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American Wholesale Insurance Group Inc.
An aggressive growth-by-acquisition strategy has propelled Charlotte, N.C.-based AmWINS to the top spot of the nation's largest wholesale insurance brokers in 2006.
AmWINS' February 2005 acquisition of Stewart Smith Group Inc. from Willis Group Holdings Ltd. not only opened the doors to the world's third-largest brokerage as a retail client, but also helped boost AmWINS' premium volume by 17.2% in 2005 to $2.814 billion--more than enough to secure the No. 1 spot from Swett & Crawford Group in Business Insurance's 2006 ranking.
"We're a growing company. I am incredibly amazed at the opportunities as a wholesaler," said President and Chief Executive Officer M. Steven DeCarlo, who founded AmWINS four years ago.
In addition to the growth opportunities presented from the world's three largest retail brokers, with which AmWINS had never worked before, AmWINS also continues to build and expand its core businesses.
In May, Americana Program Underwriters, an AmWINS managing general agency unit, announced a new program for armored car and courier services. The firm also recently acquired Irving, Texas-based Web TPA Inc., a third-party administrator for self-funded employers and insurers, which remains its own unit; and the Fort Worth, Texas-based Policy Administration Division of CBCA Administrators Inc., an association insurance administrator, that will be merged into National Employee Benefit Cos., another unit of AmWINS Benefits Brokerage.
AmWINS is made up of four core divisions: AmWINS Brok- erage, AmWINS Specialty Underwriting, AmWINS Benefits Brokerage and its newest division, AmWINS Standard Market, which provides access to standard line products and insurers for smaller retail brokers.
"To us wholesaling...is more than just E&S," Mr. DeCarlo said. "It's morphing into truly what a wholesaler is--a middleman between the retailer and the insurance company" and that may include excess and surplus lines products, standard lines products, MGA products or group benefits products.
CRC Insurance Services Inc.
Premium volume rose 34.2% at Birmingham, Ala.-based CRC Insurance Services in 2005 to $2.813 billion, propelling the BB&T Corp. unit up one spot to become the nation's second-largest wholesale broker.
Acquisitions accounted for a "good portion" of the growth, executives said. In 2005, CRC acquired Negley & Associates Inc., a Cedar Cross, N.J.-based program manager; Sterling West Insurance Services Inc., a Glendale, Calif.-based wholesaler; and Vista Insurance Services, a San Antonio-based MGA.
In addition to acquisitions, "we have been able to enjoy a fair amount of organic growth, of which a large part is due to our property department and what we've seen in the property market, especially in South Florida," said Charles W. Wood, CRC's chief operating officer.
In addition, CRC's core base of retail clients--the top 100 brokers--grew organically in 2005 and "we got our proportionate share of that," he noted.
Going forward, CRC is seeking to expand and fill out its MGA business, which operates as Southern Cross Underwriters Inc. and accounted for just 6% of its business in 2005.
The MGA business tends to be less cyclical and less vulnerable to competition than transactional business, said Tom Curtin, president and CEO.
While CRC is open to any line of traditional property/casualty wholesale MGA business, it is seeking to fill out its MGA operations in the West Coast, Northwest and Midwest, executives said.
Among its differentiators, executives point to CRC's team-based approach to clients and its "fairly deep team" of specialists and assistants. CRC invests a tremendous amount of time and resources into training and continues to hire talent right out of college, which "has given us a great deal of depth," Mr. Curtin noted.
Swett & Crawford Group
A sharp focus on sales contributed to a 1.2% rise in premium volume to nearly $2.81 billion at Atlanta-based Swett & Crawford in 2005, but it wasn't enough to maintain its spot as the nation's largest wholesaler.
In the 2006 ranking, Swett & Crawford is the nation's third-largest wholesale broker.
"I'm very pleased with it," President and CEO Neal Abernathy said of Swett's growth. "It's 1% growth in a declining market. If we had not been (focused on sales) we'd be lucky if it were flat," he said, noting specifically that the wholesaler's energy and property practice groups saw the greatest growth from a premium perspective.
