Nearly 19 years have passed since the Gramm-Leach-Bliley Act unlocked the door for banks to enter the insurance business. Few Arkansas lenders have chosen to cross the threshold, venture in and tap a new income stream: Property and casualty insurance.
Among the state’s largest banking concerns, the only one to move into this arena and stay there is Conway’s Home BancShares Inc.
But Home BancShares wasn’t among the herd of 652 banks across the nation that spent an estimated $4.7 billion to buy more than 1,100 insurance agencies between 2000-05.
The $14.9 billion-asset bank holding company became a player in property and casualty insurance incidentally, through the purchase of two financial institutions. While Home BancShares entering the insurance business was happenstance, other bankers pursued the acquisition of insurance companies when the legal barrier was removed in November 1999. They were drawn by the allure of cross-selling opportunities and diversifying their revenue base.
“It’s worked well for some, and it really hasn’t worked at all for some of them,” said Andrew Meadors, CEO of Sunstar Insurance Group’s Arkansas operations.
Expanding into insurance has worked well for BancorpSouth Inc. of Tupelo, Mississippi, which operates one of the largest banking franchises in Arkansas. The $17.2 billion-asset lender built its lucrative BXS Insurance subsidiary with the help of its $23 million purchase of Little Rock’s Ramsey Krug Farrell & Lensing Inc. in 2003.
The Largest Insurance Agencies and the The Largest Property & Casualty Insurance Companies in Arkansas. Available in either PDF or spreadsheet formats.
Known as BancorpSouth Insurance Services Inc. until this year, BXS now ranks as the 38th largest insurance firm in the nation and the third-largest in Arkansas. The insurance venture generated net income of $12.2 million last year, nearly $9 million in 2016 and about $9.4 million in 2015.
During 2017, BXS Insurance produced revenue of $120 million and contributed 8 percent to the bottom line at BancorpSouth. At last count, BXS Insurance operates 31 offices with a staff of 630 across a nine-state footprint.
At the time, Ramsey Krug Farrell & Lensing marked the third major purchase of a large independent insurance agency by BancorpSouth. It was preceded by deals for Mississippi’s Stewart, Sneed, Hewes Insurance in 1999 and Louisiana’s Wright & Percy Insurance in 2003.
Sandwiched between the insurance buys was the gateway $455 million stock swap transaction in 2000 for BancorpSouth entering Arkansas as well as Louisiana and Texas: El Dorado’s $2.7 billion-asset First United Bancshares Inc.
Rebsamen, Regions & McGriff
Dwarfing BancorpSouth’s considerable insurance holdings is BB&T Corp. of Winston-Salem, North Carolina. The company’s insurance agency/brokerage network is the fifth largest in the world.
The $222 billion-asset lender entered Arkansas in July through the purchase of Regions Insurance Group Inc., which operates offices in Little Rock, Fayetteville and Fort Smith with an in-state staff of 162.
Across its entire footprint, Regions Insurance operated 32 offices with a staff of 740 and ranked as the 33rd largest broker of U.S. business, according to Business Insurance.
Details of the sale to BB&T weren’t disclosed when announced in April by its parent company, Regions Financial Corp. of Birmingham, Alabama.
The transaction later was portrayed as a $200 million deal, although the language in securities filings was murky: “The after-tax gain associated with the transaction was approximately $200 million and common equity tier 1 capital generated was approximately $300 million,” Regions Financial reported.
Insurance operations contributed $145 million in noninterest income to Regions Financial during 2017. For the year, Regions Insurance accounted for 6.8 percent of noninterest income at Regions Financial.
Though substantial, insurance operations at Regions paled in comparison to BB&T Insurance Services, which produced revenue of $1.7 billion during 2017. For the year, that represented 15.2 percent of total revenue and nearly 37 percent of BB&T’s noninterest income.
The company’s insurance holdings and premium finance operations are headquartered in Raleigh, North Carolina. BB&T’s insurance holdings and premium finance group produced net income of $161 million during 2017.
