Newtek Business Services Inc. says it bought the insurance outsourcer Financial Keyosk as a step toward offering more services through banks and other financial institutions.
Barry Sloane, the chairman and chief executive officer of New York-based Newtek, said buying the outsourcer fits his company’s business model — providing business services like small-business and U.S.-guaranteed loans, electronic merchant payment processing, and Web hosting and other information technology.
Many of its services are offered to and through banks and other financial institutions, Mr. Sloane said. “These are typically products and applications that banks don’t necessary have internally and don’t want to manage.” “Banks are really a distribution channel for us, and we offer our products to the bank’s customers,” he said.
“We make a good alliance partner for a depository institution, since we’re not threatening or interested in deposits,” he added.
The company reaches 40,000 primarily small-business clients through its partnerships with institutions ranging from small community banks to Merrill Lynch & Co., he said. “The demographic of that market is businesses that are under 500 employees and under $25 million in sales,” he said; this group includes 23 million businesses in the United States.
This is similar to the strategy that Financial Keyosk has employed. The company, originally founded by Zurich Insurance Co. of North America, which will retain a minority stake, offers life, health, property and casualty, disability, and employee benefits products to individuals and small businesses through banks and other partners.
The company works through several banks and credit unions, including Union Planters Corp. in Memphis and MidAmerica Bank in Clarendon Hills, Ill.
“We plan on growing and penetrating that small- and medium-sized business clientele,” using Financial Keyosk’s insurance services, Mr. Sloane said. His company also plans to offer its other services to Financial Keyosk’s partners.
He said Newtek chose Financial Keyosk because it believes the “methodology of distributing insurance using a Web-based application and being able to deliver insurance policies and products on the Internet is the future of the market,” Mr. Sloane said. “The old distribution methodology of the smaller local insurance agency may not survive the course of the next five or 10 years.”
John Dawson, the president and CEO of Financial Keyosk, and Larry Paul, its chief marketing officer, have joined Newtek.
Financial Keyosk is the marketing name for the company that was formally known as Vistar Insurance Services. Mr. Sloane said the purchase price and other financial details of the transaction would be released during an investors conference call scheduled this afternoon.
Ultimately Financial Keyosk will be renamed Newtek Insurance Agency, the companies said.
