Sovereign Bank has announced an agreement with the Savings Bank Life Insurance Co. of Massachusetts to distribute term life insurance - the latest step in Sovereign's effort to build its insurance business through partnerships and organic growth.
The term life policies being offered through the SBLI partnership will help push the regional bank's nonannuity insurance revenues to an annual rate of $3 million to $5 million within a year, said Marty Zoller, senior vice president, managing director, in the insurance services group at Sovereign. Revenues should grow 10% to 15% a year thereafter, he said.
Current annual revenue is "in the seven figures," he said.
"We wanted a simple-issue product and a fully underwritten term one," Mr. Zoller said. "We chose SBLI because of its strong brand awareness."
The Wyomissing, Pa., bank is a $59 billion-asset company with more than 650 branch offices in the Northeast.
SBLI, headquartered in Woburn, Mass., has $56 billion of insurance in force. It is well known in New England and, because of its alliance with New Jersey Community Bankers, in that state as well, Mr. Zoller said. Through the alliance with Sovereign, SBLI's life products will be available to residents of most New England states, New Jersey, Pennsylvania, Maryland, and Delaware.
Sovereign began its insurance business more than four years ago with credit accidental death and dismemberment coverage and hospital accident programs, both through direct mail. The bank later added licensed agents in its Reading, Pa., call center to let it deal directly with insurance underwriters rather than third-party marketers. The bank offers annuities separately through its retail investment unit.
It has been offering SBLI products through its call center since October in a limited program aimed at getting the partnership running smoothly. With the full rollout, term products are available through branches, the bank's Web site, and an 800 number that is publicized in statement stuffers and elsewhere.
Sovereign has eight licensed agents in its Reading call center (and SBLI has more than 30 available to customers should the need arise).
A similar center is being started in East Providence, R.I., to handle overflow business. Within 90 days, four or five bank employees in the center are to be licensed.
The partnership is similar to one that Sovereign has with another third party that is aimed at its affluent customers in the Middle Atlantic states. About five months ago, the bank formed a partnership with Professional Economic Growth Group, or PEGG, in Edison, N.J., to offer insurance products appropriate to high-net-worth clients and business owners.
Sovereign, like many other banks, is looking to insurance as one way to produce fee income at a time when interest rate margins are being squeezed. It wants to increase fee income by 15% this year, Mr. Zoller said. Insurance also plays a role in the bank's goal to cross-sell six products or services per household, he said.
Agency acquisitions are not part of Sovereign's insurance growth plan, Mr. Zoller added.
For SBLI of Massachusetts, the partnership is a big coup. Of the company's 200 bank partners, Sovereign is by far the largest. (TD Banknorth in Portland, Maine - formerly the insurer's biggest bank partner - has about 400 branches and had $28.7 billion of assets at Dec. 31.)
The partnership could double SBLI's revenue through banks by next year, said Dennis Clifford, the vice president of brokerage services and bank channel marketing at the insurer. Banks account for 27% of SBLI's sales, according to the company, or $4.9 million last year.
"This is fortuitous to us, and it's mutually advantageous," said Robert Sheridan, the insurer's president and CEO.
SBLI in 1907 became the first insurance company allowed by law to sell through banks. It has expanded into 14 states and the District of Columbia and is looking to push ahead into high-density areas. It is looking at states like California, Florida, Texas, and Ohio, Mr. Clifford said.
"We have a very focused effort to expand geographically on a slow basis," said Mr. Sheridan.
