Two new acquisitions will not only strengthen Banknorth Group Inc.s network of banks in the Boston area but also represent potential new customers for its growing insurance business, a bank executive says.
In deals that it hopes to complete late this year, Portland, Maine-based Banknorth in June simultaneously bought Andover Bancorp Inc. in Andover, Mass., for about $333 million in stock and MetroWest Bank in Framingham for around $166 million in cash.
The acquisitions would increase the company’s total assets from around $18 billion to around $21 billion and would add more than 30 branches to Banknorths network, and expand its Massachusetts banking franchise to 114 branches and nearly $9 billion in assets.
A bank spokesperson said it expected to continue operating virtually all of the acquired banks branch offices.
Banknorths insurance subsidiary is Morse, Payson & Noyes Insurance, a broker it purchased in 1997, with offices in Maine, Massachusetts, New Hampshire and New Jersey. MPN offers a variety of life, long-term care and employee benefits plans, along with property/casualty and commercial products.
“We have in little over three years gone from zero agencies to the largest network of agencies in New England,” says Mickey Greene, executive vice president of insurance and investments for Banknorth.
Late last year, it entered the Connecticut insurance market with the purchase of the Watson Group, an insurance agency in Wethersfield, Conn.
Neither MetroWest nor Andover have major insurance programs. Brian Manning, chief financial officer of MetroWest, describes his banks insurance subsidiary as “inactive” after being established a year ago. Joseph Casey, Andovers CFO, says his companys insurance sales volume is “not significant.”
However, the addition of new bank branches in the lucrative Boston area will allow its agencies offices, using cross-referrals, to spur sales of annuities, employee benefits, life and other lines of insurance, Greene says.
The bank keeps careful track of all leads it supplies to its insurance and investment subsidiaries, Greene notes. Insurance is highly promoted to platform personnel, who are expected to refer customers to investment and insurance products sold by the banks subsidiaries.
Banknorth reported collecting $10 million in insurance commissions in the first quarter of this year, up 89% from $5.3 million in the same period a year earlier.
“We expect to have $400 million in premiums by the end of this year and $40 million in commissions,” Greene says. “And were expecting 20% to 25% growth next year.”
Banknorth had already planned to consolidate two Massachusetts agencies it previously acquired, Palmer Goodell in Springfield and the Catalano Agency in Methuen, Greene says.
Banknorth plans to acquire even more agencies. It has eight to 10 potential acquisitions “in the pipeline” and anticipates closing on one or two before the end of this year, Greene adds.
Key to the banks insurance strategy is increasing its sales of employee benefit programs. Banknorth is attracted to group plans because the margins are high, Greene explains.
Currently, about 25% of the banks insurance income consist of employee benefit plans, up from 20% last year. (The insurance figures dont include annuities, which Banknorth classifies as investment products.) The bank plans to push group products to 35% of its insurance revenue in the near future.
In a statement, William J. Ryan, chairman, president and CEO of Banknorth, called the acquisitions “a natural extension of our Massachusetts banking franchise.”
As of March 31, Andover had total assets of $1.8 billion, deposits of $1.3 billion and shareholders’ equity of $160 million in Massachusetts and New Hampshire.
In the same period, MetroWest had total assets of $914 million, deposits of $705 million and shareholders’ equity of $63 million in Massachusetts through 17 branch locations.
Banknorth says it expects to complete the integration of the institutions during the first quarter of 2002.
In addition to its Morse, Payson & Noyes insurance subsidiary, Banknorth owns a money management firm, the Stratevest Group, NA and an investment subsidiary, Banknorth Investment Planning Group. Other subsidiaries and divisions provide services in mortgage banking, asset-based lending, private banking, merchant services, leasing and other financial services.
Reproduced from National Underwriter Life & Health/Financial Services Edition, July 20, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.