Mr. Abernathy acknowledged that Swett's 2005 divestiture from Aon Corp. also played at part in its modest growth, noting there were indeed "a lot of questions" about Swett's future coming over the last 18 months. "People were working, but they were not 100% focused."
With that said, though, Mr. Abernathy stressed how pleased he is with Swett's employees. "I just think everybody in the company deserves a round of applause for not just hanging in, but also remaining engaged and keeping the company strong and continuing to deliver good service to our customers," he said.
Aon sold Swett in the latter half of 2005 to an investor group including Hicks, Muse, Tate & Furst Inc., Bank of America Capital Investors and Emerald Capital Group Ltd.
Mr. Abernathy said that being independent not only allows Swett to be its own company, but it also "has given us the ability to create a nimbleness to do the things that we need to do from a staffing and acquisition perspective," which didn't fit into Aon's view of where they wanted Swett to go.
"It's going fantastic," he said of Swett's new ownership arrangement. "They are very focused on helping us grow the business."
While Swett's growth strategy includes a focus on organic growth and hiring new producers, major growth will come through strategic acquisitions that make sense for the company, Mr. Abernathy said. "That's my main focus."
Growth also will come in all areas of the company including its MGA business, which in 2005 accounted for just 21% of its business, Mr. Abernathy said.
"I think MGA business is critical to us," but that doesn't mean it will ever represent more than 20% of Swett's overall business, Mr. Abernathy said. "That's because we want to grow everything."
Risk Placement Services Inc.
After topping the list as the nation's largest MGA based on 2004 premium volume, Itasca, Ill.-based Risk Placement Services Inc. is the nation's fourth-largest wholesale broker this year based on $1.3 billion in 2005 premium volume, of which 56% came from acting as a wholesaler.
"Strategically, we like to keep it around 50/50," President Joel Cavaness, said of Risk Placement Services' breakdown of wholesale vs. MGA business. "We grew a little faster on the brokerage side" in 2005, primarily because of property catastrophe business, he said.
The wholesaler's overall 13.1% rise in premium volume in 2005 is attributable to an even mix of organic growth and acquisitions, Mr. Cavaness noted.
In 2005, the wholesaler acquired WorkCare Northwest Inc., a Boise, Idaho-based program administrator specializing in workers compensation, and Alternative Market Specialists L.L.C., an Edina, Minn.-based MGA specializing in public entity business.
So far in 2006, Risk Placement Services has acquired Sobieski & Bradley Inc., a Salt Lake City-based wholesaler, and Lemac & Associates Inc., a Los Angeles-based wholesaler
While property catastrophe business is driving Risk Placement Service's organic growth, the wholesaler also has seen "significant" growth in medical malpractice, general casualty and wrap-up business, Mr. Cavaness noted. It also opened four new offices in 2005 and hired a number of new people.
"Our strategy for growth is to hire more good people, make good mergers and continue to push our college recruiting," he said.
Risk Placement Services had 22 college interns this summer, which the wholesaler hopes to hire full time, he said.
Crump Insurance Services Inc.
Premiums at the now-independent Crump Insurance Services remained flat in 2005 at an estimated $1.25 billion, much of which is attributable to its divestiture from Marsh Inc., according to Crump President and CEO Glenn Hargrove.
Not only was there the distraction associated with the November 2005 sale, but Dallas-based Crump also was not able to make any significant new hires or any acquisitions during that time period. "We were sort of frozen in time," he said.
Then there were the distractions at Marsh Inc. itself, which was and still is a significant client of Crump. Marsh lost business following New York Attorney General Eliot Spitzer's bid-rigging lawsuit and resulting settlement, which in turn affected Crump's growth, Mr. Hargrove said.
"We actually grew and were up with most of our markets, but the offset of Marsh's business deteriorating in '05 was tough," he said.
