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Jim Henderson is chairman and CEO of AssuredPartners Inc. in Lake Mary, Florida. Previously a longtime executive at Brown & Brown Inc., Mr. Henderson has led the private-equity owned brokerage’s acquisition-fueled growth since its founding in 2011. Currently ranked as the 13th-largest broker of U.S. business, AssuredPartners last month announced its biggest acquisition to date with the purchase of Torrance, California-based Keenan & Associates. Mr. Henderson recently spoke with Business Insurance Editor Gavin Souter about the acquisition and other issues affecting the brokerage sector, including AssuredPartners’ future under the ownership of Apax Partners L.L.P., its acquisition strategy and continued disputes over noncompete agreements when brokers move firms. Edited excerpts follow.
Q: What does the Keenan purchase do for AssuredPartners?
A: It’s really a transformative acquisition for AssuredPartners. Keenan allows us to have a meaningful presence in California and to have a quality of agency and people and leadership there to attract others to join us. The senior management team at Keenan has very deep experience, they’ve been in place for many years and our culture and theirs fit well — they are not looking for someone to fix them and we know that. We can help them with capital to acquire and grow, and they can help us from an operational standpoint and also with certain products, in the case of public entity and health care, that we can take to a national scale.
Q: What specialties do they bring to the table?
A: Their largest business focus is with public entities. They have a significant share of the K-12 schools in California. They are one of the largest operators of the (Protected Insurance Program for Schools and Community Colleges), where pools are allowed to share insurance or reinsurance buying and also then secure services on workers compensation claims and purchasing property and liability coverages and health care, although health care is typically not in the pools.
Q: What had been holding you back from California previously?
A: It’s finding the right fit with our company culturally. And (with California’s employment laws) you have to make sure that you’re joining with a company whose employees are pleased to be there and they want to stay there. They should be a destination employer, meaning that employees want to go there and stay there in their career. So I think it’s just finding the right company, the right entity where we felt all those pieces came together in a long-term proven culture, and certainly Keenan does that.
Q: You’ve had a pretty aggressive growth strategy over the past several years. What’s the ultimate goal for AssuredPartners?
A: We moved (ownership) about a yearanda-half ago to Apax. We feel that we can deliver great value to Apax. Above revenue size of probably $1.5 billion to $2 billion, the most likely route would be going public. And, frankly, we’ve managed in that environment. Our earnings are such that we feel like we can deliver long-term consistent value. We can also generate cash flow to grow in a public setting. Whether that’s five years, or eight years, or 10 years, that would be hard to nail down, but that likely would be our ultimate outcome down the road.
Q: What’s the vision for the company? What is AssuredPartners striving to be in the insurance brokerage market?
A: We like to be a company where employees join us and they stay, they are successful, they take care of their customers, and so the customers stay with us. We can then add value to our employees’ careers — in the case of resources, or markets, or relationships, or knowledge. And then with respect to M&A, (the vision) is to build a company that really is an acquirer of choice on behalf of the agencies joining us, where an agency will know up front if there are any changes and what the changes look like, what is the impact on the equity owner and their employees, and that that story does not change over time. We don’t go in and break glass. We feel that’s the reason for our success.
Q: Is it tough to turn those acquisitions in to profitable acquisitions, given the multiples that are being paid in the brokerage sector generally?
A: If you pick the right people, the task is much easier. The values have escalated, but the rewards of ownership are still there and therefore still attracting capital. The valuations of agencies are at an all-time high, and the number of transactions are at an all-time high. Our viewpoint is that it causes us to spend even more time to look at more agencies so we know that there’s a good fit of people and that the understanding about how it can operate is at a level that we can sustain. If it’s not, then we need to share that view with the agency to be acquired, and perhaps we’re not the choice for them.
Q: You and other brokers have been involved in disputes over restrictive covenants. Has there been any change in that kind of issue when you’re looking to pick up new people? Is it getting any easier?
A: No, I don’t think it is. We have employment agreements, others have them as well, and we do honor them. Employees are going to leave and go where they want to work, and no one’s going to stop that. Typically when that happens, though, there’s some economic settlement for the customers that follow those employees over to their new company — and there should be. We've lost employees and we've got value for it and we've had employees join us and we've paid for value.
Q: What’s your view of the general property/casualty market?
A: Well, the market pricing headwind is a challenge for everyone. Our solution is that we need to invest even more in new producers and new skill sets and training so that we can continue to grow organically. In the last six months, we've had a pleasant rise in our organic growth.