AmWINS CEO DeCarlo on Colemont Merger, Texas and Going Global

The acquisition of wholesale insurance broker Colemont Insurance Brokers by its competitor AmWINS Group gives AmWINS entry into international markets for the first time and a bigger presence in Texas, where Colemont is based.

The deal also enhances some of the product teams at AmWINS, including those for property, financial services and trucking markets, Steve DeCarlo, CEO of AmWINS, told Insurance Journal just days after the acquisition closed and was announced.

According to DeCarlo, no layoffs among field forces are planned, although offices in a few cities where both brokers have a presence will be consolidated.

The combined firm boasts about $3.6 billion in annual property/casualty premium and about 1,800 employees worldwide. The company has $4.8 billion in combined property/casualty and benefits premium, and $5.3 billion in combined property/casualty, life and benefits premium.

AmWINS now has access to more than 1,000 specialty lines markets and programs, as well as in-house underwriting facilities and a fast-growing group benefits segment that DeCarlo thinks is under-appreciated. Indeed, DeCarlo seems as proud of his company’s expansion into the benefits business as he is of the Colemont coup.

Texas, Global Units

For DeCarlo, the addition of Colemont’s Texas team and its international business are the keys to the blockbuster deal.

“Geographically, it’s a real advantage for us to pick up the Texas team. The Texas organization is well north of, or approximately, $25 million in revenue. So that was a big part of this transaction, to be able to partner with this brokerage team in Texas,” DeCarlo said.

To its existing excess and surplus lines brokerage, life and health benefits brokerage and property/casualty program underwriting, AmWINS now adds a global reinsurance component from Colemont’s operations. About 40 percent of Colemont’s business is international.

DeCarlo said he has been looking to go global for several years – specifically in London but that didn’t work out. He saw Colemont, which brings a London broker and business in 16 countries, as the “right partner” with which to finally do it.

“We picked up 16 countries. So that was a big, exciting part of the transaction, too, to kind of push our footprint out of the 50 states,” he said.

According to DeCarlo, the international capability sets AmWINS apart from its competitors.

“I don’t know that a lot of wholesalers are thinking internationally. Obviously, Colemont did. When we looked at it, we had three legs to our company. We were a broker. We were the underwriting business. And we were in the benefits space. By partnering with Colemont, we picked up a fourth segment, that being the international component, which will make up about 11 percent of our revenue.

“We think that’s about the right mix to have, 11 percent of our revenue internationally, as we don’t want it, obviously, to become overweighed. But not many wholesalers are expanding on the international platform.”

DeCarlo sees the deal strengthening AmWINS in other areas as well: property, financial products and trucking in particular.

“We’ll have the best property wholesale team in the industry,” he said. He also thinks AmWINS emerges with the largest finpro (financial products) team and picks up additional trucking capabilities in the United States.

The combined firm is being led by DeCarlo as CEO; Skip Cooper, president; James Drinkwater, president, U.S. Brokerage Division; Sam Fleet, president, Group Benefits Division; Michael Lapeyrouse, Underwriting Division leader and president, The American Equity Underwriters Inc.; and Surinder Beerh, CEO, Colemont Global Group, the international unit.

No Outside Capital

The terms of the deal remain confidential. However, privately held, Charlotte, N.C- based AmWINS was able to handle the terms in-house, according to Scott Purviance, CFO. “It didn’t really require us to raise any new capital,” he said.

“We didn’t need to go outside our four walls to raise more money,” DeCarlo confirmed.

Also, private equity firm Parthenon Capital, which owns a majority of AmWINS and is on its board, assisted with due diligence but was not asked to put up any money, according to the AmWINS executives.

All employees, including some coming over from Colemont, will own 40 percent of the company.

DeCarlo said he does not anticipate major layoffs, especially not in the field, although in cities such as Chicago and Atlanta where both brokerages have locations the offices will be combined. AmWINS has 45 offices in the United States; Colemont has 10.

The AmWINS chief said that while there is overlap among the carriers used, there is not a lot of redundancy when it comes to the sales force. “A good salesman has relationships, and he or she sells. We want them on our team,” DeCarlo said.

DeCarlo said AmWINS got involved last year when Colemont was seeking to raise capital and talks got serious between the two last October. He said it was a “very competitive process” for Colemont, and he thinks AmWINS won in the end because the two firms’ “cultures aligned pretty well and the brokers saw an opportunity to partner with a stable, long-term looking firm.”

Where People Want to Work

DeCarlo told Insurance Journal that being the biggest in the property/casualty wholesale sector has never been the goal.

“We’ve never really set out to become a large organization. We’ve always tried to work hard on diversification, stability and, quite frankly, culture – to be the place people want to come work.

“The scale part is a nice … it is helpful. You see, all the underwriting companies, all the markets, know your names now.”

Instead the goal has been to demonstrate the value of wholesalers.

“[W]hat we’ve been trying to do, that I think has been the dream of Scott [Purviance, CFO] and I, is to prove that wholesale brokers are the great distribution structure that we believe they are. That they can survive as an independent company through the vagaries, if that’s the right way to say it, of the property/casualty, E&S (excess and surplus) up and down cycles,” De Carlo said.

However, he likes that the bigger size gives his firm added stability and growth without having to expand the corporate management structure, which will remain in Charlotte, N.C.

“[W]e never have known where this leads, except we know we want to be a wholesaler. We know we want to be a great place to work. We know we want to be diversified. And we know that scale does have its advantages. Such as your corporate structure, as a percent of your overall revenue, can be managed at a much more reasonable level based on more volume. And we’re very keen to manage our corporate structure as efficiently as we possibly can,” he said.

He said that the sudden growth would not change the corporate culture or the desire to keep AmWINS a place where people want to work.

“All of us enjoy being part of an entrepreneurial firm and one of my jokes is that every time I go to buy a business, they meet us and they kind of like us and they get to know us and then say, ‘OK, where are the adults?’ And we’re like, ‘Oh no, we’re the adults, too. We’re the guys that actually buy the company.’

“We always want to keep that,” DeCarlo continued. “As I said to all my new Colemont friends, ‘Please call me Steve,’ because there’s just no misters in our company.”

According to the AmWINS CEO, the timing of the merger – in a soft market – should not be a surprise. “From a market timing perspective, it’s impossible to merge with another wholesale firm during a hard market. Things are blowing and going. You’re very much in demand. So acquisitions, or mergers, would occur in this type of market. I think that’s one of the reasons we were able to partner with Colemont,” he said.

Effects on Retail Agents

Retail agent customers of the two brokerages should not see a lot of change due to the merger, according to DeCarlo. “I think relationships that have been formed – because it is a people business – will continue to operate to where they have been,” he said.

“We will not be competing internally against each other. So if a retailer might have been using two wholesalers against each other, they may have to pick another firm, but I don’t see a real impact on the retailers other than the opportunity for us to use our relationships on a deeper level with markets to solve their client’s problems.”

The biggest change may be that AmWINS can do more to help retailers. “[T]his scale is giving us broader relationships with insurance company underwriters and executives. It’s helpful in the sense that we can solve clients’ problems by getting folks to return our phone calls so that the needs of the insured can be addressed. That’s the deciding vote.”

Topics Mergers & Acquisitions USA Texas Agencies Underwriting Property Property Casualty Casualty