Wanted: Agencies Focusing on Hispanic Market

Arizona, California, Nevada High on List of States for Agency Acquisitions by Consolidators Behind Confie Seguros

The business model calls for growing agencies by expanding their product mix to include life products, homeowners and certain benefit products.

The brains behind the insurance agency consolidation firm Confie Seguros say they are well-positioned to meet their goal of a $300 million revenue company focused on the Hispanic insurance market within a few years, despite current financial markets.

Also, while they have already closed on three agency acquisitions in California and Texas — bringing total revenues for Confie Seguros to $75 million and premium volume to $250 million — they are very interested in finding agency partners in Florida and in the Southeast, as they grow the company.

According to John Addeo, CEO, and Mordy Rothberg, president, Confie Seguros expects to build a national distribution company focusing on eight to 10 of the most densely populated Hispanic markets, including California, Arizona, Florida, Texas, Illinois and Nevada.

The company has $300 million in funding lined up for acquisitions; the money is being provided by private equity firm Genstar Capital and the company management team, for $75 million, as well as a bank facility with expected capacity in excess of $200 million.

The current credit market freeze is not dampening the company’s enthusiasm or ability to proceed.

“Thankfully, it doesn’t have an effect. We’re well-financed and big believers in this marketplace,” Rothberg said.

In fact, the current financial turmoil could turn out to be an advantage for the company.

“In a lot of ways, it’s making us look at things differently in the sense that there’s not too many other people out there who are actually capable of making acquisitions at this time,” Rothberg added.

Addeo told Insurance Journal the company is willing to go wherever it can find agents who believe in their business model. “Whether it’s Texas or Arizona or Florida or Las Vegas, you know we don’t say because we are in California, we are going to Texas next. We take them as they come.”

Confie Seguros is looking to acquire independent insurance agencies that are focused on Hispanic customers. Typically these agencies’ main product is nonstandard auto — as much as 90 percent of their revenues can be from this line, according to Rothberg.

The Confie Seguros business model calls for growing the acquired agencies by expanding their product mix to include life products, homeowners and certain benefit products.

“The fact that these agencies we’re looking at aren’t offering any products — other than nonstandard auto — gives us a tremendous ability to grow our business, and there is limited competition with respect to acquisitions with these agencies,” Rothberg said. He cited statistics showing that between 50 and 75 percent of the Hispanic community has never been approached by a life agent.

Rothberg thinks Hispanic customers will appreciate agents who offer them such products. “Our customer comes into our store to buy insurance. Our customer doesn’t buy insurance over the phone; our customer doesn’t buy insurance on the Internet, what our customer wants is face-to-face contact when they buy insurance products. So, we literally have our customer coming in the store. It doesn’t cost us any more to say to them, ‘have you considered purchasing life insurance to protect your family?'” he said.

There is another reason Addeo is optimistic about his business model. When he was building Alliant Resources Group and USI Insurance Services in the middle market commercial lines space, he would bump into 20 or 30 other companies looking at the same potential acquisition. But Confie Seguros is not seeing that kind of competition for agencies, he said.

Structuring a Deal

When he does find an agency he is interested in, Addeo said he structures the deal to meet the circumstances.

“We have an aggressive acquisition program. I think we pay a fair price, and we can accommodate sellers that either want to stay in the business or that want to get out of the business. If you look at my track record, I’ve always dealt fairly with my partners, and I think we have a sound business program, that for those that want to stay, I think there will be a lot of rewards down the road for them,” Addeo said.

The owners of the first company that Confie Seguros acquired in California chose to take some money from the deal but also stayed around to grow the business using Confie Seguros’ resources. In its second deal, the seller wanted to get out of the business.

“We really have to sit down with each potential selling candidate and understand what they want to do in the future,” Addeo said.

Roll-Up Record

Addeo has a track record in rolling-up agency businesses. He led two consolidations of middle-market property and casualty brokerages. Most recently, he was president and CEO of Alliant, a company he founded with revenues exceeding $200 million through 12 acquisitions. Prior to that, he was president and chief operating office of USI, where he acquired 90 insurance brokerages and built USI into the sixth largest brokerage firm in the United States

Rothberg, founder and president of Confie Seguros, has business development experience from his tenure as an executive at IDT Corp and Net2phone. He is heading up the business development and strategy for Confie Seguros.

In addition to Addeo and Rothberg, the executive team includes Stephen Provenzano and Andre Urena. Provenzano is executive vice president and CFO. Provenzano has more than 25 years of finance and operations experience in multi-unit retail businesses. Urena is senior vice president of business development. Urena has more than 20 years of insurance industry experience in the Hispanic insurance market and is the CEO and founder of the Latin American Agents Association.

Addeo’s experience with other consolidations confirms his enthusiasm for his latest venture. “The potential here is as good if not greater,” he said of Confie Seguros.