Arrowhead CU subsidiary continues acquisition path with purchase of insurance firm

<p>SAN BERNARDINO, Calif. – Arrowhead Financial Group (AFG) continued its buying spree with the acquisition of one of the largest insurance companies serving the Inland Empire of Riverside and San Bernardino counties. The purchase of Sawyer, Cook & Co., a company founded in 1924, added about 30 carriers to AFG and catapulted it to the third largest provider of business and commercial insurance in the area. The acquisition is the latest move by AFG to rapidly expand its services as it attempts to become a one-stop shop for business and financial services. AFG, a subsidiary of Arrowhead Credit Union, most recently acquired four financial planning firms. Seven months ago, it acquired CalBond Insurance Agency and Surety Services of Corona. Jim Estes, president of AFG, said the Sawyer, Cook acquisition “adds to our depth.” “We have CalBond, but it just was not large enough or strong enough for what we decided we wanted to do,” Estes said. “The Sawyer, Cook acquisition significantly strengthens our position in the Inland Empire insurance market.” The addition of Sawyer, Cook, the ninth largest insurance agency in the Inland Empire, boosted AFG’s insurance revenues to $45 million. Following the acquisition, AFG announced it would split its insurance services into two divisions, with commercial lines marketed under the Sawyer, Cook name. Glenn Goodwin, former president of Sawyer, Cook, was named senior vice president at AFG and will be in charge of the commercial insurance area. Sawyer, Cook, with 2,000 commercial accounts, had offices in Redlands and Lake Arrowhead and employed 20 people. The company offered both personal and commercial insurance but AFG said its strength was in business insurance. Personal lines of insurance will continue to be marketed through CU Insurance Service headed by Senior Vice President Sharon Pinkerton. She has directed the insurance division since 1997, taking it from $200,000 in commissions to $1.6 million. CU Insurance, like AFG and Arrowhead Trust Inc., are subsidiaries of Arrowhead Credit Union. Estes said talks were ongoing with other smaller agencies and financial planning firms. “What we’re finding now surprisingly is a lot of firms are approaching us to be acquired,” he reported. “They realize the same thing we did a while back. They’re not able to survive in a very, very competitive environment.” He said that was especially true for insurance agencies. “I think the smaller ones don’t have the impact with the large carriers and the large carriers are going to look at them and say, `Maybe this isn’t going to work.’ ” Estes predicted that the Sawyer, Cook acquisition will intensify the consolidation of insurance agencies in the Inland Empire and make it increasingly difficult for smaller agencies to compete. He said AFG’s customers would benefit from a larger selection of insurance choices and prices than they might otherwise obtain. Estes said AFG opted to purchase Sawyer, Cook in order to grow faster than it could have on its own. The purchase also comes at a time when commercial rates are increasing by 30% to 40% a year, he said, adding that such a trend was expected to continue for three or four years. “ . . .If you’re getting 30 to 35% increases in rates every year, you’re also seeing 30 to 35% increases in income,” Estes said. “So we think our timing is pretty good.” Estes said that the future looked rosy for Arrowhead, which can now offer customers business and personal banking, tax preparation, financial planning, insurance and trust services. “Right now, we’re the third largest insurance agency in the Inland Empire,” he noted. “That’s fairly significant being able to serve our base, be it the member or non-member.” AFG is also the largest financial planning firm and third largest broker dealer in the Inland Empire, he said. Estes said that prior to the Sawyer, Cook acquisition, gross income for AFG in January and February was larger than all of AFG’s income in 1996. AFG’s gross income for the first quarter of 2002 was larger than it was for all of 1997, he said. “I think (including) April will take us through 1998,” he added. “We’re looking at a ROI of about 20%,” he said. “The issue now that we’ve got the size is can we get the synergy. That’s where I’m going to spend more of my time.” -</p> <p>[email protected]</p>