Jim Henderson, President/COO, Brown & Brown
OWNERSHIP CHANGES
Jim Henderson, President/COO, Brown & Brown
Brown & Brown (www.bbinsurance.com) continues an aggressive program of agency acquisitions, closing out the first half of the year with 21 acquisitions totaling $86 million in estimated annual revenues. By contrast, Brown & Brown acquired 17 agencies in all of '03, with revenues of $39 million. In all of '02 it made 24 acquisitions accounting for $69 million.
Noting that its targets for acquisitions are "people-based" rather than centered on regions of the United States or specific niches, Brown & Brown President and COO Jim Henderson says its typical acquisition target is a middle market retail firm. About 71% of the broker's revenues are derived from retail business, with wholesale, brokerage and TPA services making up most of the remainder.
The prices Brown & Brown pays for acquired agencies continue to be based on earnings going forward one, two or three years. "We're being a lot more cautious about sustainable earnings--taking more time to see what earnings can be achieved," Henderson says.
With acquisition prices tied to earnings, a softening in property/casualty prices can be expected to lower acquisition prices. Henderson says Brown & Brown has seen some softening in the "large property and some casualty lines of business."
Asked about banks' activity in the acquisition market, Henderson comments, "We're still waiting to see how many of the agencies that have been bought by banks will fit long term. Some of these agencies [bought by banks] have been spun out of the banks later when the banks, themselves, were sold."
When Brown & Brown acquires an agency, its strategy is to leave people and accounting systems in place. However, one area where Brown & Brown takes immediate control is accounting compliance issues. "Sarbanes-Oxley has placed tremendous pressure on firms to create strong internal audit procedures and financial controls," Henderson notes.
The company's recent acquisitions include:
Hardin & Wilson, Inc. of Little Rock, Arkansas which has operated for almost 40 years, produces annual revenues of approximately $1.2 million. Principals Howard Hardin, Larry Wilson and the agency staff will join Brown & Brown's existing Little Rock office.
Insurance Marketing Group (IMG) of Marietta, Georgia. IMG, which has annual revenues of approximately $1.5 million, will become a stand-alone Brown & Brown office. IMG specializes in insuring condominium associations and homeowners associations, primarily in the Atlanta metropolitan area.
IMG President Sally-Lewis Butler and Executive Vice President Harold D. Kelley and their staff will continue to operate the agency.
McDuffee Insurance Agency, Inc., of New Hampshire and Massachusetts. McDuffee has annual revenues of approximately $7 million, operating from offices in Merrimack, New Hampshire; Dover, New Hampshire; and Peppercell, Massachusetts. It will become a free-standing Brown & Brown profit center, representing the broker's initial entry into New Hampshire and Massachusetts.
Chapman Simmons Agency and Professional Surety Services (also doing business as St. James General Agency) of The Woodlands, Texas. These agencies provide bonding and surety services to contractors in Texas and throughout the United States. They operate both on a retail and wholesale basis and produce annual revenues of about $1.3 million. Their operations will be combined with Brown & Brown's Houston office.
Wiita Insurance Agency, Inc., Robert Wiita Insurance Agency, Inc. (dba Wiita & Stevens), and Tribal Benefits Specialists, LLC. These three agencies all serve Native American tribes and related businesses from offices in the Upper Midwest, and produce combined annual revenues of approximately $2 million. They will continue to operate from their current locations in Hurley, Wisconsin; Minocqua, Wisconsin; Ontonagon, Michigan (doing business there as Rogers Agency, Inc.); and Woodbury, Minnesota.
Robert Wiita will be the profit center manger for this new stand-alone Brown & Brown operation.
Recent agency ownership changes involving other purchasers include the following:
Arthur J. Gallagher & Co. (www.ajg.com) acquires Johnsey Insurance Agency of Fresno, California.
Johnsey Insurance Agency is a 62-year-old agency specializing in construction, commercial property, food processing, manufacturing and transportation accounts. The agency will continue to operate in its Fresno and Visalia offices under the direction of James McFarlane, AJG's West Coast regional manager of the Brokerage Services Retail Division.
Banknorth Group (www.Banknorth.com) plans to acquire Drake, Swan & Crocker Insurance Agency of Orleans, Massachusetts.
Drake, Swan & Crocker (DS&C) has offices in Orleans, Brewster and South Dennis, Massachusetts, and serves more than 10,000 customers throughout Cape Cod and Southeastern Massachusetts. It traces its history to 1854. The current agency was created in 1982 after a number of mergers.
Michael Walther, vice president and chief operating officer of DS&C, will become a regional vice president of Banknorth Insurance Group. "Other than a name change and becoming part of a larger company with an expanded network of products, the day-to-day services we provide to our customers will not change," said Walther.
Hilb, Rogal & Hobbs (www.hrh.com) acquires Rose, Smith Tucker, LLC, of Knoxville, Tennessee.
Rose, Smith, Tucker (RST) specializes in serving the property/casualty needs of the mining and energy industries and in commercial surety bonds. The agency produces approximately $4 million in annual revenues. RST will become part of HRH's Mid-Atlantic Region.
Woronoco Bancorp (www.woronoco.com) signs a definitive agreement to acquire The Colton Agency of Westfield, Massachusetts.
The Colton Agency will be merged with the insurance agency already owned by Woronoco Savings Bank--Keyes, Mattson & Agan, Inc. The two agencies to be owned by Woronoco will have 23 employees, a total of 11,000 policies and 7,300 clients producing $13.3 million in annual premiums.
The Colton Agency's owner, David C. Colton, Jr., will be a consultant to the merged agency. *