& Acquisitions
Big Deal
M&A Summer Recess
Finally, dealmakers get some R&R.
G
M&A Activity
(YTD through Aug 2008)
260
240
220
200
180
number of announced transactions
Insurance Industry Mergers
Market Temperature: Chilly
160
140
120
100
80
60
40
20
0
175
iven the robust deal making through most of the summer, it was nearly certain
M&A activity would slow to a snail’s pace just because of seasonality. August
experienced the lowest volume this year with only 13 announced
deals. Compare this to 22 in August of 2007 and one might wonder
if there are still deals to be had. Despite one slow summer month,
68 announcements were made from June through August—eight
ahead of last year’s season.
Brown & Brown continues to lead the brokerage category with
four in August (year-to-date total: 21). That’s 11 more than last
year’s rate! Arthur J. Gallagher is second on the leader board
By Audra Szollosy
with one in August and 16 year-to-date, similarly besting last
year’s pace by three.
Combined, Brown & Brown and
Arthur J. Gallagher accounted for
30% of brokerage activity. Hub
International and USI Holdings, both
private, continue to methodically
acquire, with seven and six acquisitions year-to-date, respectively. It is
clear the soft market has motivated
insurance brokers to acquire and
consolidate having accounted for
70% of transactions this year.
One public broker continued
its pattern of purchasing overseas.
Aon Corporation acquired Benfield
Group Ltd., a U.K.-based reinsurance intermediary. The deal value of the Benfield transaction was the second largest behind Willis’ announced acquisition of Hilb Rogal & Hobbs.
One buyer group was completely silent in August: insurance and financial services
firms. Banks and other buyers were nearly as void of activity. Two banks, Wells Fargo and
Eastern Bank Corp., committed to building their insurance brokerage arms. Each purchased one agency in August. Overall, the number of bank acquisitions is down 19% from
last year. Unfortunately, some of the banks that purchased insurance agencies were hit
hard by the mortgage crisis, which directed their focus elsewhere.
Varying economic reasons and consolidation plays prompted several banks to sell off
their insurance brokerage arms even before the mortgage crisis hit. It is plausible to see
further downsizing if banks feeling the pinch have no other choice but to sell off the insurance brokerage asset. A buying opportunity perhaps?
The other category acquisitions are down 55% due in large part to fewer title agency purchases and more private equity groups (PEGs) sitting on the sidelines. PEGs may not be out
there making initial investments in insurance agencies similar to the banner year of 2007,
but agencies and brokerages backed by PEGs are putting their inflow of capital to work in
doing their own acquiring—another reason for the increase in brokerage acquisitions.
Through August, 175 insurance brokerage transactions have been announced—exactly
where activity was last year at this time. Buyers’ pipelines remain full, and despite unstable market conditions, strategic acquirers operating in a position of strength will continue
to acquire insurance brokerages. As attention turns to the presidential election and the
uncertainty a changing of the guard may bring, anticipate a bevy of M&A activity throughout the end of the year.
Buyers’ pipelines remain full,
and despite unstable market
conditions, strategic acquirers
operating in a position of
strength will continue to acquire
insurance brokerages.
Send your M&A announcements to Audra Szollosy at
LeadersEdgeMagazine.com
22
[email protected].
M&A Puts Nine Banks in Top 100 List
N
ine new banks have been named to the list of
top 100 of banks in insurance, says the 2008
edition of Who’s Who in Bank Insurance.
Most of the new entries owe their inclusion
to an insurance agency acquisition. The newcomers include:
Central Community Corporation (Texas), which
operates First State Bank Central Texas. Its ranking
rose from 157th to 31st, mainly on the strength of
its investment in a title insurance agency.
Gateway Financial Holdings (Va.), which owns
Gateway Bank & Trust, saw its ranking rise from
118th to 84th. Its agency specializes in personal
lines with a focus on coastal residences.
Star Financial Group (Ind.), which owns Star
Financial Bank, rose from 108th to 88th with
the purchase of a large independent agency
in 2006.
