Hub International Ltd.'s mid-February deal to buy several insurance lines from Capital One Financial Corp. was the Chicago insurance broker's third with a bank in the past five years.
Now Hub is being sold to the private-equity firm Apax Partners and Morgan Stanley Principal Investments in a deal announced Feb. 26, but Bruce Guthart, Hub's chief operating officer, said that it plans to continue snapping up insurance brokerage agencies and that banks would be among the potential sellers.
"Over the next five years, we need to fill seven or eight new regions with hubs," he said last week. "Banks will be among the suppliers."
The banking world is a good place to shop for agencies, because many banks are not sure the ones they have acquired over the past several years are a good fit.
"I think more banks are looking at their insurance operations and trying to evaluate if they're part of the core business," Mr. Guthart said.
In many cases, agencies acquired by regional banks are sold after their parent company is bought, he said. "With large bank mergers, the final holding company is not the one that made the decision to go into the insurance business."
Mr. Guthart said that management teams at the businesses acquired from Capital One, of McLean, Va., would remain in place.
Capital One acquired the New Orleans banking company Hibernia Corp. in 2005; Hub is acquiring Hibernia's property/casualty and employee benefits brokerage businesses. The businesses had revenue of about $18 million, according to Capital One.
Hibernia Insurance Agency LLC of Metairie, La., would become a regional platform for Hub. Steve Terry, the president of Hibernia Insurance, would become president of Hub Gulf South.
A spokesman for Capital One said the company "decided that property and casualty and employee benefits would no longer be part of our long-term strategic focus in Louisiana and Texas."
Mr. Guthart said that insurance carriers are shying away from weather-ravaged Louisiana and that it is easier for large agencies like Hub to get them to provide coverage there.
"The acquisition gives the management team there the chance to hook up with strong insurance company relationships so they can deliver more diverse products," he said.
John Wepler, the president Marsh, Berry & Co. Inc., an insurance consulting firm in Concord, Ohio, said that Hub's deals with banks should not be taken as evidence of a broad trend of regional banks getting out of the business.
"Banks are concerned about the potential impact of the soft market on growth," he said, "but are committed to the business given strong industry performance and are pleased with the financial performance of their agency acquisitions."
Mr. Wepler, whose firm represented Hub in the Capital One deal and brokered it, said banks' insurance agencies tend to have strong organic growth.
Insurance operations have "almost exclusively" been sold when one bank has inherited them through the acquisition of another bank and sees no hope of expanding the insurance practice to cover its entire service area, he said.
"The majority of the banks that made a strategic decision to enter this business are here to stay and are not interested in a divestiture," Mr. Wepler said.
Hub bought insurance brokerage businesses from Fifth Third Bank of Cincinnati in 2002 and Royal Bank of Scotland's Citizens Financial Group in March of last year. It intends to expand further in the Southeast and along the Gulf Coast to have operations nationwide, Mr. Guthart said.
One enticement that Hub may use to strike deals with banks is referral partnership of the type it arranged with Citizens, Mr. Guthart said. Hub and Citizens, of Providence, R.I., cooperate on marketing and "sharing customers," he said, characterizing the relationship as a strategic alliance.
Hub's senior managers are to stay on after the sale to Apax and Morgan Stanley. They stand to get a chunk of the deal, having committed to investing more than $65 million of equity in it. The deal values Hub at $1.8 billion, Hub said. It is expected to close in the second quarter.
The Capital One deal is expected to close in the first quarter. The price was not disclosed.
