In Brokers We Trust

Alliant Insurance Services Puts Its Money Where Its Trust Is — In Teams, Not Individuals

Insurance Journal Top 100 Agency Profile

Alliant Insurance Services

RANKING: No. 2
Headquarters: Newport Beach, Calif.
Year Founded: 1927
Total Premium Volume: $2.8 billion 2007 Total P/C Premium
Additional Locations: Offices in 16 states 2007
Volume: $1.8 billion
2007 P/C Revenues: $187.2 million
Principals: Thomas W. Corbett, chairman and CEO; Jerold D. Hall, executive vice president and chief operating officer; Greg Zimmer, president and chief financial officer.
Mergers/Acquisitions: The Clarity Group, an Atlanta-based consulting firm specializing in consulting services in absence management and disability and life insurance, October 2007.
Number of Employees: 1,000

Teamwork is one of the great mantras of 21st Century business, but Tom Corbett, chairman and CEO of Newport Beach, Calif.-based Alliant Insurance Services, believes it means nothing unless “you put your money where your mouth is.”

By that, he means that most brokerage firms that espouse teamwork stop short of letting the concept impact workers’ pocketbooks. “In our business, it’s hard to get brokers to take down those walls and trust each other,” Corbett says. “Everyone talks about teamwork, but five brokers on a team aren’t really a team if they are being compensated individually. As long as they are compensated individually, they are each going to do what’s best for them.”

In contrast, about two-thirds of Alliant’s producers work in niche-focused teams called “Broker Revenue Groups” that share income from new and ongoing business, much like an accounting or law firm. “They live and die together,” Corbett says. “Every time someone wins an account, everyone in the group benefits. Every time someone loses an account, everyone loses.”

The peer pressure to succeed, he says, results in better service to the client — and more bucks for the producers. The average income of a team-based producer is 50 percent higher than that of Alliant producers who opt to go it alone. “They are smart people, and they know they’ll make more money than they can as individuals,” Corbett says.

Self-Managing Groups

Alliant Insurance Services was founded in 1927, the same year the New Yorker magazine was launched and the Goodyear blimp carried its first ad through the air. As far back as 1950, when the firm was still named after founder Robert Driver, the president’s silver anniversary message was: “Teamwork is essential to success. One of the principal reasons why [we’ve] forged ahead is the splendid teamwork of our personnel. Each member of the staff not only takes care of his or her own responsibility, but shares in the spirit of ‘one for all’ that is reflected in a high standard of service to our customers.”

As Ralph Hurst, head of Alliant’s Public Entity Insurance Brokerage Services, which generates about 35 percent of the firm’s revenues, notes, “We have had substantial or full ownership by employees since we were founded 80 years ago. When people have a vested ownership interest, they do all the little things in a zillion different ways that the customer notices. It’s part of our DNA.”

The Broker Revenue Groups extends that entrepreneurial spirit, and Hurst says the teams help attract top producers with a strong work ethic. The Public Entity Services has several Broker Revenue Groups that handle municipalities, schools, health care, and other areas. The smaller groups have five to seven members, while the larger ones comprise 10 to 15 senior partners and 10 or more associate partners.

Like a law firm, the groups mostly self-manage. The members of each group divide responsibilities and set compensation internally as a team. Once a year, team members get together and decide what percentage of the revenues each member will receive.

The team approach eliminates the need for the traditional sales management structure with district or regional managers — or “the checkers,” as Hurst puts it.

“Because you are working with peer responsibility, everyone knows what everyone is doing, so you don’t need a formal sales management structure,” he says. “We don’t need layers and layers of management looking at call reports and expense accounts. That helps us deliver a better-priced product to clients because we are not paying huge amounts for overseeing duties that don’t directly bring value to the client.”

Eliminating Silos

Alliant serves some 20,000 commercial clients nationwide, with an expertise that ranges from airports, aircraft and watercraft, to boiler and machinery, to pool and joint powers authority program administration. Unlike many brokers, Alliant has no geographic focus. “Opening new offices is inefficient,” Corbett says. “We are not a geographic play.” For instance, the company’s growing tribal business represents Native American groups throughout the country, though heaviest in the Sunbelt, but all the business is serviced through one office in California.

“The only way we can do that is to have more expertise and better service,” says Greg Zimmer, Alliant’s president and chief financial officer. “If we’re no better than the next guy, we’ll lose the jump ball to the guy down the street.”

The lack of any kind of geographic focus makes the emphasis on teamwork even more important. Alliant believes using a consolidated, rather than a geographic approach, leads to camaraderie because team members share in each other’s success.

“An area within the Public Entity Services, for example, might have a few producers scattered in Atlanta, Phoenix, and Washington,” Zimmer says. “If they’re not attached somehow, you can create silos and fiefdoms. We see that in a lot of our competitors. They’re not leveraging their collective skills and volumes, so they end up stepping on each other’s toes going after prospects and leads.”

The Broker Revenue Groups in the different niches also come together for projects that cross industry borders. For instance, the Broker Revenue Group that handles large construction projects might work with the hospital or hotel group, sharing income from the project.

