Sky Financial Group Inc.’s purchase of a benefits consulting company moves it another notch closer to a goal of $80 million to $90 million of annual insurance revenue, the chief executive officer of Sky Insurance says.
The acquisition of Lindig Benefit Consultants in Worthington, Ohio, near Columbus, gives Sky’s insurance agency affiliate $61 million of annual revenue, said Jerry Batt, the unit’s president and CEO. Sky Insurance, which has grown swiftly through acquisitions, is aiming to grow to $80 million to $90 million of revenue by “sometime in 2008,” he said. Sky Financial is based in Bowling Green, Ohio.
The insurance business is becoming an impressive contributor of fee income as a percentage of overall income at $15.8 billion-asset Sky Financial Group, said Michael White, who heads a bank insurance consulting firm in Radnor, Pa.
Data reported to the Federal Reserve and compiled by Michael White Associates shows that Sky generated $17.6 million of insurance brokerage fee income in the first quarter of 2006, he said. This was good enough to place it 14th out of 68 bank holding companies with at least $10 billion of assets, he said.
In addition, Sky’s ratio of insurance fee income to noninterest income was 31.2%, ranking it third in its asset class. Insurance fee income accounts for 9.3% of the company’s net operating revenue.
“That’s really significant,” Mr. White said.
Lindig’s business — it specializes in association member benefit programs — will be consolidated into Sky Insurance, Mr. Batt said, and it will take the Sky name in three to four months. It joins an operation in which employee benefit business accounts for 34% of annual revenue, he said.
The purchase comes after Sky’s acquisition in January of the Peter B. Burke Agency in Pittsburgh, a property/casualty surety specialist.
Lindig has six employees and about $1 million of annual revenues. The employees have agreed to stay on for at least five years, Mr. Batt said. Payment for the deal was in stock and cash, but Mr. Batt declined to disclose the purchase price.
The 16-year-old agency specializes in health insurance programs, in particular member benefit programs for associations. Its association clients include two regional Better Business Bureau groups, as well as construction, agricultural, and educational associations.
Sky will remain on the lookout for acquisition targets, Mr. Batt said. Areas of particular interest include Columbus, where Sky Insurance has a local employee benefits presence but wants a property/casualty outpost.
Indianapolis, home of Union Federal Bank, which Sky bought this year for $330 million, is another target area, he said.
The company is also seeking an entrée into trucking insurance. The bank parent has many trucking company customers and must go through a third party to fulfill their insurance needs.
“It doesn’t make sense to continue to do that over the long term,” Mr. Batt said.
Though agreeing that banks have cherry-picked many of the larger “foundation agencies,” Sky believes good targets remain with revenue of $1 million to $5 million and strong management, Mr. Batt said.
“We’ll continue to seek out foundation agencies,” he said, “but we don’t have to have a foundation agency.”
