Top insurance brokers: BB&T Insurance Holdings Inc.Posted On: Jul. 20, 2014 12:00 AM CST
Organic growth and strategic acquisitions in 2013 helped BB&T Insurance Holdings Inc. retain its position as the sixth-largest insurance brokerage in the world in Business Insurance's 2014 ranking.
BB&T grew its brokerage revenue by 6.9% to $1.58 billion in 2013 and posted organic growth of 4.7% in 2013, unchanged from 2012.
In addition, the insurance arm of bank parent BB&T Corp. increased its revenue contribution to 16% in 2013 from 4% in 2000, said Chris Mutascio, Baltimore-based managing director at Keefe, Bruyette & Woods Inc.
“What's happened is you now have an insurance line item that is becoming a fairly sizeable piece of the overall revenue,” Mr. Mutascio said. “This provides a little bit of protection in a very-low-interest-rate environment.”
Now that it has finished digesting its $570 million 2012 acquisition of Roseland, New Jersey-based wholesale broker Crump Group Inc., the insurance arm again is looking to acquisitions, having completed two deals already this year — the March purchase of Woodbury & Co. of Wilmington, North Carolina, and Myrtle Beach, South Carolina, and Caledonian Insurance Group Inc. of Mercer Island, Washington — through BB&T subsidiary McGriff, Seibels & Williams Inc.
“I would say things are getting more back to normal on the acquisition front,” said H. Wade Reece, BB&T Insurance Holdings' chairman and CEO. The Crump purchase “really did dominate what we did” during the latter part of 2012 and most of 2013, he said.
“We would view ourselves as a strategic buyer that's looking to increase revenues within certain niches or certain industry specializations,” Mr. Reece said. “We would not view ourselves as an aggregator.”
“I do think you've seen a combination of both organic growth in terms of their business in trying to cross-sell their commercial borrowers and commercial insurance customers and, on top of that, with certainly meaningful acquisitions,” Mr. Mutascio said.
Gaining a platform for growth was the goal behind the 2011 acquisition of Irvine, California-based employee benefits firm Precept Group Inc., Mr. Reece said.
“We spent a lot of time and resources making that acquisition and then building it out as a national platform” for employee benefits, he said.
While its 2013 employee benefits revenue fell 2.8% to $152.4 million, BB&T sees employee benefits as a major growth area in the future.
“We anticipate our employee benefits division to be in double-digit growth year over year,” said David Pruett, CEO of the company's retail division and vice chairman of BB&T Insurance Holdings.
“Our single greatest opportunity for growth in the retail division is in the execution of our employee benefits strategy,” added Mr. Reece. The company plans to use the transformed Precept as a national employee benefits platform to give “all of our producers ... the resources and infrastructure available to meet client needs,” said Mr. Reece.
“We are seeing some fairly significant growth in our surety area, which I think may be a sign of improving economic conditions, when you have contractor and construction surety growing in double digits,” said Mr. Pruett.
The company's two private insurance exchanges — CarePlus Benefits Exchanges, available in standard and custom options — set up last November, are “fully operational today” but have yet to see robust activity, largely due to the changing implementation dates of the health care reform law.
“The real need, in my opinion, for the exchanges is now not happening until late 2014 and 2015,” Mr. Pruett said.
Soft rates are a concern for the company's wholesale division, which grew its 2013 revenue by 6.7% to $680.8 million.
“When I look at the marketplace, I think it is becoming a little bit more challenging,” said John Howard, Roseland, New Jersey-based CEO of BB&T's wholesale division and vice chairman of BB&T Insurance Holdings.
Cross-marketing through all BB&T channels, including the parent company, will give the wholesale division an avenue for growth, Mr. Howard said.
In a May upgrade of its bank parent to outperform from neutral, Credit Suisse Group A.G. analyst Craig Siegenthaler said the insurance brokerage is undervalued.
“BB&T's insurance brokerage value is not fully embedded in the stock,” he said in an analyst note. “We estimate BB&T is not receiving full value for its (approximately) $4 billion insurance brokerage business in its current valuation.”
Indeed, Credit Suisse is so bullish on BB&T Insurance that it identified several ways for the bank to unlock additional value from the brokerage: A tax-free spinoff to shareholders; a public sale of 20% to 30% of the insurance business stock; or several ways to sell the insurance arm.
However, “BB&T has been in the insurance business since 1922,” said Mr. Pruett. “It has been and will continue to be a significant part of BB&T's income diversification strategy.”