Mass. insurers make their marks

In the ultracompetitive world of financial services, a few Massachusetts companies emerged as leaders of the pack last year.

Two insurers, Safety Insurance Group of Boston and Commerce Insurance of Webster, rank 17th and 29th on this year's Globe 100 list, respectively. Safety, which specializes in auto insurance, improved its profit margin by over 100 percent, while Commerce increased its net income 14 percent over 2004. Both benefited from the improving climate for auto insurance in Massachusetts and nationally. Claims are down across the country, while in Massachusetts specifically, factors including good weather and efforts to crack down on insurance fraud are helping insurers' financial performance, said Jim Ermilio, Commerce Group Inc.'s general counsel.

Companies that manage money also performed well. Eaton Vance Corp. has averaged 18.4 percent annual revenue growth over the last two years and 20.5 percent profit growth. It ranked 29th on the Growth 50 list of fast-growing companies. Chairman Jim Hawkes credited the Boston mutual fund company's diversified mix of funds and its success in keeping employees happy while avoiding regulatory embarrassments that plagued other fund industry players. With a strong franchise in managing money for individuals, Eaton Vance is making a major push into managing money for institutions, which should pay off in the future, Hawkes said.

''We had a good year last year, but we also had a good year the year before that, and the year before that," Hawkes said. ''The reason is that we are well diversified."

But another financial services firm, Boston Private Financial Holdings Inc. of Boston, has shined for several years by taking precisely the opposite approach: Developing a niche and staying focused on it. Boston Private, number 41 in The Globe 100, focuses on serving exclusively affluent clients, which delivers above-industry-average profits and gives it an edge in competing with more diversified money managers for the business of the wealthiest clients.

Meanwhile, of the handful of community banks left in Massachusetts, eight landed in The Globe 100, although none had a spectacular year. Independent Bank Corp. of Rockland placed 73d, followed by seven other little banks that squeaked into the top-100 list: Brookline Bancorp Inc. in Brookline, Central Bancorp Inc. in Somerville, Capital Crossing Bank in Boston, Hingham Institution for Savings, Berkshire Hills Bancorp Inc. in Pittsfield, Slade's Ferry Bancorp in Somerset, and Westbank Corp. in West Springfield.

All have faced a challenging environment for the banking industry. For months now, short-term interest rates have been rising, while long-term rates remain flat. Banks make their money off the difference between the two and are feeling squeezed.

But still, many Massachusetts bank stocks trade at extraordinarily high prices. Shares of Brookline Bancorp have been trading around 40 times earnings, and Berkshire Hills 30 times earnings. As more and more banks have been acquired over the last several years, investors have bid up small bank stocks, and the high prices reflect investors' expectations that banking consolidation won't stop anytime soon.

Sasha Talcott can be reached at stalcott@globe.com.