Not everyone is sold on insurance companies owned by banks.
Good News Everyone: Companies Bancorp $2.2 Billion
Restrictions that had prevented banks from selling insurance products were lifted in the late 1990s with the passage of the Gramm-Leach-Bliley Act by Congress and the ruling of the Supreme Court in the case of Barnett Bank of Marion County, N.A. v. Nelson.
Hundreds of community banks entered the market over the course of the following ten years, investing billions of dollars to buy agencies.
Twenty-five years later, it seems that traffic is heading in the other direction. Banks have divested insurance assets for striking valuations in several high-profile deals.
The pattern persisted in December when World Insurance Associates purchased the insurance subsidiary of the $1.4 billion asset CB Financial for $30.5 million, which is 26 times the company’s earnings over the previous 12 months. After the agreement by the CB’s sale,
Evans Bancorp, a $2.2 billion asset, will sell Arthur J. Gallagher & Co. its agency for $40 million.
According to Hovde Analyst David Bishop’s recent research note, banks are “acutely aware” of the prices agencies are currently commanding. Nevertheless, a lot of organizations seem to be doing nothing but enjoying the consistent flow of revenue that insurance brings in.
The following are summaries of a few well-known community banks with an insurance division:
Community Bank has been developing its One Group agency for nearly ten years.
In 2015, the Community Bank System located in Syracuse, New York, ventured into the insurance industry by purchasing Oneida Financial, also located in Oneida, New York, for $142 million.
Before Oneida bought it in 2000, two family-owned agencies merged to form One Group, the agency that Oneida now owns.
Towne’s primary business is insurance.
Two years after Towne Bank opened, in 2001, Towne Bancorp, located in Suffolk, Virginia, a city well-known for its ties to peanuts, established Towne Insurance, its insurance subsidiary.
Since then, Towne Insurance has played a significant role in Towne’s business plan. Its expansion has been aided by 27 acquisitions, the most recent of which closed in January 2023.
David Bishop, who covers the $16.7 billion Towne asset for Hovde, stated in a recent research note earlier this month that management is aware that a sale of Towne Insurance could result in significant benefits.
In addition, it views insurance as a core business and predicts that the unit’s value will rise with time.
Towne’s findings support that theory. Since 2012, insurance revenues have increased at a combined annual growth rate of 12.7%. As of the end of September 30, insurance revenues amounted to $28.8 million, a 23% increase from the previous year.
Insurance revenue for the first nine months of 2023 came to $83.5 million, which is nearly equal to the $91.6 million reported for the entire year 2022.
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