Summit Bancorp is stepping up its efforts in the employee benefits business.
The Princeton, N.J.-based bank announced plans last week to acquire two privately held employee health benefit companies, Corporate Dynamics and Philadelphia Benefits.
Terms of the stock deal for the Mount Laurel, N.J.-based companies, which share a common owner, were not disclosed.
Jack Cussen, senior vice president in charge of retail investments and insurance services for Summit, said the planned acquisition "provides a level of expertise that we don't have."
Summit has 15 salespeople who primarily sell individual life policies from large insurers like CNA, U.S. Life, and Provident Mutual.
It also sells business-succession insurance and some employee benefits, including 401(k) plans. But this latest deal marks its first foray into the health benefits arena, and marks a departure from a previous focus on individual policies.
Corporate Dynamics acts as an agent and broker for middle-market and smaller companies, to negotiate rates with major providers of health insurance, Mr. Cussen said. The company also sells group insurance, group life, and group disability policies, he said.
"The synergy will occur when they work on some of our accounts," Mr. Cussen said. "We have several thousand medium business accounts who might be able to use Corporate Dynamics."
Its affiliate, Philadelphia Benefits, is a wholesaler that processes health care cases from insurance brokers that are too small to deal with large insurance companies or health maintenance organizations on their own.
Because Philadelphia Benefits "writes business" for 800 separate brokers, it can negotiate price discounts and pass them on to small brokers, Mr. Cussen explained.
Summit plans to refer its corporate clients to Corporate Dynamics, and Philadelphia Benefits will operate as an independent business, he said. "It will not be part of the package that we present to our customers."
Though Summit has yet to decide on a long-term strategy for the business, Mr. Cussen said, "I expect we'll expand where it makes good sense." He plans on retaining all the employees of both companies.
Summit's move fits in with the bank's approach to the insurance business, said David Kaytes, an insurance analyst with First Manhattan Consulting Group, New York. It also brings to the bank a book of business with a revenue stream.
The bank's move is partly defensive, Mr. Kaytes said. Summit probably has its eye on First Union Corp.'s proposed acquisition of CoreStates Financial Corp., which is based in its region, he said. First Union announced plans to acquire CoreStates last month.
"First Union is a very strong distributor of insurance products in its own areas," he said.
Mr. Cussen said that the move was not in direct response to First Union's proposed acquisition of CoreStates. But he said the deals would bring to Summit "an ability to make the relationships with corporations stronger and make it more difficult for corporate relationships to leave."