Now, nearly 10 months into its new relationship with parent J.C. Flowers & Co. L.L.C., Mr. Hargrove said being independent "is terrific."
The New York-based private equity firm is "very supportive" of what Crump would like to do and that is to acquire companies or teams of people and hire "significant" talent, Mr. Hargrove said.
"We've done a couple of small acquisitions of teams or individual operations and there are a number of things we're in the process of working on right now," he said.
Additionally, the fifth-largest wholesale broker continues to promote its 2-year-old team-based approach to its client services--a philosophy that not only is being "embraced" by employees and clients, but also is an attractive recruiting point for new hires, he said. More than 20% of Crump's transactions now involve multiple Crump brokers, Mr. Hargrove noted.
BISYS Commercial Insurance Services Inc.
A number of drivers were responsible for San Francisco-based BISYS Commercial Insurance Services' 1% rise in premium volume to $1.02 billion and 7.1% rise in gross revenues to $90 million in 2005, according to President John Hahn.
Last year, the firm rolled out new sales and customer service training programs, which have driven new business and improved retentions, Mr. Hahn said. It also continues to develop new fee-based consultative services within its wholesale brokerage unit, Tri-City Brokerage, including a new residential construction Wrap Risk Assessment Program. The computerized modeling tool evaluates critical project components from an underwriting perspective to help identify the best insurance strategy for clients.
On the MGA front, BISYS Specialty Programs unveiled a new towing and recovery program and has forged new insurer relationships for its transportation lines, allowing it to write new classes of business, Mr. Hahn said.
While all of BISYS' growth last year was organic, the firm--the sixth-largest U.S. wholesale broker in the 2006 ranking--is "in a bullish acquisition mode right now," he said. That means not only growing BISYS' brokerage business, but also expanding its MGA business by diversifying from transportation-related coverages.
"Even though it is our bread and butter and we love it and will continue to add new carriers and geographic spread to it, we want to be more than just a transportation MGA," Mr. Hahn said.
About 60% of its MGA business is transportation, with the rest a mix of workers compensation, errors and omissions and employment practices liability, he said.
On the brokerage front, about 50% of the business is casualty, 25% professional liability and 25% property, Mr. Hahn said.
In 2005, 58% of BISYS' business was derived from acting as a wholesaler and 40% from acting as an MGA, a business mix BISYS intends to maintain. "We like to balance the business that way," Mr. Hahn said.
Premium volume grew 32.8% to $491.3 million at Kansas City, Mo.-based Westrope, which President and CEO Kevin Westrope attributes to a combination of things.
"Part of our growth process is always driven by people," Mr. Westrope said. Westrope's brokers are at various levels of development, and "as they continue to mature, we get growth."
At the same time, the property market "is a huge product line for us" and Westrope has benefited from the dislocation occurring in the property catastrophe market, Mr. Westrope added.
"But having said that, our casualty operations grew at a rate of 30% as well," he said, attributing the growth to Westrope "out-hustling" the competition.
While there was a time that Westrope was known primarily for its property expertise, its casualty operation represented 45% of its business in 2005, Mr. Westrope said.
As for the overall success of the nation's seventh-largest wholesale broker in the 2006 ranking, Mr. Westrope points to its team-based approach and culture as its main differentiators.
"We have a highly motivated, sales-oriented but integrity-driven culture," he said. "And we're very team-oriented. At every level of our organization, we're constantly talking about teamwork and you'll rarely find just one person working on your piece of business or even one broker. There may be two or three of us who have looked at it, offered advice or thoughts on structure, possible markets, etc.," Mr. Westrope said.
ARC Excess & Surplus L.L.C.
After 20 years of operating solely as a professional and management liability specialist, Garden City, N.Y.-based ARC Excess & Surplus is branching out into more traditional property/casualty lines of business.
In May, ARC formed ARC Specialty Brokerage L.L.C., a full-service property/casualty wholesaler with four employees and a goal of producing about $15 million to $20 million in premiums the first year.