Hanmi Financial Corporation (Cal.), which operates Hanmi Bank, rose from 214th to 90th on the
strength of two agency acquisitions in January 2007.
Salem Five Bancorp (Mass.), which operates
Salem Five Cents Savings, rose from 159th to
97th. Salem acquired a commercial and personal
lines insurance agency in 2006.
To make the top 100 required $3.7 million in
annual insurance brokerage revenues, down
from $4.1 million in 2007 and $3.8 million in the
2006 edition.
Who’s Who in Bank Insurance is published
annually in November by the Bank Insurance
Market Research Group, www.singerpubs.com.
[ THE REAL DEAL ]
Recent M&A Action
ACQUIRER
BROKERAGES
ANNOUNCED
TARGET FIRM
Cherry Creek Ins. Group
8 /25/08
Hanes Hathaway Mont. specialty agency focusing on coverage and risk exposures for
technology related firms
Aon Corp.
8 /22/08
Benfield Group UK reinsurance intermediary Revenue: $609 million Price: $1.75 billion
Arthur J. Gallagher & Co.
8 /19/08
Wm. W. George & Assoc. Texas retail insurance brokerage providing commercial p-c,
workers comp. and risk management services as well as employee benefit consulting and
brokerage services to their clients in the U.S.
Brown & Brown
8 /18/08
Advanced Insurance Concepts Pa. General Agent offering individual and group employee
benefit insurance products on behalf of brokers in Del., N.J., and Pa. Revenue: $2 million
8 /12/08
Reed Brothers Insurance Group Ky. agency office specializing in p-c and group employee
benefits insurance to clients in the Recreational Vehicle, Power Sport Dealership, and
Manufactured Housing industries and Fla. agency office offering individual personal lines
products and services for owners and operators in these industries Revenue: $2.1 million
8 /8 /08
Burt & Associates Benefit Planning Ind. agency offering individual and group employee benefit
insurance products to clients in Ind. and surrounding Midwest states Revenue: $1.2 million
8 /1 /08
Fullerton & Co. Ore. agency focusing on benefit plans and p-c insurance for individuals and
businesses in Ore. and throughout the northwestern U.S. Revenue: $9.3 million
8 /6 /08
CCS Fla. employee benefits insurance brokerage firm specializing in the automobile
dealership industry Revenue: $2 million
8 /4 /08
Group Brokerage Assoc. Pa. employee benefit General Agent Revenue: $1.6 million
8 /1 /08
Blaich Assoc. N.Y. retail insurance broker offering personal risk management, commercial
p-c, employee benefits and personal lines insurance to clients in N.Y.
Wells Fargo & Co.
8 /12/08
Martin Financial/Insurance Services Calif. agency focusing on the employee benefit needs
of groups ranging in size from one to several hundred employees, including both fully insured
and self-funded plans
Eastern Bank Corp.
8 /11/08
Kittredge Insurance Agency Mass. full-service agency
8 /5 /08
Colorado title insurance operations of the Mercury Companies
USI Holdings Corp.
Risk Strategies Co.
BANKS
OTHER
Fidelity National Financial
LeadersEdgeMagazine.com
24
What’s Being Bought
JUNE-AUGUST 2008
Full-Service
20
P-C Commercial
8
Benefits
22
P-C Personal
2
Consulting
1
Life, LTC, and/or DI 3
TPA
11
Title
1
Who’s Buying
JUNE-AUGUST 2008
Insurer & Other
12
Insurance Broker 46
Bank & Thrift
10
Retail vs. Wholesale Acquisitions
JUNE-AUGUST 2008
Retail
Wholesale
55
13
[ SCORECARD ]
Our World in Play
COMPANY
JUNAUG
YTD
8/31
1
2
0
1
1
0
1
1
0
0
0
1
1
1
0
10
4
3
2
2
1
1
1
1
1
1
1
1
1
1
1
22
COMPANY
BANKS
BB&T Corp.
Wells Fargo & Co.
BancorpSouth
Eastern Bank Corp.
Central Bancorp
Central Bancshares
Community Bank System
Cullen/Frost Bankers
Doral Financial Corp.
