John P. Young 3d hadn't settled on a career when he returned home in 1946 after serving in Europe and Japan during World War II.

"There wasn't much need for an infantry rifleman," he said.

So at his father's suggestion, he became the fourth-generation Young to take a turn at selling insurance. He soon became a partner in Robins & Weill Insurance Agency of Greensboro, N.C., a company he would help build for nearly 30 years before selling his interest.

Today, Mr. Young, a consultant and director of special projects for the Independent Insurance Agents of North Carolina, is called upon by agencies and banking companies like BB&T Corp. and Bancorp South that want to form insurance sales partnerships.

After more than 50 years in the business, Mr. Young says, he believes banks have clear opportunities if they pay close attention to the differences between banking and insurance.

He recently discussed some of the vital issues with staff writer Michael O'D. Moore.

What are some of the key issues banks should consider when assessing an agency for acquisition?

YOUNG: A lot of independent insurance agents have an unrealistic view of their agency. I recently spoke with a bank that had someone come to them anxious to sell his agency but wanted three times the annual commissions. And of course that's a totally discredited method of valuing an agency.

I get a lot of calls on this now. "What is the going rate for agencies? Is it 1.5 times (revenues)? Is it 2 times?" There is really no going rate.

You can evaluate an agency on the multiple of cash flow after determining flow or what the balance sheet value really is. An agency really has to be looked at very carefully by a bank because one thing you don't want to do is dilute the bank's earnings.

Are banks getting caught up in the valuation terminology used by agents?

YOUNG: If a bank is really interested in getting into the business, then they are inclined to find reasons to do a deal. With a bank that is making an initial purchase, they may have to pay for an opportunity cost. I have no problem with that.

And that cost might occur even if they are already in the business but getting into a new market area. There may be an opportunity, and only the bank can determine what they should pay for that. But it's not something that's going to occur on a repetitive basis.

Once a bank gets in the business and gets its back-room operations established, then when they buy another agency they should be able to do a pro forma that will show how they can operate more efficiently.

Do banks compensate agents enough, and does changing agency pay schemes to align with bank pay schedules harm an agency's sales?

YOUNG: I think you've got two problems here. One is that people are not producing, but getting big salaries or salaries that aren't commensurate with their contributions to the bottom line. The other is that if you limit the producer based on comparable bank salary structure, then you're going to lose producers.

I think that it is critical in doing that pro forma that you structure the compensation. Now obviously there are some agencies out there that have very successful compensation programs which reward people who produce-if the bank is fortunate enough to get involved with something like that, they better not mess with it.

Some consider BB&T Insurance Services in Winston-Salem, N.C., a model for how a bank can run an insurance agency. What are the keys to their success, and how do you view their operation?

YOUNG: The bank's management from the top down deserves a tremendous amount of credit for allowing Wade Reece, president of BB&T Insurance Services, to pretty much run his own show. He's a tremendous individual who basically came in as a banker but recognized right up-front that you cannot run an insurance agency like a bank.

The other advantage that BB&T had is that they've actually been in the independent insurance agency business since the '30s. For a long time they weren't aggressive, they weren't in an acquisition mode, but when they decided they were going into one, at least they'd had some experience.

As somebody who's been involved in insurance for 50 years, what's your prediction on whether banks can succeed in insurance sales?

YOUNG: Banks have a marvelous opportunity in insurance but have to realize that it has to be run differently.

A lot of banks aren't going the agency route. David Holton at Wachovia is using direct mail, and First Union is selling business owner protection plans.

There are so many different avenues to marketing this product, and one isn't going to be superior to all others. I can see the day when a bank is issuing a policy, and it will be an automobile policy that will say First National Bank of whatever.

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