance struggled to boost its revenue last year without the benefit of acquisitions. It posted $626 million in insurance brokerage revenue for the first three quarters, about flat with the year-earlier period, according to Michael White Associates.
Mr. Reece said BB&T Insurance, which has made more than 90 acquisitions in the past 17 years, had organic growth of 2% or 3% in 2008 and he expects that figure to rise to 5% this year. "I'm actually pretty bullish on 2009," he said, relative to 2008.
Mr. Kroll said 2009 could yield many agency acquisitions. The capital to acquire was in short supply in 2008, but some banks will have the funding to acquire this year. "There are a lot of opportunities out there, and a lot of opportunities that didn't get done," he said. "But the economic motivation for those transactions remains."
Agency owners have various reasons to sell, Mr. Kroll said. They might be planning to retire, lack the skill and infrastructure to grow, or have limited business lines, he said. Or their small size may leave them without carrier partners, or force them to accept unfavorable deals from those partners, Mr. Kroll said. "If you're bigger, money talks, as the saying goes," he said.