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6: BB&T Insurance Services Inc.

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BB&T Insurance Services Inc. remains focused on growth and posted double-digit revenue gains last year despite market conditions that remain challenging, a top executive said.

Raleigh, N.C.-based BB&T's brokerage revenue increased 12.4% to $1.08 billion in 2009, vaulting it to No. 6 among the world's largest insurance brokers in the 2010 Business Insurance rankings, up from No. 8 the previous year.

“We finally broke the billion-dollar barrier, and it's exciting,” said H. Wade Reece, chairman and CEO.

The broker, a unit of bank parent BB&T Corp., reaped the benefits of an active acquisition year in 2008, when it made 11 deals worth $212 million in annualized revenue. Several year-end 2008 purchases, including Orlando, Fla., retail agency J. Rolfe Davis Insurance, “really gave us a lift in 2009,” Mr. Reece said.

BB&T's appetite for new acquisitions continues to be strong, although market conditions resulted in just one deal in 2009. In November, BB&T acquired Fort Myers, Fla.-based retail agency Oswald Trippe & Co. Inc. to round out its Florida franchise. The deal added about $25 million in annualized revenue, Mr. Reece said.

The purchase was consistent with BB&T's strategy of seeking acquisitions where its parent has strong banking operations to leverage cross-selling opportunities and organic growth. The Oswald Trippe deal came after BB&T Corp.'s takeover of Colonial BancGroup, which had much of its operations in Florida, from the Federal Deposit Insurance Corp.

On the wholesale level, BB&T posted a 35% gain in 2009 with $311 million in revenue. The boost was driven largely by BB&T's wholesale unit CRC Insurance Services Inc.'s December 2008 purchase of Burlington N.C.-based managing general agency TAPCO underwriters Inc.

TAPCO, with roughly $65 million in annualized revenues, specializes in high-volume, middle-market excess and surplus lines. Integrating TAPCO as a division of Southern Cross Underwriters, also an MGA, is nearly complete, Mr. Reece said. “The two units have come together very well and also grown in the process, so it's been a great story,” he said.

While an uncertain economy, tight credit markets and soft insurance market conditions brought much of the sector's M&A activity to a halt last year, BB&T anticipates a “moderate” increase in the second half of this year.

“Things were so uncertain last year that everyone played wait-and-see,” Mr. Reece said. “Conditions are improving and we would really like to do some deals in the second half of the year.”

High-quality agencies with good sales cultures continue to be attractive targets for BB&T. While the broker has built a strong presence in U.S. Southeast and Mid-Atlantic, BB&T is eyeing more opportunities in California after its 2008 acquisition of San Diego-based UnionBanc Insurance Services Inc., Mr. Reece said.

The UnionBanc deal added to California operations that already include CRC and large-account commercial broker McGriff, Seibels & Williams Inc. As the California economy improves, BB&T anticipates investing in more retail agencies in the state to expand on its foundation, Mr. Reece said.

BB&T also has faced some challenges in the past year.

Its CRC unit suffered a hit in May when more than 120 employees in Chicago, Philadelphia and California left the wholesaler to join Chicago-based Ryan Specialty Group Inc. Litigation is pending and observers say it's too soon to determine the financial loss as a result of the departures.

Mr. Reece characterized the situation as “extremely disappointing” and “disruptive,” but stressed that CRC will continue to invest in and rebuild the affected offices.

Although BB&T often has followed in the footsteps of its parent in seeking acquisitions, “there seems to be a shift under way to a more national approach,” said Jim Campbell, a principal with Reagan Consulting Inc. in Atlanta. The California deals “have really opened things up, and that's liberating. I think it will allow them to pursue what they view as the best opportunities,” regardless of its bank parent, he said.

“They have made a commitment to acquire outstanding firms and they've paid a premium in some cases, but if you look at where the organization is today, it's quite formidable,” said John Wicher, a principal at San Francisco-based John Wicher & Associates Inc., which provides advisory and investment banking services.

One of the most impressive aspects of BB&T's acquisition strategy is “they don't fool with the secret sauce,” Mr. Wicher said. When integrating acquisitions, “they let each one of those assets continue to do what they do well.”

When acquisitions resume, observers foresee challenges.

“Assuming they return to normal acquisition activity, they will find the acquisition marketplace is getting a little more competitive again,” said Mr. Campbell. The biggest challenges BB&T faces, however, are the same challenges the industry is facing—a soft market and a weak economy, he said.

While much of BB&T's 2009 revenue was fueled by acquisitions, organic growth remains a “priority” Mr. Reece said. While BB&T posted organic growth of just 0.4% last year, “given the overall economic conditions, we were happy with that,” Mr. Reece said.

“Everything really has to be viewed through the perspective of a continued soft market and tough economy,” Mr. Campbell said. In a year that saw many brokers experience negative organic growth, for BB&T to realize “even just a little bit of positive growth is good,” he said.

New business plus retaining current clients is essential and BB&T in 2009 achieved a 93% client retention rate, Mr. Reece said. “If we focus on understanding our clients and giving great service, they reward us by sticking with us.”

In addition, beefed-up producer support, especially in the large-account arena, has helped to generate new business that Mr. Reece described as “our lifeline.”

BB&T also has focused on enhancing its offerings, including additional products and services in the specialty and directors and officers lines, and more sophisticated captive and alternative risk capabilities, Mr. Reece said.

While difficult conditions persist across the industry, analysts say BB&T is well-positioned for when the market turns.

BB&T Corp.'s stock closed at $28.18 on July 9. Its 52-week high was $35.72 and its 52-week low was $19.91.