W Holding Co. Inc., the financial holding company for $5 billion-asset Westernbank Puerto Rico, has purchased an insurance agency in the bank's hometown of Mayaguez in a deal some observers say could signal a trend in Puerto Rico.
W Holding, which completed the deal this week, has renamed the agency Westernbank Insurance Corp. and plans to start selling its lines at Westernbank's 35 branches immediately. It did not give the price of the deal or the old name of the agency, which specializes in property, casualty, disability, and credit life insurance and has revenue of $1.5 million.
"We have wanted to broaden our financial services offerings, and now we're doing that," said Freddie Maldonado, chief financial officer of W Holding. "We have wanted to offer insurance through our branches, and this will give us the chance to cross-sell to our customers."
He plans to start selling small-business insurance sometime next year. "We're a strong commercial lending bank and we have small-business customers, so offering commercial packages would be a good fit for us," he said.
Westernbank will probably need that time to lay the necessary groundwork, Mr. Maldonado said.
"Commercial insurance is very specialized, and we don't yet have the expertise on hand," he said. "We have to recruit people and set up a staff. But we have an advantage in that we already have the client base. We're not starting from scratch."
The purchase also opens doors for the agency on the life insurance side, Mr. Maldonado said, because the bank offers annuities and it does not.
Robert C. Smith, a senior vice president at Reagan Consulting Inc., an Atlanta company that advises banks and insurance agencies in acquisitions, said he is not surprised that a bank in Puerto Rico has entered the insurance agency business.
"Just as U.S. banks of all sizes - from $100 million of assets to the big boys - have moved into the business, so will a wide range of banks there," Mr. Smith said. "The insurance industry is as fragmented in Puerto Rico as it is in the United States. Banks all over are trying to make names for themselves as financial services companies. So it makes sense."
Several banks in Puerto Rico sell insurance, but few are in the insurance agency business. Industry observers expect that more will get into it.
James Campbell, also a senior vice president at Reagan Consulting, said Puerto Rican banks want to bolster their insurance agency business.
"In our yearly survey we ask banks if they're interested in the insurance industry, and a couple of Puerto Rican banks have answered 'yes' " - for life and health as well as property/casualty, he said.
John Wepler, senior vice president of mergers and acquisitions for Marsh, Berry & Co. Inc. in Concord, Ohio, which also advises on bank-agency acquisitions, is already aware of another bank in Puerto Rico looking to buy an agency.
"In a small area like Puerto Rico, the best way for a bank to grow its business is to touch a customer a lot," Mr. Wepler said. "So we expect more deals like this to take place there."