Citizens Financial Sells Three Insurance Agencies
Citizens Financial Group was a Top 25 bank insurance operation last year. That is not likely to be the case in the future.
With its announcement yesterday that it was selling three insurance agencies to Hub International Ltd., a Chicago-based insurance brokerage, Citizens made clear that it sees little future in the full-line insurance brokerage business。
The agencies are Citizens Clair Insurance Group ; Brewer2 Lord ; and Feitelberg Insurance . Collectively they have 19 offices in Pennsylvania, Massachusetts, and Rhode Island. Combined revenues were about $45 million last year.
The purchase price for the brokerages was $80 million , payable4 in cash on closing, as well as an earn-out based on future performance. The insurance agencies will continue to operate independently within the Hub International system.
The transaction was presented by the two companies more as a strategic alliance than an outright5 sale, promising6 joint marketing7 efforts that would bring a broader array of insurance products and services to Citizens retail9 and commercial customers. Citizens Bank will continue to refer clients with insurance needs to the brokerages, presumably, even though they will now be owned by Hub and not Citizens.
While we achieved both revenue growth and profitability in line with our strategies for the insurance brokerage business, we see a new opportunity to serve our customers by partnering with Hub International as our insurance broker1 of choice, said Robert M. Mahoney, vice8 chairman of Citizens Financial Group. Our strategic alliance with Hub International will expand our product offerings, locations and expertise10, enhancing our competitive position. We will be able to offer insurance products to corporate11 customers throughout our 13-state footprint, not just to customers in three local markets.
In 2003, Citizens Financial, a wholly owned subsidiary of The Royal Bank of Scotland Group, purchased The Feitelberg Company, one of the largest insurance agencies in southeastern New England. With combined annual premiums12 of $325 million, the transaction made Citizens Bank, its operating bank, one of the largest bank/insurance brokerage operations in the United States. Citizens Clair and Brewer Lord were acquired earlier, coming to Citizens as part of bank acquisitions.
Citizens, the eighth-largest commercial banking13 company in the United States ranked by deposits, was a Top 25 institution in Whos Who in Bank Insurance .
The earn-out payments associated with the transaction will in the aggregate14 be at least $3 million. This will be payable over three years and, at Hubs option, in cash or a combination of cash and Hub common shares. Martin P. Hughes, HUB CEO, indicated that he expects total consideration for the transaction will be within Hubs target multiple of 5-7 times EBITDA . Closing of the acquisitions is expected to occur in April 2006 and is subject to the satisfaction of regulatory and other customary conditions.
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