Top insurance brokers, No. 5: BB&T Insurance Holdings Inc.Posted On: Jul. 1, 2018 12:00 AM CST
2017 brokerage revenue: $1.92 billion
Percent increase (decrease): 2.2%
Acquisitions continue to drive growth at BB&T Insurance Holdings Inc., as the broker saw its first full-year contribution from its 2016 purchase of Swett & Crawford Group Inc. and announced another key buy with rival bank-owned brokerage Regions Insurance Group Inc. in April.
BB&T also saw modest organic growth and benefited from increased customer retention in 2017 as well, its top executive said.
“The main driver in 2017 was completing the Swett & Crawford integration and realizing a full year of results from Swett & Crawford,” said John Howard, chairman and CEO of the brokerage.
“Swett & Crawford has outperformed our expectations and has been a tremendous complement to our wholesale business.” Organic growth was about 2%, and 2017 also saw improvements in retention, he added.
BB&T reported brokerage revenue of $1.92 billion, placing it No. 5 in Business Insurance’s 2018 ranking of the world’s largest brokerages, the same as last year.
“It’s been a positive story,” said Brian Klock, managing director for Keefe, Bruyette & Woods Inc. in Boston. “There’s now some momentum around the Swett & Crawford acquisition,” which accounted for much of BB&T’s revenue increase last year, he said.
Building on the acquisition of a wholesaler, last year Mr. Howard said he wanted to execute a retail acquisition, which is what BB&T did with the deal to acquire Regions Insurance.
“I expect that we will have a nice balance between retail and wholesale following the completion of the Regions Insurance acquisition, and I think both are very strong platforms,” Mr. Howard said. “We will be focused in the near term on completing the integration of Regions.”
After the announcement of the deal to buy Regions Insurance from Birmingham, Alabama-based Regions Financial Corp. in April, the former BB&T Insurance Services — part of BB&T Insurance Holdings Inc., which is a unit of BB&T Corp. — was rebranded as McGriff Insurance Services as of June 25, the brokerage said.
“The rebranding of McGriff is brilliant,” said John Wepler, chairman and CEO of Marsh, Berry & Co. Inc. in Woodmere, Ohio, adding that McGriff has a strong reputation for handling large, sophisticated accounts. “This will really resonate well in the marketplace, and we believe it will be an impetus for growth.”
“They have a time-proven strategy,” he said. “They’ve been able to build an insurance operation alongside their bank operation that not only has independent leadership to run the company but also works with the bank and collaborates with the bank.”
“What investors like to see longer term is a better mix of revenues between spread-based revenues (such as lending) and fee-based revenues, and I think adding to the insurance business does take away from that interest rate risk investors are concerned about,” Mr. Klock said. “It’s a more stable part of the business and diversifies revenue stream.”
With the rebalancing of retail and wholesale via the Regions deal, both sectors could see further growth.
“Both our divisions are candidates for continued building,” Mr. Howard said. “I anticipate we will continue to invest in both our retail and wholesale operations.”
“BB&T has a very long history in insurance and finds insurance brokerage really attractive,” he said. “We are currently about 16% of BB&T Corporation’s revenue, and BB&T has stated publicly that it would like to grow insurance revenue to 20%.”
One potential headwind for acquisitions is the rich valuations now present in the brokerage merger and acquisition market.
“The pricing on acquisitions has increased significantly, and I do believe there are limitations on what buyers are willing to pay,” Mr. Howard said.
“Valuations for high-quality insurance brokers is at the highest point on record,” Mr. Wepler said. “According to the information we track, valuations have never been higher than they are today.”
Still, analysts are positive on the broker’s position.
“What we think is different about BB&T (is) they have a wide cross section of insureds including small commercial, large commercial and employee benefits,” Mr. Wepler said. “They have a very broad offering and as a result, if you are a BB&T banking customer, I imagine they can serve any banking customer’s insurance needs.”
“With the rebound in pricing in the property/casualty market post-hurricanes and getting Regions Insurance in the numbers in the third quarter, management feels pretty good about the momentum they have there,” Mr. Klock said.