Farmers Forms Alliances in Expansion Drive

Los Angeles-based Farmers Insurance Group--the nation’s No. 3 auto and home insurer--is hoping to fuel ambitious expansion plans with the help of the nation’s biggest bank and the world’s largest labor federation.

Farmers this week announced partnerships with Bank of America and Ulico Insurance Group, a company that provides commercial insurance to the AFL-CIO and other unions representing more than 16 million workers.

Farmers’ goal is to triple its $11 billion in premium sales in the next four years, a plan that if successful would make the company a rival to market leader State Farm Insurance, said Stephen Leaman, president of Farmers’ personal lines business.

Although the two deals are only a small step in that direction, the alliances are “a really nice marketing strategy and it mirrors what [Farmers’] competitors are doing,” said Brian Sullivan, an independent insurance analyst in Laguna Niguel.

Bank of America, the nation’s largest bank with 37 million households, will offer Farmers’ home and auto insurance to its customers, while Farmers will market the bank’s accounts, credit cards and loans through its 17,000 agents, the companies said.

Insurance companies and banks in recent years have sought ways to tap into each others’ businesses, particularly in the wake of the 1999 financial modernization law that loosened restrictions between the two industries.

Citigroup was formed from the merger of bank behemoth Citicorp and insurance giant Travelers Group, for example, while State Farm has launched its own bank.

The labor alliance gives Farmers an exclusive right to offer homeowners and auto insurance to workers whose unions are served by Ulico, which provides liability, workers’ compensation and commercial property insurance to labor organizations. Ulico is part of the ULLICO (Union Labor Life Insurance Co.) group of companies based in Washington.

Farmers, founded in Los Angeles in 1928, was purchased by Britain’s BAT Industries in 1988 and 10 years later was merged with Switzerland’s Zurich Insurance to create Zurich Financial Services Group.

Since then, Farmers has expanded into Eastern and Southern states from the West and Midwest. Last year, the insurer bought Foremost Corp. of America, a purchase that helped Farmers capture 25% of the manufactured-home insurance market.