MARKETING AGENCY OF THE MONTH
Mahoney Group perpetuates internally and grows to $25 million in revenue
By Dennis Pillsbury
Douglas Fyfe, president and CEO, The Mahoney Group, reviews his appointments for the day.
The Mahoney Group, Casa Grande, Arizona, has had several changes in ownership throughout its more than 85 years. However, each ownership transfer kept the agency in the extended family of employees who wanted to maintain its independence.
The agency began life in the mining town of Ray, which now is little more than a large hole in the ground. It was founded by John R. O'Donnell in 1915. The 1950s and '60s represented a period of strong growth as Don Mahoney and John E. O'Donnell (the son of the founder) led the agency. Real estate services were added and offices were opened in Casa Grande, Coolidge, Phoenix, Superior and Tucson.
The agency ownership passed to five employees when Mahoney died in 1972. In 2001, a new owners group which consisted of the agency's controller, Matthew Bagnall, and seven top producers--Leon Byrd, Douglas Fyfe, Steve Goble, David Herrold, J. R. McEvoy, Barbara Millar and Glen Nelson--purchased ownership. This new group of owners had been identified in 1993 as representing the next generation of independent agents to lead the agency. "The owners were extremely generous," Doug Fyfe, current president and CEO, says. "They had a belief in the system and wanted to make certain the agency remained independent. A big concern for them was the 145 employees. They believed, as do I and the rest of the current management team, that one of the reasons for our existence is to create opportunities for the employees."
Prior to the perpetuation plan that was completed on July 2, 2001, the previous owners already had sold one-third of their stock to an ESOP. The loan for that purchase was paid off over a five-year period. "The ESOP was a real plus because the price for the shares is established on an annual basis by an independent appraisal," Doug says. "Funding for the perpetuation was obtained through Assurex Development Corp. It was the largest loan they had ever done. Assurex played a big part in making this work. Agencies aren't asset-based and banks don't understand that."
Doug continues by noting that the agency has always rolled a lot of money back into the agency. "We hire between six and eight producers a year, getting some of them from intern programs we have with Arizona State University and the University of Arizona. We have a very attractive compensation plan which some have criticized as being too rich. We have a profit-sharing plan to which we heavily contribute, a good benefits package and a company-matched 401(k). We invest our money in comfortable offices and quality people. We don't believe in overspending on office space."
Today, The Mahoney Group is the largest independent agency in Arizona with $18.5 million in insurance revenues last year and another $1 million from real estate. The agency enjoyed 29% growth
last year. "This year, we will exceed $25 million in revenue," Doug says confidently. "So far this year, we've been averaging $416,000 in new commission income every month." The Mahoney Group currently is ranked 91st in the Business Insurance list of top 100 brokers.
Independence extends to offices
The Mahoney Group doesn't have centralized marketing for its nine offices. Each one is run and staffed by people who are local to the area. "We recognize the importance of having local, rural offices with agents who live in the community that they serve," Doug says. "Our clients like dealing with a local business. So each office determines the best way to market our insurance and real estate products in their community. At the same time, they have access to the services of a significant regional broker.
"All our offices are tied together by high-volume data transmission lines on a wide area network," he continues. "Our accounting and carrier appointments are handled in Casa Grande. We use the Applied Agency Management System, and it allows us to complete a month-end close by 7:30 in the evening of the last day of the month. That way we know exactly where we are and if we're on target when we have our monthly branch managers meeting."
Acquisitions support office needs
"Pretty much all our growth has been organic," Doug says. "We have purchased some small agencies in rural areas to increase staff in an office and expand our opportunities. We bought agencies in Prescott and Kingman to increase local presence and strengthen our staff in those offices. In other areas, we've just hired another producer. We always want to have at least two agents in every office to provide backup and coverage in our rural offices just in case one of them is away for vacation or medical emergency or whatever. We also made an acquisition in Tucson to get two really good producers."
The long-term goal of The Mahoney Group is "to build to become a major regional broker. We will continue to grow the agency in Arizona and neighboring states. We've been able to attract good producers and intend to continue to add local offices as we expand. We see that as one of our core values--to provide local service to our insureds. We will continue to commit resources and talent to each of our offices to assure their success."
