A bank-owned insurance agency in Indiana has big ambitions.
Citizens Insurance, the insurance arm of $6.9 billion-asset CNB Bancshares in Evansville, expects this year to join the handful of bank units on the list of the top 100 U.S. insurance agencies.
With annual revenues approaching $10 million, Citizens Insurance, also of Evansville, will join a group of insurance agencies that includes those owned by banks such as Winston-Salem, N.C.-based BB&T Corp. and Minneapolis-based Norwest.
It will have earned the spot by sticking to methods that are decidedly unflashy, said Roger Forystek, Citizens Insurance's chief executive officer. "We do things that are proven," he said. "We know the returns we're going to get on it before we get into it. We're not on the cutting edge."
Citizens has focused on integrating new acquisitions, building bank referrals, and streamlining back-room operations. That has resulted in a 25% operating margin for insurance, Mr. Forystek said. And return on investment stands at more than 20%, he said.
"We see the (insurance) income as being an increasing share of revenues," said James J. Giancola, president and CEO of CNB Bancshares. He said he wants Mr. Forystek to achieve a 45% operating margin in insurance-a desirable component of the bank's fee income, because it is a less cyclical product, he said.
Mr. Forystek joined Citizens in March, after a four-year stint as national sales manager for KeyCorp's Insurance Management Group. "He was quite a catch for CNB," said Brocker C. Vandervliet, an analyst with Keefe, Bruyette & Woods Inc. in New York.
Mr. Vandervliet praised Mr. Forystek's ideas and said he has joined an insurance program that is "significantly ahead of the curve," for the bank's size.
Citizens joined the insurance fray with an acquisition in 1994. About 65% of Citizens' sales are in commercial property and casualty insurance. The other 35% comes from employee benefits, insurance related to financial planning, and homeowners and automobile insurance.
With CNB's acquisition this year of Pinnacle Financial, St. Joseph, Mich., the opportunities to sell commercial property and casualty insurance to those customers "is pretty much a green field as far as CNB is concerned," Mr. Vandervliet said.
Citizens has bought two small agencies this year and is negotiating to acquire two more. It now has 90 employees, 37 of whom are brokers. But that work force, together with the nearly 10 more brokers in the agencies to be acquired, will be whittled through attrition. Accounting, technology, and human resources functions will be centralized, he said.
Streamlining efforts yielded a 22% increase in profits last year, Mr. Forystek said. By taking over administrative duties from acquired brokers "we're taking away all these headaches they have-and they make more (money)," he said.
The challenge of integrating agencies is balancing bank interests and entrepreneurial agents, Mr. Forystek said. Too many bank managers come in and tell brokers how things will work, he said. He wants "to guide their ego-you don't try to control it, you try to guide it in the right direction."
Cross-sales have accounted for 65% of the growth in homeowner and automobile policy sales, Mr. Forystek said, but there is room to improve. Building referrals does not depend on location, he said. He noted that three-quarters of Citizens' agents are based not at bank branches but at the agency.
"It's relationship activity, not location that matters," he said.
Citizens has profited from customers with specialized insurance needs who have come from acquired agencies and competitors, Mr. Forystek said. For instance, one new customer found insurance for an underground coal- mining operation and another a policy for a crane operator, he said.
Citizens does 80% of its underwriting with 12 core insurers. The other 20% is niche coverage through 38 other underwriters.
The size of Citizens and the number of underwriters it works with has resulted in the agency acquiring customers from its competitors on a regular basis, Mr. Forystek said, adding that this business is profitable.
"We have the expertise that mom-and-pop shops can't have," he said.