Regions Financial Corp.'s insurance unit has taken another step forward in its expansion plan, adding the customer accounts and staff of an agency in a city, Memphis, where it has ample cross-selling opportunities.
Regions Insurance Group's purchase of Galbreath Insurance Agency last week brings in 3,000 commercial and personal accounts. It also creates cross-selling potential with customers of the bank and of units that are based in Memphis - Morgan Keegan & Co. Inc., an investment, brokerage, trust, and asset management company, and Regions Mortgage.
In addition Memphis was the headquarters city of Union Planters Corp., which Birmingham, Ala.-based Regions bought last year to create the $84 billion-asset company it is today. The newly acquired insurance business is to be moved into Union Planters' erstwhile headquarters building.
"This gives us the opportunity to plant the flag in Memphis, to cross-sell and reinforce our presence there," said David L. "Casey" Bowlin, the insurance group's president and chief executive officer. The group is the holding company for three insurance businesses; it generates annual premiums of $800 million.
Galbreath principals George Clarke Jr. and George Clarke Sr. and their staff are to transfer to Regions under the banner of Rebsamen Insurance, the Little Rock, Ark., agency operation that bought the Memphis agency.
Regions Insurance wants to have a strong presence throughout the parent's 15-state footprint and wants insurance to be a "more important contributor" to the bank's revenues, Mr. Bowlin said.
The insurance group has offices in Tennessee, Arkansas, Louisiana, Missouri, and Alabama but also sells insurance in the other states where the bank has offices. Its insurance operations, including Galbreath, generate $86 million of annual commission revenues, he said.
Last year, Regions was ranked 11th among U.S. banking companies in insurance brokerage fee income, with nearly $80 million, according to the "Fee Income Rating Report" published by Michael White Associates, a Radnor, Pa., consulting firm. That was a 15.4% increase from the previous year.
Insurance brokerage fee income made up 5.1% of Regions' noninterest income, putting the Alabama company in the 85th percentile in that category, according to the report.
An American Banker article in December suggested that Mr. Bowlin wanted an agency in each of the 50 states in three years, but he said this week that this was not accurate. His goal, he said, is limited to the 15 states of Regions' footprint and he has no definite timetable.
The company is aiming for lots of organic growth, Mr. Bowlin said, but remains open to selective acquisitions.
That's a sensible approach, said Mike White, the president of White Associates. In the wake of the Gramm-Leach-Bliley law that repealed a Depression-era ban on bank sales of insurance, banking companies have competed to buy agencies, driving up their prices and prompting many banks to be more patient, he said.
"Some institutions paid far too much," Mr. White said.
Banks are being more shrewd now in part because they have hired seasoned insurance executives to run their businesses, he added. Mr. Bowlin, for example, joined Regions late last year from Summit Global Partners Inc., a Dallas insurance brokerage and risk management and benefits consulting firm where he was the president and chief executive officer of retail operations.
Cross-selling can indeed lead to significant revenue growth, Mr. White said, but it is not a given. Banking companies have a mixed record of success, he said. "They're still maturing and learning how to do it," he said.
Regions entered the insurance business early in 2001 with the purchase of Rebsamen. The next year it bought the assets of ICT Group in New Iberia, La.
This sort of dealmaking within the parent bank's footprint resembled the campaign begun by BB&T Corp. of Winston-Salem, N.C., a few years earlier. BB&T, which eventually could boast more than 70 agency deals, exemplified how a regional bank could assemble a powerful insurance business through acquisition. It now has the fourth-largest bank-owned insurance brokerage, with $619.1 million of revenue last year, according to a report by the American Bankers Insurance Association.
The promise of renewable fee income is what attracts banks to the insurance business, said James Campbell, a principal at Reagan Consulting Inc. in Atlanta.
But a pure acquisition strategy would be difficult to execute in today's environment, he said. "Doing what BB&T did would be hard to replicate because there has been so much consolidation and acquisition, and so many active buyers in the marketplace," he said.
Of Regions Insurance's three business units, Mr. Bowlin said, Rebsamen accounts for $40 million of annual revenue; ICT for $30 million; and Regions Insurance Services, which is dedicated to credit-related insurance products such as credit life and debt cancellation, for $16 million.
Mr. Garmhausen, who covered mutual funds for American Banker from 1997 to 1999, is a freelance writer in Brooklyn, N.Y.
