The Virginia Bankers Association has assembled a consortium of 50 banks that is poised to acquire an insurance agency offering a broad range of products.
It would be the association's first purchase of a multiproduct agency. The association already owns seven title-insurance agencies.
The agency would market a broad range of insurance products through subsidiaries of its bank owners.
The aim would be to sell auto, homeowners, and life insurance.
By centralizing the administrative duties in the agency, smaller banks would achieve an economy of scale, said Bruce T. Whitehurst, deputy executive vice president of the Richmond-based association.
"We're approaching the point where we're beginning to negotiate," he said. "There have been a number of meetings with various agencies."
Speaking to about 100 bankers and insurance providers during the community banking segment of the Association of Banks in Insurance conference here, Mr. Whitehurst said the arrangement would allow "banks to focus on cross-selling and not on operational issues.''
He said the new consortium has been capitalized but declined to disclose details because of the situation's evolving status.
The 50 institutions include thrifts and state and nationally chartered banks, ranging in size from less than $50 million of assets to more than $1 billion, Mr. Whitehurst said in an interview after the presentation. Though he would not outline the combined assets of the institutions, he said they have considerable power.
After the session, a Virginia banker said his peers are energized about the prospects.
"There's a lot of interest. I think it makes a lot of sense," said Larry Warren, president and chief executive of Potomac Bank of Virginia in Vienna.
However, he said his year-old, $38 million-asset start-up bank would not join the consortium while it is still building its core operations.
Mr. Whitehurst said the consortium would give smaller institutions the opportunity to get into the insurance business and offer a broad menu of insurance offerings. And as partial owners of the company, they would share in revenues while getting variable compensation for their portion of agency sales. "That's where they have a lot of control," he said. For its role in the new business, the bankers association is to get a flat management fee.
The association's seven title insurance agencies are each owned by about 15 banks and have proven so successful that some of these banks say the agencies account for up to 5% of net income, Mr. Whitehurst said. And "that's just from title insurance," he said.