The other end of the spectrum
While The Mahoney Group stresses the importance of local service, it also provides access to an international network of brokers through membership in Assurex Global. "Some of our insureds have offices overseas and we're able to help them," Doug says. "We had one mining equipment manufacturer risk that opened an office in Australia. We called the Assurex partner there and he took care of everything for them. It's great to have a network of brokers who know the local customs and laws and who adhere to the same values and principles. We know that our customers will be treated well by any Assurex partner."
Doug continues that the Assurex partnership also "gives us the opportunity to share information with a group of superior players in our field. It's nice to be rubbing shoulders with these people. Because of the exclusive nature of the membership, we don't worry about sharing financial and management information. We share market information and provide on-site assistance to out-of-state partners. We've done several joint accounts with Woodruff Sawyer and IMA, Assurex partners in California and Kansas, respectively."
Standing in front of the headquarters sign are (from left): Steve Goble; Leon Byrd; Paul S. Carney, agent; Steve Curtis, producer; Barbara Millar, employee benefits manager; J.R. McEvoy; and Matthew Bagnall.
Program business
As The Mahoney Group grew, it developed expertise in a number of different areas. Using that expertise, the agency developed programs for each of the particular niche markets, several of which now are available on a nationwide basis, with The Mahoney Group serving as a direct retailer or wholesaler outside of Arizona. Among the national programs are ones for:
* Property managers
* Apartment owners
* Shopping centers
* Self storage facilities
* Homeowners associations and planned unit developments
* Sovereign Indian Nations
"One of our largest niche markets is apartments," Doug notes, "and that's been real strong for us now. The market has hardened significantly for apartment risks and this has helped us grow appreciably."
Another big area of expertise is the Native American market. "We write 14 of the federally recognized tribes in Arizona. Coverage includes public entity, farms, casinos and health care operations," Doug notes. "We also insure several irrigation districts that are owned by the tribes. Our agency has been doing business with Native Americans for more than 35 years."
He adds that working with the Native American tribes has been extremely interesting and rewarding. "The level of poverty and lack of opportunity that you see on the reservations is so much higher than anywhere else in this country. You realize how lucky you are, but also how important it is to help those who haven't been as fortunate.
"I've heard people complain about all the money the Native Americans are getting from the casinos, but the fact is that it's not enough," Doug continues. "A great deal of the money is going back into the community to build new homes, health care facilities and schools. One of the tribes with which we worked used some of the casino revenues to set up 13 dialysis stations to help both the members of their tribe and others in the area as well. A lot of people don't realize that Native Americans have a much higher rate of diabetes than the general population, and one of the side effects is kidney failure. From what we've seen, most of the revenue from the casinos is going back to the community, but they're so far behind. It will take a long time to catch up."
The Mahoney Group also has statewide programs for:
* Medical services providers
* Farm, ranch & crop
* Construction and contract bonds
"Integrity is a key part of making a program work," Doug says. "We have selected producers in other states that are writing business through us and they know that we have high standards of integrity, professionalism and competency. They are entrusting their clients to us, and they have to believe that we will treat those clients well and that we would never try to steal those clients even if we eventually enter that agent's state as part of our intention to become a regional broker."
The most important asset
"We have an excellent group of employees who really are responsible for our success. They truly are our most important asset," Doug concludes. "We compensate them very well, but they fully deserve it. Everyone at the agency doesn't just do their job, they excel at it. In return, management provides an atmosphere of positive encouragement and fair-mindedness. We don't blame; we build up. We value employee diversity and independence and welcome their ideas.
"All of us at The Mahoney Group also recognize that our success comes from the communities that we serve. That is why we maintain local offices throughout the state. It is also why we encourage our employees to get involved in their community."
The Mahoney Group has grown to become the largest independent agency in Arizona by sticking to its core values--values that exemplify the best of the Independent Agency System: integrity, professionalism, caring and, of course, independence. And for that, we recognize them as our Marketing Agency of the Month. *