Now that it has sold its equity stake in Hispanic-focused auto insurance broker Confie Seguros, Genstar Capital LLC appears to be on the hunt for another insurance concern.
The San Francisco, Calif.-based private equity firm on Friday sold off its investment in Confie Seguros to Boston-based private equity firm ABRY Partners. Terms of the deal were not disclosed.
Genstar partnered with insurance executives in 2008 to establish Confie Seguros, and the Buena Park, Calif.-based company has grown to over 300 retail locations with annual revenues of more than $200 million. It now has market positions in California, Arizona, Texas, Florida, Washington, Oregon, New York, New Jersey and Nevada.
Genstar’s next move, according to Ryan Clark, a managing director at the firm, may be similar to what it did in its Confie Seguros investment with another brokerage, or a managing general agent, yet with a few key differences.
Genstar’s new fund, Genstar 6, is comprised of a mix of family funds, endowments, pension funds, fund of funds, and it has about $75 million to invest – similar to what Genstar put into Confie Seguros nearly five years ago.
Genstar won’t build out another Hispanic-focused automobile insurance concern. It is likely to take a hard look at some commercial lines businesses over personal lines, Clark said.
“We’re out looking more at something different than Confie, more commercial lines maybe,” Clark said. “Right now I’m looking for new opportunities that Genstar 6 would invest in.”
Clark said the hope is to make a buy in 2013, but he pointed out that a purchase for what will likely turn out to be a six- to seven-year fund isn’t a sure thing within one calendar year.
“You have to find the right business, it has to be for sale, you have to come to terms with the sellers,” he said. “It’s hard to predict.”
Like Confie Seguros, Genstar could be looking at regional platforms that want capital to expand nationally, and possibly it would be an acquisition of a business that’s already focused on a niche – an ethnic niche, a regional niche or a certain line, Clark said.
Confie Seguros’ niche focus on the Hispanic market may have been a large driver of its success. When Genstar partnered with insurance industry executives and Westline Corp. – its brokerage operations at the time included South Coast Auto Insurance, Solo Insurance, and Freeway Insurance – to establish Confie Seguros in 2008 the goal was to create a national brokerage tailored for Hispanic consumers.
Looking at the growth of the Hispanic population, Confie Seguros’ plan was a no-brainer. According to the Washington, D.C.-based nonprofit Pew Hispanic Center the Hispanic population now represents well over 16 percent of the nation’s entire populous. By 2050 there will be 130 million Hispanics in the U.S., accounting for 30 percent of the total population—nearly double the group’s share of the population today, according to Pew.
Precisely what lines Genstar may look at for its next target is anyone’s guess. Past Genstar insurance-related investments run the gamut: Insurity, a Hartford, Conn.-based provider of policy administration software solutions for the property-casualty industry; Granite Global Solutions, a Canadian provider of risk mitigation services; Innovative Aftermarket Systems, an Austin, Texas-based an underwriter of vehicle protection products sold through automobile dealers; and 21st Services, a provider of life expectancy information for the life settlement industry.
Beside financial services Genstar invests in life sciences, healthcare services, software and software services and industrial technology.
Clark, who said Genstar dumped its stake in Confie Seguros because “it was just the lifecycle of our investment fund, it was the right time for our fund to sell,” was bullish on the brokerage business.
“We continue to think that insurance brokerages are good investments,” he said. “There are other good platforms out there with good management teams that are looking for capital to help build their platform out.”
Clark declined to say how much Genstar earned off its investment in Confie Seguros, which has steadily built out since 2008, including deals closed for more than 20 retail agencies in the last year.
Buying then building is a formula that Clark, a Harvard MBA graduate, really likes, and it may be a good indicator of where to place your bets on Genstar’s next buy.
“I’m really looking at another brokerage consolidation, much like Confie,” Clark said.