NU Online News Service, June 18, 6:12 p.m. – Commonwealth Bancorp Inc., Norristown, Pa., is entering the insurance agency business by turning to the people who know the business best.
Instead of striking out on its own or making an acquisition, the midsize, $1.8-billion-asset bank holding company teamed up last week with a local insurance agency, the Elite Group L.L.C., Exton, Pa., to form Commonwealth Insurance Advisors L.P., an insurance agency joint venture that will target businesses with annual sales of $50 million or less and between 15 and 200 employees.
Commonwealth can now use the new entity to offer business customers pension plans, group health and group life policies, voluntary benefits and property-casualty insurance.
The joint venture agreement calls for Commonwealth and Elite to split the fees from successful bank referrals.
Patrick Ward, president of Commonwealth, says the joint venture concept appealed to him because it could help the bank earn steady fee income and carried none of the risks of making an acquisition.
“We had looked at agencies to purchase but had not been able to agree on price,” Ward says.
Besides, he says, few of the agencies that were up for sale were suitable candidates, and “a lot of the agencies were on their last legs.”
Elite approached Commonwealth in March 2001 with the joint venture idea.
Ward was impressed.
Elite “is a young, aggressive, forward-looking agency that is doing well, with strong management and offering broad services,” Ward says. He also liked the idea that the agency was looking for a way to grow.
Elite also believes that it and Commonwealth will be a good match, according to Grant Thornton, an Elite vice president.
“We have the same target market,” Thornton says. “The same type of client, the same type of strong client relationship, and it was a great cross-selling opportunity for us.”
Thornton adds that the small-business employee benefits market is a largely untapped market, and that serving that market should be a powerful way for both the bank and the agency to get a foot in the corporate door to sell other financial services.