Citizens Financial banks on ‘not your typical’ insurance agency sale

Not Your Typical Bank,” the slogan used by Citizens Financial Group in its consumer ads, seems to apply to the bank’s latest move, the selling off of its respected insurance agencies.

It is not a typical sale. The bank did not shop the agencies around to assure the best price, the agencies being sold were not performing poorly, and the bank is actually expanding its reach into insurance as a result of selling off.

Providence, R.I.-based Citizens Financial Group, the eighth-largest commercial bank holding company in the U.S. with $155 billion in assets, is selling its three well-known agencies with combined revenues near $45 million for the price of $80 million to Hub International Ltd., a Chicago-based network of agencies across the country and in Canada. The deal includes a strategic alliance between the two for future joint sales and marketing.

The three large insurance brokerages joining Hub are well-established with a combined 19 offices in Pennsylvania, Massachusetts, and Rhode Island.

With roots dating back to the 1920s, Citizens Clair Insurance Group is one of the largest insurance agencies in eastern Pennsylvania with annual revenue of $16.5 million. Founded in 1859, Boston-based Brewer & Lord has 11 offices throughout Massachusetts and Rhode Island with annual revenue of $19.7 million. Established in 1916, Feitelberg Insurance, based in Fall River, Mass., has six offices in eastern Massachusetts with annual revenue of $8.6 million.

This sale reflects the judgment of one bank and is not the start of a flight from insurance by other banks, according to experts.

“This is not necessarily a trend,” said Michael White, president of Michael White Associates (, explaining that he thinks the Citizens decision might have come down to the relatively small contribution the agencies were making to the bank’s overall revenues.

“These insurance agencies were good producers; it’s not that they were performing poorly,” he added. It’s just that Citizens was expanding its banking reach and revenues much faster and apparently decided to focus there.

Another bank consultant, Gerald C. Vigneron, of North Bridge Advisors Inc. in Concord, Mass., said he was not totally surprised by the transaction because he has long felt agencies are not a good fit for larger banks. “I’d been predicting this. Like in any trend, some who jump in will look at insurance and see this isn’t their real mission and doesn’t fit.”

Vigneron stopped short of suggesting that other banks will follow suit but thinks others could get some ideas from this. “This is not yet a trend but it could put in the mind of other brokers that maybe they could pick off some agencies now owned by banks.”

Bruce Guthart, Hub chief operating officer, offered his own rationale. “Insurance operations were going well but it’s tough to be a bank and grow an insurance operation also,” he said, adding that the joint marketing agreement actually gives Citizens a quicker way to expand insurance offerings into new territories.

Banking expansion
In August 2004, Citizens acquired Charter One Financial, Inc., which extended Citizens’ banking beyond southern New England and Pennsylvania into Ohio, Illinois, Indiana, Michigan, New York and Vermont. But Citizens’ insurance operations are only in Massachusetts, Rhode Island and Pennsylvania, so its banking and insurance footprints no longer match. To expand its insurance operations to keep pace with its banking expansion would have required buying additional agencies, perhaps at inflated prices if any were even available, observers noted.

Citizens contacted Hub and no other buyers participated. Citizens “specifically chose us to partner with,” according to Hub CEO and chairman, Martin Hughes.

Consultants Vigneron and White agreed Citizens got a good price at $80 million, despite having dealt with only Hub about the sale. Both also agreed that Hub was a good partner.

Joseph Feitelberg’s agency Feitelberg Insurance, was bought by Citizens in 2003 and now becomes part of Hub. Feitelberg says the way Citizens went about this transaction might not be typical of other sellers but is typical of how Citizens operates under Chairman and CEO Lawrence K. Fish. The company’s credo emphasizes the “Three Cs”: customers, colleagues and community, and Feitelberg says that’s what the bank did.

“They (Citizens) wanted to do the right thing for customers and colleagues, so they pre-selected a partner they knew the people on the insurance side would be comfortable with. HUB is the right partner,” says Feitelberg.

Hub officials indicated that no major consolidation or expense savings are anticipated. Hub has another New England office in Wilmington, Mass., which is north of Boston. The two Massachusetts agencies purchased are closer to and south of Boston.