A month ago James Threadgill, the head of BancorpSouth's insurance unit, spoke confidently about reaching record highs in sales this year and nearly doubling insurance commissions in the next five.
But within 48 hours after Hurricane Katrina hit the Gulf Coast, the Tupelo, Miss., company's insurance business was no longer selling insurance. It had become exclusively a claims servicing operation, and calls were pouring in around the clock.
Since 1999, BancorpSouth's insurance brokerage operation had become one of the country's most successful. But Mr. Threadgill, who is also a vice chairman of the $11 billion-asset banking company, says the unit now must back up its promises of service, and on a grand scale.
"This is where we solidify our relationships with the client," he said.
The insurance staff has had to scramble clear of water to do its job. Its Stewart Sneed Hewes Inc. agency in Gulfport, Miss., was the worst hit; its ground floor was swamped, and operations were temporarily moved to its offices in Jackson, Miss.
Mr. Threadgill says that the shift from selling insurance to acting as an intermediary between policyholders and their carriers will slow what had been crisp revenue growth at BancorpSouth's insurance unit. It is too early to know Katrina's affect on business, he said, but he expressed confidence that the unit remains well positioned for long-term growth.
In raw dollars, BancorpSouth has respectable revenue from insurance sales. At $56 million last year from sales of fixed annuities and property/casualty and term-life, it ranked 18th among U.S. bank holding companies.
The total put it in the same class as its larger regional competitor Commerce Bancshares Inc. of Birmingham, Ala., which reported almost $72 million of 2004 insurance revenue.
But BancorpSouth is a standout by another measure. Insurance sales provided 10.87% of its $518.3 million of net operating revenue last year, according to Federal Reserve data compiled by Michael White Associates, a Radnor, Pa., bank-insurance consulting firm. That percentage put it neck and neck with a powerhouse in the business, BB&T Corp. of Winston-Salem, N.C. - whose insurance sales totaled $593.3 million last year - for first place among depository institutions with least $10 billion of assets.
Mr. Threadgill said insurance sales accounted for 31.2% of BancorpSouth's noninterest income last year and were the largest single contributor in that category. The company ranked first among the nation's 73 largest bank holding companies last year in insurance brokerage revenue as a share of noninterest income, according to Michael White research.
In an interview before Katrina hit, Mr. Threadgill said he expected BancorpSouth's insurance commission income to reach $100 million within five years - half from future acquisitions.
Last week he said he could not be sure if those predictions will hold up. For now, the insurance unit is focused on service and maintaining good client relationships, he said, but down the road it could look for deals.
Like many banking companies, BancorpSouth has built its insurance business on acquisitions. Since 1999 it has bought three large agencies.
Stewart Sneed Hewes, bought in 1999, was the largest independent agency in Mississippi and one of the top 100 in the nation. That year it pulled in more than $13 million of revenue on sales of property/casualty policies and, to a lesser extent, group life and health insurance.
In May 2003, BancorpSouth snapped up Louisiana's largest independent agency, Wright & Percy of Baton Rouge. Wright & Percy agency generated $14 million of revenue that year, mostly from property/casualty sales but nearly a third from group benefits.
Three months later the banking company announced a deal for Ramsey Krug Farrell & Lensing Inc. in Little Rock. It was one of Arkansas' largest independents, with annual commissions of about $13 million. A strong property/casualty player, it also had a good medical malpractice business and was one of the largest hospital insurers in the state.
The three agencies' collective revenue has grown, partly through cross-selling, since BancorpSouth bought them. Last year they contributed more than $50 million.
In addition, sales of insurance products in BancorpSouth's 300 bank branches brought in $6 million. Most was from fixed annuities sold by 400 insurance-licensed platform reps; about 100 earned their licenses in 2004 as BancorpSouth kept adding branches and followed through on a plan to have at least one insurance-licensed platform banker in each.
The drive to sell insurance from the platform began in 1999, the year the Gramm-Leach-Bliley Act removed legal obstacles to banks' buying agencies. But even before Gramm-Leach-Bliley the company's leadership had reached a consensus that insurance could be a significant way to boost fee income.
At the time fee income, including noninsurance revenue, was in the "low 20s" as a percentage of its revenue, Mr. Threadgill said. It is now about 36%.
Fixed-annuity sales have grown from $45 million in 2001 to $115 million in 2003. The figure dropped to $90 million last year, but many banks experienced similar declines as interest rates fell.
Last year BancorpSouth started offering term-life policies through platform bankers. It sold 2,000. The product is valuable to customers but not a significant source of bank revenue, Mr. Threadgill said.
Mr. White said it helps that the company's insurance program aims at the mass market rather than the affluent. "BancorpSouth is really committed to the middle market and making it work," he said - "not all this high-net-worth stuff, where they'd be chasing customers along with other insurance companies."
Mr. Threadgill said strong cross-selling enabled the three agencies to increase revenue quickly. "We picked a lot of low-hanging fruit those first few years," he said.
The banking company's directors proved an early source of business for Stewart Sneed Hewes, as did the advisory boards of the community banks BancorpSouth owns. Cross-selling has helped put the Gulfport agency on track for $20 million of commissions this year.
Wayne Tisdale, an executive vice president of risk management at Steward Sneed, said BancorpSouth does not have a "secret" cross-selling formula. The agency and its 30 producers have an enterprising culture in which agents tend to seek out their banker counterparts on their own initiative, he said.
"Like most insurance agencies that become affiliated with banks, you have to experiment to see what works," Mr. Tisdale said. "What makes a good loan prospect doesn't necessarily make a good insurance prospect. It's not the panacea people thought it was some years ago."
BancorpSouth has helped accommodate referrals by setting up a call center in Tupelo for homeowners insurance and other retail products.
Mr. Threadgill said he aims to boost profitability. Last year the agencies' profit margin was 27%; the goal is 30% within 24 months, and integrating back-office operations should get him part of the way, he said. "We have just begun to recognize the savings of integrating these three agencies."
The agencies have begun sharing software, and three months ago BancorpSouth hired a marketing executive to represent all the agencies in meetings with third-party providers, Mr. Threadgill said.
Long-term the banking company is looking for more insurance acquisitions. "I'd like to expand my insurance footprint to include the entire bank footprint," Mr. Threadgill said. "It's hard to provide insurance service in Tennessee from Mississippi or Arkansas."
But Cynthia Saccocia of MasterCard's TowerGroup in Needham, Mass., said that years of consolidation in the insurance brokerage field have brought price inflation, and that many of the best acquisition candidates are no longer available.
"Prices are still relatively high," said Ms. Saccocia, TowerGroup's director of insurance. "It's tough to find a good-quality agency these days that's still relatively stand-alone."
But Mr. Threadgill insists that it is possible - even after Katrina.
"There are still a number of outstanding agencies available that have elected to remain independent," he said. "My job is to convince them that being part of a larger organization actually enhances their ability to grow revenues and provides them with liquidity as well as clout with carriers."
