The $8.9 billion-asset Old National Bancorp in Evansville, Ind., which stepped outside its banking footprint in 2002 to buy a Missouri agency and had plans to shop for a bank to complement the deal, says it is now focused on fill-in insurance deals in Indiana and Kentucky.
Jim Parsons, the president and chief executive officer of ONB Insurance Group, which recently announced its seventh agency deal, said he will keep looking for deals in the states contiguous to its home base on the Ohio River in southern Indiana.
He declined to discuss the parent’s St. Louis-area ambitions, but an analyst said Old National has “streamlined their strategy” and speculated that the company may eventually sell its St. Louis agency.
Troy Ward, an analyst at A.G. Edwards Inc. in St. Louis, said the shift in geographic focus goes for the corporate parent, too. “Before, their strategy included St. Louis, but now they are saying, ‘Let’s further direct our focus on these two markets,’ ” he said.
The shift makes sense, he said, because Old National already has banking operations in Indiana and Kentucky but St. Louis is a “start-from-scratch opportunity.”
“The reason to buy an insurance agency is to bring it all together and cross-sell,” Mr. Ward said. Old National’s lack of a bank in St. Louis “diminishes the attractiveness” of the agency. In a note published April 4, he wrote, “It is our expectation that ONB may divest the St. Louis insurance group.”
“ONB’s current strategy is to focus expansion on Indianapolis and Louisville,” he wrote. “ONB currently has no bank expansion plans for St. Louis. We believe the St. Louis insurance operations are less desirable without a banking presence and may be divested to focus on core markets.”
“There’s adequate potential that it could happen in ’05,” Mr. Ward said.
ONB Insurance says it plans to close its $18.4 million deal for J.W. Flynn Co. in Indianapolis, and J.W.F. Specialty Co., Inc., a related alternative risk services company, on May 1.
When the deal closes, ONB Insurance would have annual revenues of $43 million and employ nearly 325, Mr. Parsons said.
“We got together with the people from Flynn and liked their operations,” he said. The deal would enhance ONB Insurance’s property and casualty, employee benefits, and third-party administration capabilities, he said, and the bank unit would also be able to offer risk management services to international accounts.
Mr. Parsons said ONB Insurance chose to make the purchase because “we have a banking presence in Indianapolis but did not have a significant insurance presence.”
“It’s … very important to be in areas where we have a banking business,” he said, and Old National has branches in Indiana, Illinois, Kentucky, Ohio, and Tennessee. “There are other areas we would like to enter into. We would like to fill out our geographic footprint as good opportunities present themselves,” he said, mentioning that Louisville is attractive.
Carmen Effron, the president of the C F Effron Co. consulting firm in Westport, Conn., said, “It is difficult buying a bank to support an agency. It’s easier to put people in that existing agency and focus on expanding their existing services. Buying a bank is a huge leap to support insurance.”
When considering agency deals, ONB Insurance examines geography, products and services, and most importantly the management team, Mr. Parsons said. “We want a management team that wants to continue to work with us. We are not looking to buy people out; we want to form partnerships.”
He declined to discuss a deal timetable, saying only, “When they make strategic sense for the bank, we will pursue deals.”
Old National made its first agency purchase in 1999, in Terre Haute, Ind., buying Sycamore Insurance Agency. It later bought Wolford Cannon Hoecker Insurance in Danville, Ill.; Terrill Group in Chesterfield, Mo.; James L. Will Insurance Agency Inc. in Evansville; Graham and Peat Insurance Agency Inc. in St. Louis; and Fort Wayne, Ind.- based Insurance and Risk Management.
The Flynn agency is one of the largest risk management, insurance brokerage, and third-party administrators in central Indiana, Mr. Parsons said. The purchase would give Old National one of the largest Indiana brokerage operations.
When asked whether the deal is a cross-selling opportunity, Mr. Parsons said, “We are convinced that it is. With Flynn’s standing in the community, their expertise and products, we think they will blend very well with banking opportunities.” He declined to put numbers to the cross-selling expectations or discuss long-term sales goals, however.