As Hurst sees it, this approach gives their customers easier access to expertise than if brokers aligned by profit centers, as is the case with most brokerage firms. “At another brokerage firm, someone in the Los Angeles office might want to tap into the knowledge of an environmental expert in Houston, but that means a chargeback from one profit center to another,” he says. “That puts up road blocks because the producer in Los Angeles might decide to handle it himself to avoid the chargeback, even though his colleague in Houston could provide knowledge that would benefit the customer.”

A Few Key Niches

Teamwork and specialization are the two planks of Alliant’s approach. Like most top brokers these days, Alliant focuses intently on a few key specialties, including law firms, public entities, and tribal nations.

“We don’t want to be all things to all people,” Corbett says. “When we choose to get involved in an industry segment, we are going to get totally immersed and offer better solutions to the client. We want to be able to compete with anyone and win the business.”

For instance, Alliant’s specialty practice for the legal industry, a division called ProQuest, launched in 1997, has grown to $90 million in annual premium written, by providing coverage placement, claim analysis/facilitation, policy drafting, and risk/practice management. Boasting that it is “the largest privately held insurance agency exclusively insuring law firms,” Alliant has the capability to place coverage up to $500 million.

ProQuest was the first organization to initiate special risk and practice management education more than 10 years ago in conjunction with Anthony Davis, a nationally recognized expert in this area. The company provides interactive seminars, workshops, and audits that guide firms in client intake, leadership and management structure, and other areas.

Another of Alliant’s primary niches, Public Entity Services has $500 million in premiums and premium equivalents placed. Alliant Insurance touts the division as “understanding how public entities are perceived within the insurance marketplace and how the operating environment of the public sector shapes the risk transfer approach and requirements of these organizations.” Alliant notes it has been on the forefront of designing programs for public entities, from joint purchase programs and risk-sharing pools to risk retention and non-insurance approaches.

“By bringing groups of public agencies together under one umbrella, they get better pricing and coverage as a large group,” Corbett says. “We launched that 20 years ago.”

The Blackstone Connection

Despite its 80-year history of steady growth, Alliant was all but unknown to the larger business community until last August, when Blackstone, the private-equity giant, plunked down a reported $1.1 billion for the brokerage firm. Blackstone made the purchase in partnership with Alliant’s management and employees, buying it from Lindsay Goldberg, a New York investment firm that also held a stake with management and employees.

“This transaction is a validation of the success of our business plan which is to be the industry leader in organic growth and operating productivity through a commitment to industry specialization, client service, and a team-based approach,” says Corbett, who started with the firm as a producer three decades ago. He ticks off the three main benefits of the Blackstone connection from Alliant’s viewpoint:

• Cache. “We are not a public company, and have never done many acquisitions,” Corbett says.
• Deep Pockets. “If we need capitol it’s no problem,” he says, “through we don’t call on them for capitol without a good business reason.”
• A Ready Customer. “They are the world’s largest owner of real estate and office property,” he says. “We have a deep expertise in those areas, and believe we’ll be doing a lot of business with Blackstone.”

The Alliant Group represents a small purchase for Blackstone, whose deals normally carry price tags in the tens of billions. But Blackstone said Alliant offers an appealing “platform,” suggesting that it would roll more brokerages into the business, as industry consolidation continues. “Alliant is an attractive platform due to its market leadership in its core segments and superior growth prospects,” Blackstone’s Senior Managing Director Chinh Chu said in a statement.

Organic Growth

The Blackstone purchase came just nine months after Alliant announced it had bought the U.S. operations of London-based Jardine Lloyd Thompson Group PLC for $100 million. JLT USA, headquartered in Houston, Texas, is a specialist insurance brokerage firm with approximately $60 million in revenues, involving employee benefits, energy and marine, and health care.

The timing seemed ironic because Alliant’s story consists largely of organic growth. “You cannot buy success through acquisitions,” Corbett says. “You need the foundation that you build on and learn from. The insurance industry is not a growth industry. The only way to grow faster is to deliver better products to more clients.”

Consequently, Alliant constantly works on new products, according to Corbett. Every Monday morning, the new products group discusses the five or 10 projects that are in the works at any given time. If Alliant launches two or three programs in 12 months, “We think that’s a pretty good year,” Corbett says. The threshold: the programs have to bring in $2 million to $5 million of premium. For example, the company recently launched a national program for parking facilities that came from a broker focused on that business. The broker came to Alliant to build the business on a larger scale.

Instituting a proprietary product requires an average of one to two years of research and development time. “That’s another barrier to entry,” Corbett says. “We are willing to invest whatever it takes if we believe we can build a segment area out and take a reasonable ROI [return on investment] down the road.”

The patience, Alliant says, is another reflection of its entrepreneurial focus. Alliant’s differentiation is having employees feel their day-to-day efforts matter, because they hold an ownership stake in the company or because they are directly accountable to other team members for each other’s livelihoods.

“I don’t know that you could take an existing company and rebuild it like we do,” Hurst says. “It’s in our DNA. You have to grow up like this.”

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