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Agency buys back agency After being bank-owned for three years, employees of J.W. Terrill agency buy it back By Phil Zinkewicz
There was a time—it seems like eons ago—when the word “bank” was the worst four-letter word imaginable to property/casualty insurance agencies. Agent associations worked long and hard on behalf of their member agencies to keep banking interests from intruding into the insurance arena. And, for a time, they were successful. Then came what many characterized as the infamous Barnett vs. Nelson case in which a ruling by the United States Supreme Court opened the door for banks to sell property/casualty insurance. The Barnett decision was hotly debated within the industry; however, the die was cast and by the 1990s, especially with the passage of the Gramm-Leach-Bliley Act in 1999, agencies, at a significant rate, were looking to join forces with banks when there was a commonality of interest. We’ve read a good deal over the last few years about insurance agencies striking deals with banks, where the benefits to both parties to the contract were clear. And, as a consequence, banks have been making serious inroads into the insurance business. A recent survey by the American Bankers Insurance Association (ABIA) indicated that insurance revenue reported to the Federal Reserve by the nation’s bank holding companies grew by $7.3 billion in 2004 to a level of $40.8 billion, 22% higher than a year earlier. “The new record numbers in ABIA’s analysis confirm that banks are major and growing players in the insurance business,” said Valerie Barton, associate director of ABIA, in announcing the survey’s results. “The bank insurance industry is continuing to take advantage of the legislative reform of 1999 in expanding services it offers to customers. Since the passage of Gramm-Leach-Bliley, bank insurance revenue has steadily risen through agency acquisitions and systemic growth.” According to the survey, the total number of bank holding companies reporting insurance revenue also increased 11% to 1,413 in 2004 compared to 1,257 in 2003. In addition, 93 bank holding companies reported earning insurance premium income. This indicates that the holding company is engaged in insurance underwriting or reinsurance activities, as opposed to simply acting as agent for the sale of insurance underwritten by an unaffiliated insurance company, according to the survey. With these results, it is small wonder that many insurance agencies have hitched their wagons to banking interests’ stars. However, are such marriages always successful? The answer, of course, is no, and the St. Louis-based Terrill Group is a case in point. Having been bought out by Old National Bancorp in 2002, J.W. Terrill employees decided to form a privately held company called JWT Acquisition Corporation, Inc., to buy back the Terrill Group and its wholly owned subsidiary, J.W. Terrill, from the bank this past July. In making the announcement of the re-purchase, J.W. Terrill President and CEO, Andy Thome, said: “We are proud to be independently and locally owned. J.W. Terrill clients will continue to receive the effective, value-added services they have come to expect and rely on. Our dedication to understanding their businesses and ability to comprehensively evaluate their exposures enables us to meet their risk management needs on a cost-effective basis.” So what happened? First, it would be beneficial to take a look at the J.W. Terrill organization itself. J.W. Terrill started out as a one-man operation in 1962. At that time, the agency wrote only personal lines business. In 1972, son Jack joined his father, John W. Terrill, Sr., in the business. That same year, the agency expanded into the commercial lines arena by hiring new account executives, adding commercial lines markets, and beginning to acquire other insurance agencies. In later years, the agency further expanded its insurance and risk management services to include employee benefits in 1976 and a third-party administrator in 2000. Says Thome: “Today we are a middle market agency with the tools to handle and compete for much larger risks. We have expanded the agency’s consultative and value-added services with loss control, claims, and human resource divisions. Over 130 employees service clients ranging in size from $1 million to a billion dollars in revenue. We have also made a substantial investment in our benefit administration operation, where we have realized double-digit growth for the last three years. Our business breakdown is roughly 50% commercial lines, 35% group benefits, 10% surety, and 5% personal lines. Approximately 75% of our revenues are generated locally, although we have insured interests in all states and international accounts as well.” Industries or other areas in which Terrill has great strength are construction, manufacturing, health care, technology, transportation, environmental, trade union, corporate employee benefits, and personal insurance for high net worth individuals. “Our commercial lines operation is staffed by seasoned insurance experts—many of whom have been with us 15, 20, or 25 years,” Thome reports. “This consistent and extensive experience on staff is a big part of our ability to identify our clients’ changing risk management needs. Additionally, the services provided by our loss control and claims professionals help us to mitigate client losses. These tools create a strong team to benefit our commercial lines clients. “Positioned beside the commercial lines division is our surety division. This group of professionals enjoys a national reputation for facilitating surety credit for difficult cases where others have previously failed. This strength provides our clients with surety needs the convenience of having all their risk management needs handled by one agency,” he continues. “We have also seen extensive growth in our employee benefits/third-party administration divisions. Our employee benefits consultants support our clients in many ways including providing benchmarking and other peer analysis reports. Beginning in 1985, J.W. Terrill began offering various forms of benefit administration such as cafeteria plans and COBRA administration. With the addition of a licensed TPA in 2000 that could provide service to clients often overlooked by larger, vanilla TPAs, J.W. Terrill provides single-source accountability to clients who previously may have had to outsource to multiple consultants,” Thome states.
Another type of value-added approach has been the development by the company of a human resources consulting division. “At a time when employment practices are a substantial risk for employers, our clients consistently turn to this resource,” Thome says. “We offer a continuing series of educational seminars to our clients’ managers or HR staff to help them stay abreast of legal requirements and good employer practices. The group also offers a list of services that range from helping clients create policies and their employee handbooks to a help desk (HR Pro) clients can call for advice on daily HR problems.” The Employee Benefits Division is staffed by a proven group of financial professionals who possess the skills clients need to establish or change their employee retirement programs. They also offer consulting advice on an individual basis to client owners/executives or high net worth individuals for estate planning and other matters. As is the case in property/casualty at J.W. Terrill, by offering a full menu of EB services, clients can have virtually all of their needs handled by one organization. J.W. Terrill’s retention rate is approximately 93%, according to Thome. He attributes that stellar record to a “core group of carriers” that provide consistency from cycle to cycle. Additionally, its staff excels at educating clients about trends in risk management. But, let’s get back to J.W. Terrill’s brief interlude with the banking industry, specifically Old National Bancorp. Thome says J.W. Terrill wasn’t looking to establish a relationship with a bank when Old National approached its executives. “At the time the deal was struck, the expectation on both sides was that Old National would purchase a banking franchise in St. Louis. Our acquisition was premised on the ability of a regional insurance agency such as ours to cross-sell products with a regional bank. For various reasons, a bank acquisition in Missouri never came to pass. Over time, it became increasingly evident that we were not a good fit for each other. We were like an island, albeit a successful island, but were no longer part of Old National’s strategic vision. We mutually agreed that both parties would be better off going their separate ways and over a five-month period hashed out the deal that enabled our management team to buy back the agency.” So, what’s in store for J.W. Terrill now that it is once again captain of its own ship? “We will continue to focus on ways to enhance the service platform that has served us so well,” says Thome. “The key components are competitive products provided by stable carriers; a staff of experienced, knowledgeable insurance professionals; and a commitment by everyone here to provide clients with a level of service that makes them feel comfortable about referring J.W. Terrill to their peers.” “We will certainly look to expand our niches through acquisition as those opportunities surface, but in the meantime we will continue to seek out experienced professionals who have the ability to come up with strategic solutions to satisfy client needs,” Thome concludes. “Today, more than ever, our strength comes from the entrepreneurial spirit of the individuals who make up our agency.” * |
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