For Huntington Bancshares the path to successful commercial insurance sales has been circuitous.
The company has built a successful life insurance distribution model largely through agency acquisitions. It acquired its taste for commercial insurance in Florida before the bank left that state, and since then Huntington has been seeking the right agency to buy in Ohio for a reentry into commercial property/casualty sales.
But the bank refuses to let the M&A market dictate its next move, says Michael Moore, president of Huntington Insurance Services. So for now it is pursuing commercial customers through an unusual program with Zurich Life.
“This year we’ve gotten back into that strategically by the pilot program we’re doing with Zurich Life,” Mr. Moore said. Through this program, Huntington bankers refer small-commercial customers to a call center at Zurich for insurance products.
Meanwhile, for larger clients, it has hired an experienced property/casualty agency in Cincinnati, and it plans to hire more in other markets.
But Mr. Moore acknowledged that this de novo agency-alliance model is just a stopgap while Huntington actively searches for an agency it wants to buy.
Asked whether he has any agencies in his sights, Mr. Moore joked, “Do you know any that are for sale?”
Huntington has the go-ahead from its chairman to buy an agency, he said, but is having trouble finding the right one at the right price. And the company refuses to let the mergers-and-acquisitions market dictate its ability to be in this business.
Mr. Moore joined Huntington in 1996 to help it get into insurance. The first effort, begun in 1996 with the purchase of Tice Insurance Agency in Columbus, was followed by a deal for Pollock & Pollock Insurance Agency of Cleveland in 1997. Unlike many peers that were doing deals on the commercial property/casualty side, Huntington bought agencies that added staff and expertise to support life insurance sales to high-end clients.
In August 2000 it bought the J. Rolfe Davis Insurance Agency in Maitland, Fla., a commercial property/casualty operation, which gave it a presence “pretty much in all avenues of insurance marketing at that point,” Mr. Moore said.
But things got complicated.
In February 2002, the parent decided to sell its 141 Florida branches to SunTrust Banks Inc. of Atlanta for $705 million. With no reason to own an agency in a state far from home where it now had no bank branches, the insurance unit reluctantly spun off J. Rolfe to its management in July of that year.
“Like everything else in life, it’s kind of a timing issue,” Mr. Moore said. “We divested ourselves of J. Rolfe Davis at a time when the property/casualty industry hit the hard market.”
“We liked it, we got into it, and it worked very well,” he said, “but you just can’t wave a magic wand and be back in it again.”
As insurance premiums rose, agency revenues went up proportionally, and many agencies expected higher prices for selling the business, he said.
“If we find the right agency at the right price at the right location, we would certainly consider an acquisition. The thing we don’t control is the timing,” he said. So “we’ve set up a parallel strategy. We’re working with Zurich and other companies to get ourselves back in the business.”
The alliance with Zurich means the operation is not entirely de novo, “which on the property/casualty side is pretty difficult to do.”
Zurich’s program for middle-market commercial clients supplies quotes not only on its own insurance products but also on those of a few other vendors, Mr. Moore said. Customers who cannot get coverage in the Zurich program are referred back to a Huntington agent, who will try to find coverage.
The idea is to get a start in the business with a program that can be rolled out to other Huntington markets, he said.
Once Huntington buys an agency it can roll in the agents it has hired, Mr. Moore said. Bankers will already be trained for cross-selling and attuned to making referrals to the insurance operation. Because of Zurich’s size, he said, “almost any agency that we would acquire already does business with Zurich, so it would be very easy to integrate customers within a perfect market.”
He said he knows that this temporary approach is “not of course the perfect solution. But in the end, you really need to have initial feet on the ground.”
In addition to the commercial sales pilot test, he said, Huntington has “a similar call center program on the personal line side that you can reach through direct bank and mail, and we have brochures in the branches where you can call and get a quote.” The agency operation started this arrangement in January 2003 with Answer Financial of Encino, Calif., an insurance sales outsourcer.
“That kind of middle-market personal lines is better facilitated through that kind of centralized system,” Mr. Moore said. “I don’t see us trying to get deeply into the personal lines business … . It is highly back-office-oriented, and that’s kind of unbank-like.”
Huntington’s brokerage and insurance income, which includes insurance commission and fees from life insurance, title insurance, and property/casualty products, was $57.8 million in 2003, down 13.5% from the previous year. The decline was primarily due to the $6.9 million of 2002 insurance revenue that was sold with the Florida operation, the company said in its annual report. This divestiture was partly offset by a $2.7 million increase in sales by the remaining operations, mostly attributable to growing title insurance fees from the mortgage refinancing market.
John Wepler, an executive vice president at Marsh, Berry & Co. in Concord, Ohio, said there is no shortage of agencies available in the state. “Ohio has faced very little consolidation relative to other states,” he said, “and bank-agency deals have been virtually nonexistent.”
“The independent agency business is very close-knit,” Mr. Wepler acknowledged, and any sizable agency would be familiar with J. Rolfe Davis’ relatively brief experience as a bank-owned agency. However, he said, he doubts this has tainted Huntington among potential sellers.
Instead, he said, banking companies like Huntington may be having trouble finding an agency to buy because more of those in Ohio and elsewhere are looking to sell to large, publicly traded agencies as the industry heads into a soft market.
Selling to a big agency lets smaller ones know they will be part of an organization with broad insurance expertise at a time when falling prices make value-added services more important, he said. The big agencies are also actively seeking to buy new expertise for the same reason and so are offering good prices, he said.
Banks have, in many cases, balked at paying the prices agencies want, Mr. Wepler said, and have lost out to the larger agencies. Banks must also contend with the reality that consolidation in banking erodes the dependability of a key attraction about being a “foundation agency purchase,” he said — the idea that the agency’s leadership will get to run the whole insurance show at that bank.
At Huntington, life insurance remains the business it knows best because it was an early entrant.
It focused on high-end life sales, Mr. Moore said, but later expanded into retail distribution. Though acquiring was a good choice for the initial foray into advanced sales, he said, “acquisitions don’t really make any sense to fit into the retail world” of life insurance sales.
“We get to those customers, though, seven years later, through the essential partnerships we have with the private bankers, trust officers, investment officers, and commercial bankers,” he said. “We have an established referral system and a relationship with those people. It’s taken a lot of time to build, but we now have the right people in place.”
With that system, more than 35% of the new business in the advanced life sales market comes from referrals, Mr. Moore said.
“It’s part of a well thought out strategy to provide a high level of service to those customers,” he said.
