A Download From the 2024 Insurance Investor-Connect Conference
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To our friends and clients:
Three weeks ago, leaders from across the country met in New York City for Reagan Consulting’s 2024 Insurance Investor-Connect Conference. We designed the conference to serve as a forum for industry leaders and financial investors (primarily private equity firms and family offices) to learn more about emerging trends in insurance distribution.
While the conference covered a wide array of topics, we wanted to share three key takeaways:
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- Outside equity investments in insurance distribution take many different forms.
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Outside equity investment in our industry exploded after the end of the Great Recession. Since then, much of this activity has involved strategic buyers with outside investors acquiring insurance brokers outright. These strategic buyers include equity-fueled brokers already operating in our industry—think Hub, USI, or Assured Partners.
A different type of investment is making waves in our industry today. Financial investors with portfolios spanning multiple industries are becoming increasingly visible in the insurance distribution investment landscape. These investors do not typically have massive insurance operations, although they may invest in many different insurance entities. They pursue financial returns and are willing to invest on both a minority and majority interest basis. Many of these investments stay under the radar and go completely unnoticed from the outside world.
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- Outside equity investments occur at various size levels.
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Some believe outside equity investments to be the domain of only the super large, such as the recent blockbuster deal in which Stonepoint / CD&R took the Truist insurance operations private.
Today, high-quality brokers of all sizes (some with revenue as small as $20M) are attracting outside equity capital. The right equity investor can provide critical resources to brokers wishing to avoid a complete sale of the business, including growth capital, assistance with M&A and producer lift-outs, financial expertise, a market valuation, and attractive equity opportunities for employees.
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- Minority equity capital is an emerging and increasingly popular strategy.
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For the most part, minority equity is still a relatively new phenomenon in our industry. Although isolated examples of this can be traced back several decades (remember St. Paul Insurance and its widespread practice of investing in brokers back in the 1990s?), minority capital has moved front and center with high-profile players such as IMA, Higginbotham, and Unison, all of whom now remain majority employee-owned with outside capital partners.
Outside equity capital allows these and other market leaders to combine the best of both worlds – remaining employee-owned while having access to capital and expertise of the investor community to fuel their ambitious growth engines.
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The Bottom Line:
The secret regarding our industry's amazing investment potential has been out for some time now. Strong cash flows, renewing revenue, and consistently strong organic growth remain music to the ears of outside investors seeking to generate strong returns. Although publicly traded brokers and private equity-backed buyers have dominated the M&A space for some time now, the capital markets are evolving at light speed as other financial investors seek to take advantage of the opportunities existing in this amazing industry.
This is great news for privately held insurance brokers. Today, an ever-increasing number of creative and agile investors can satisfy virtually any capital or resource need a brokerage might have.
These are the good old days.
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ReaganView is Reagan Consulting’s forum for providing an occasional perspective on issues and opportunities relevant to the insurance distribution industry.
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*This document includes only general information and should not be relied upon as legal, tax or compliance advice.
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