In June, BB&T Insurance Services was rebranded as McGriff Insurance Services. The name is a nod to McGriff Seibels & Williams of Birmingham, Alabama, a 2004 acquisition of BB&T.
At the time of the deal, the Alabama firm was the second largest privately-held insurance broker in the United States.
The $40.2 million purchase of Little Rock’s Rebsamen Insurance in 2001 established Regions Insurance in Arkansas. Back then, Rebsamen was the largest independent insurance broker in the state and ranked among the 50 largest insurance brokers in the nation. It is now No. 2 in Arkansas.
Centennial & Cook Insurance
Home BancShares gained entry to the insurance business through bank acquisitions in Arkansas and Florida.
The 2003 purchase of Community Financial Group Inc. of Cabot included Community Insurance Agency in addition to the $305 million-asset Community Bank.
“That’s where I came from, Community Bank of Cabot,” said Tracy French, CEO and president of Home Banc-Shares’ Centennial Bank. “The insurance agency was a nice tool to have, a nice addition to non-interest income and an opportunity to cross-sell customers.”
Headquartered in Jacksonville, the company’s insurance operates as Centennial Insurance in Arkansas. In Florida, business is conducted as Cook Insurance Agency Inc.
Founded in 1913, the independent insurance agency came under the Home BancShares banner in 2010 as part of the FDIC-assisted acquisition of Gulf State Community Bank of Carrabelle, Florida.
The combined insurance operations of Centennial Insurance and Cook encompasses 15 staffers.
“It’s certainly a line item for Home BancShares.” French said.
Last year, insurance revenue at Home BancShares totaled $1.9 million, 2 percent of its 2017 non-interest income. During the past five years, insurance revenue at the company reached a high-water mark of $4.3 million in 2014.
That followed the $320 million acquisition of Jonesboro’s Liberty Bancshares Inc. in 2013. Liberty owned Town & Country Insurance Agency in Jonesboro, purchased in 2004.
Town and Country specialized in commercial business insurance and employee benefit programs and also provided a full line of personal insurance products including automobile, homeowners, health and life policies.
But Town & Country didn’t stay a part of Centennial Insurance Agency for long. Its book of business was sold to Little Rock’s Stephens Insurance LLC in a 2015 transaction valued at more than $2.9 million by Home BancShares.
This year, Stephens — the largest insurance agency in the state — sold Town & Country to Sunstar Insurance Group LLC of Memphis. A year ago, Sunstar also acquired the property and casualty insurance business assembled by Simmons Bank of Pine Bluff.
Simmons & First Security
Like Home BancShares, Simmons got into the business of selling home and auto insurance incidentally through bank buys. The series of purchases involved Little Rock’s Delta Trust & Banking Corp. in 2014, Community First Bancshares Inc. of Union City, Tennessee, in 2015, and Hardeman County Investment Co. of Jackson Tennessee, in 2017.
The deals brought insurance sales to the Simmons footprint in central Arkansas and western Tennessee. Instead of spreading property and casualty offerings throughout its network or growing the business through acquisition, company officials decided to sell.
“We were kind of straddling the fence to becoming a competitive force,” said Phil Tappan, executive vice president of financial services for Simmons Bank. “When it comes to property and casualty insurance, there is no safe ground in the middle. You really need to have scale and be very big.”
Simmons hired the consulting firm of Marsh Berry & Co. in Willoughby, Ohio, a leading financial adviser in insurance mergers and acquisitions. The analysis led to Simmons deciding to invest its resources elsewhere.
“We determined there was significant time, money and opportunity costs to expand our property and casualty,” Tappan said. “But we haven’t exited the insurance business entirely.”
Simmons still conducts life, health and employee benefits insurance business through other subsidiaries.
Like most lenders in Arkansas, Searcy’s First Security Bancorp. passed on adding property and casualty insurance to its line of financial services.
“We wanted to continue focusing on banking and not go in that direction,” said said Reynie Rutledge, chairman and CEO of First Security Bancorp. “Maybe it’s for something we can get into in the future, but we don’t have any plans.”