"It's a very small part of our operation, but we will build it our over time and make it work," said Christopher J. Cavallaro, managing director at ARC.
Overall premium volume rose 5.6% in 2005 to $475 million, all of which is organic. "We've never done an acquisition," Mr. Cavallaro said.
That premium volume made ARC the eighth-largest wholesale broker in 2006.
While ARC's "strong suit" is directors and officers liability insurance, the wholesaler handles all forms of professional liability with expertise in miscellaneous professional liability, employment practices, employed lawyers liability, errors and omissions, fiduciary liability and Internet liability.
Professional Risk Facilities Inc., its small Garden City, N.Y.-based MGA subsidiary, underwrites D&O, EPL, miscellaneous professional liability, employed lawyers and fiduciary liability coverages.
Gresham & Associates Inc.
Premium volume grew 6.7% in 2005 to $389.2 million at Stockbridge, Ga.-based Gresham & Associates, which President George Abernathy attributes to strong growth in both its wholesale and MGA business.
"We're an MGA and an open market broker and that's why we are different than a lot of other people," Mr. Abernathy said. Others are either an MGA or an open-market broker or they "dabble" in both. "We do a lot of each," he said.
In 2005, 60% of Gresham's business was derived from wholesale and 40% from MGA business.
"It's not by design" that Gresham's business is divided this way, Mr. Abernathy noted. "We let it roll as the market gives us the opportunity to grow."
With that said, Gresham will "never forgo the profits and the opportunities that we have on a continuous basis in the MGA world," he said.
Each of Gresham's 12 offices, with the exception of one, is staffed with contract binding specialists and commercial open market brokers, Mr. Abernathy said. As a result, "we can handle your small $1,500 MGA account or your $1.5 million account."
In terms of Gresham's growth last year that made it the ninth-largest wholesale broker in this year's ranking, Mr. Abernathy points specifically to its national environmental transportation program within its Indianapolis office as having "excellent growth" and its three Florida offices that generated "a lot of wind business."
Based on the growth Gresham is having so far in 2006, Mr. Abernathy predicts the wholesaler will finish the year at about $425 million in premium volume.
"It's been very exciting this year," Mr. Abernathy said, noting premium volume is up 15% and profits are up more than 20% so far.
U.S. Risk Insurance Group Inc.
Premium volume rose 2.8% to $378 million at Dallas-based U.S. Risk Insurance Group, which Mac Wesson attributes primarily to the wholesaler "pushing the pedal to the metal."
"We're just exerting more effort," U.S. Risk's president and chief operating officer said.
In the latter half of 2005, U.S. Risk expanded its presence in California, opening a startup office in Irvine, where there "was an almost immediate flow of new business that was a result of that," Mr. Wesson said.
He also pointed to the wholesaler's criminal justice operations program--which provides general liability and professional liability coverage to privately owned detention centers and other social service centers such as halfway houses--as a book of business that "grew quite nicely" in 2005.
That growth made U.S. Risk the 10th-largest wholesale broker in the 2006 ranking.
While the wholesaler made no acquisitions in 2005, it did earlier this year with the purchase of Lighthouse Underwriters L.L.C., an Annandale, Va.-based program administrator for select industries.
"We're always acquisition-minded and will look at anything that comes our way," Mr. Wesson said. Rather than being geographically focused, though, U.S. Risk wants to add quality people and quality products to its portfolio regardless of location, he said.
"Having said that, we did recognize that we wanted to grow in California and we've made the same decision with New York and Florida" where U.S. Risk will try to find acquisition possibilities, he said.
"Because we're independent and because we have a relatively few number of owners, we're able to be pretty nimble and that allows us to maneuver through some opportunities pretty fast," he said.
"Our basic strategy is to groom ourselves to be twice the size we were last year, four years from now," Mr. Wesson said. "It's a lofty goal, but I think we can get there."