First Financial Holdings
First Manitowoc Bancorp
High Point Bank Corp.
NBT Bancorp
Pinnacle Financial Partners
Regions Financial Corp.
Total
YTD
8/31
9
4
0
3
3
1
0
2
1
0
0
2
2
0
0
1
0
0
1
1
21
16
8
7
6
3
3
2
2
2
2
2
2
1
1
1
1
1
1
1
0
0
0
1
1
0
0
0
1
1
1
1
1
1
1
1
0
0
0
1
0
0
1
1
1
1
1
1
1
1
1
1
BROKERAGES
Brown & Brown
Arthur J. Gallagher & Co.
National Financial Partners
Hub International Limited
USI Holdings Corp.
Aon Corp.
Ascension Insurance
Bearence Management Group
Cherry Creek Insurance Group
Hilb Rogal & Hobbs Co.
NSM Insurance Group
Warner Pacific Insurance Services
York Insurance Services Group
Advance Insurance Services
Alliant Insurance Services
Alpha Risk Insurance Services
American E&S Insurance Brokers
AmWINS Group
Apex Global Partners
Assurance Investment Partners
Atlantic Specialty Lines of Pa., a
subsidiary of Atlantic Specialty Lines
Barney & Barney
Beecher Carlson
BenefitMall
BEN-E-LECT
Britt / Paulk Insurance Agency
Casualty & Surety
CBIZ
Cordova Insurance Center d/b/a
Independent Solutions United
Cretcher-Lynch & Co.
Edgewood Partners Insurance Center
HealthFirst TPA
Insurance Specialty Group
J. Smith Lanier & Co.
Jardine Lloyd Thompson Group plc
Keenan & Associates
INSURANCE AND FINANCIAL SERVICES
RenaissanceRe Holdings
American Independence Corp.
American Safety Insurance Holdings
Argo Group International Holdings
Church Mutual Insurance Co.
Companion Life Insurance Co.
Hudson Insurance Group
Ironshore
Markel Corp.
Munich Re Group
Old Republic International Corp.
OneBeacon Insurance Group
Philadelphia Consolidated Holding
Corp.
PMA Capital Corp.
Republic Companies Group
SeaBright Insurance Holdings
White Mountains Insurance Group
Total
JUNAUG
0
0
0
0
0
1
1
1
0
0
0
1
2
1
1
1
1
1
1
1
1
1
1
1
0
1
0
1
0
6
1
1
1
1
1
18
COMPANY
Kinloch Holdings
0
LA’s Best Insurance Service
1
Lockton Companies
0
Management of Barry, Evans, Josephs
& Snipes
1
Marsh & McLennan Cos.
1
Mercator Risk Services
0
MOC Insurance (Maroevich, O’Shea &
Coghlan)
0
Mutual Assurance Administrators
1
North American Risk Services
1
Presidio Reinsurance Group
0
PSA Financial Center
1
R.E. Chaix & Associates Insurance
Brokers
0
R.W. Stein & Co.
1
Risk Strategies Co.
1
Skelton & Carnegie Insurance
Specialty Corp.
0
The NIA Group
1
The Woodlands Financial Group
1
The Wright Group Services
0
Third party title insurance agency
0
Thorbahn Associates
0
Titledge Holding Co.
0
Venbrook Group
0
Willis Group Holdings Limited
1
46
Total
26
YTD
8/31
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
122
OTHER
LTC Global Solutions
National Investment Managers
Allied Solutions
Empire American Holdings
Evercore Capital Partners
Fidelity National Financial
FirstPlus Financial Group
Global Risk Holdings
Mgmt team and private equity group
Total
Disclosure: Scorecard year-to-date totals may change from month to month should an acquirer contact Hales to request an earlier acquisition be included in the Scorecard that was not publicly announced.
As always, Hales welcomes your announcements.
LeadersEdgeMagazine.com
JUNAUG
1
2
1
0
0
1
0
0
1
6
4
2
1
1
1
1
1
1
1
13