Insurance Brokerage M&A Took a 3rd Quarter Vacation

By | October 19, 2009

Deal making wasn’t at the top of the list of summer activities this season, but deal vacation was. Third quarter merger and acquisition (M&A) activity continued declining to just 30 announced transactions between July and September. This quarterly activity follows a relatively active first quarter with 51 transactions followed by a less active second quarter with 41 transactions. Deal momentum and deal volume have slowed dramatically compared to last year. With only three months left in the year to transact, 122 transactions have been announced through September versus 224 last year.

Arthur J. Gallagher remains the most active acquirer of agencies with a total of eight. AJG announced only one deal in the third quarter which involved the acquisition of the New England offices located in Maine and Rhode Island of wholesale insurance broker Gresham & Associates.

Always a leading consolidator, Brown & Brown (B&B) picked up two more agencies bringing its year-to-date total to six. Similar to AJG, B&B maintains a wholesale operation in addition to its retail brokerage. B&B added to its wholesale operation with the acquisition New Jersey-based Camford National Insurance Brokers in July. B&B also picked up an employee benefit practice in Tennessee.

Two other noted wholesale insurance brokerage deals took place this quarter. AmWINS Group purchased The Managing Agency Group – Employee Benefits (MAG-EB) located in Connecticut. MAG-EB is a wholesale broker and administrator of employee benefit plans for small and mid-sized employer groups of 2 to 300 employees, and serves as a brokerage general agency of employee benefit plans for over 30 major carriers. MAG-EB was a division of Willis HRH. The other combination involved two long established general agencies both headquartered in Manhattan. The Demetriou General Agency, now in its 84th year, acquired H. Al Roth Agency providing agents with enhanced market strength in New York and New Jersey.

Ascension Insurance continued its strategic geographical approach to acquisitions with the addition of two agencies. Based in North Carolina, Commercial Insurance Group and Georgia-based Haas & Dodd Insurance, both retail P/C agencies, were acquired by Ascension in July bringing its year-to-date total to six.

Once a formidable consolidator of insurance brokerages, most banks have been focused on core operations rather than agency acquisitions during the past twelve months. The number of bank deals has declined consistently both from a quantitative perspective and overall percentage basis for the past several years. With less emphasis on revenue diversification and more on revenue preservation, bank divestitures of insurance brokerages continue, even at the national level. In August, the former owners and employees of Galloway-Chandler-McKinney Insurance Agency purchased the Mississippi agency from Cadence Bank.

Deal activity may pick up slightly going into the end of the year as those deals that have been in the works for months aim to close by year end. Despite the anticipated uptick in volume, the year 2009 is on track to be the least active M&A period in 10 years. Looking ahead, healthcare reform, insurance rates and pricing, and the expiration on Dec. 31, 2010 of the current long-term capital gains tax rate, which is the lowest it’s been since 1993, will surely impact insurance brokerage M&A activity one way or another.

Select Merger & Acquisition Activity: July – September 2009

Announced Date Buyer Seller Seller Description 09/22/09 A.N. Ansay & Associates, Inc. The Vincent Group, Inc. WI, Retail P&C Agency 09/01/09 AF Financial Group Royall-Cox/Northwestern Insurance Services NC, Retail P&C Agency 09/01/09 American Westbrook Ins.Services, LLC Westbrook Financial Services, Inc. IL, Retail Benefits Agency 09/09/09 AmWINS Group, Inc. The Managing Agency Group, Inc. – Employee Benefits, a division of Willis HRH CT, Wholesale Benefits Agency 07/07/09 Armstrong/Robitaille/Riegle Robco Insurance Services Inc. CA, Retail P&C Agency 07/30/09 Arthur J. Gallagher & Co. New England offices of Gresham & Associates, Inc. ME/RI, Wholesale P&C Agency 07/01/09 Ascension Insurance, Inc. Commercial Insurance Group, Inc. NC, Retail P&C Agency 07/14/09 Ascension Insurance, Inc. Haas & Dodd Insurance, Inc. GA, Retail P&C Agency 07/01/09 Brown & Brown, Inc. Camford National Insurance Brokers, LLC NJ, Wholesale P&C Agency 08/31/09 Brown & Brown, Inc. Group employee benefits division of Roussel & Associates, LLC TN, Retail Benefits Agency (Revenue $1.7MM) 07/01/09 CBIZ, Inc. EAO Consultants, LLC d/b/a Egan, Amato & O’Connor NJ, Retail Benefits Agency (Revenue $2.9MM) 07/27/09 Cottingham & Butler, Inc. Baker Tilly Employee Benefits, LLC WI, Retail Benefits Agency 08/11/09 Demetriou General Agency, Inc. H. Al Roth Agency NY, Wholesale P&C Agency 08/19/09 Edgewood Partners Insurance Center METRO/RISK CA, Retail P&C Agency 08/27/09 First Horizon National Corporation Sandlin Insurance Agency TN, Retail P&C Agency 08/31/09 Markel Corporation Elliott Special Risks LP Canada, Wholesale P&C Agency (Deal Value $69.2MM) 09/18/09 Marsh & McLennan Companies, Inc. International Advisory Services Ltd. Bermuda, Retail P&C Agency 09/02/09 McQueary Henry Bowles Troy, L.L.P. Texas division of Holmes Murphy & Associates TX, Retail P&C Agency 09/21/09 National Penn Bancshares, Inc. Milestone Financial Associates, LLC PA, Retail Benefits Agency 08/31/09 Owners and employees of Galloway-Chandler-McKinney Insurance Agency, Inc. Galloway-Chandler-McKinney Insurance Agency, Inc. from Cadence Bank, N.A MS, Retail P&C Agency (Deal Value $5.5MM) 09/30/09 The NIA Group, LLC J. Lindsay Fuller, CLU, Inc. and USC Administrative Services, LLC NJ, Retail Benefits Agency 08/06/09 UMB Financial Corporation Chapman-Sander Insurance, Inc. MO, Retail P&C Agency 09/29/09 Willis Group Holdings Limited Remaning 40% of Herzfeld Willis S.A. and Willis S.A. Argentina, Retail P&C Agencies

About Audra M. Szollosy

Szollosy is a senior vice president with Hales & Co., located in Hales' Harrisburg, Pa., office. She advises agents and brokers on valuation and mergers and acquisitions transaction matters. Phone: 717-541-9300, ext. 103. E-mail: aszollosy@halesgroup.com. Web site www.halesgroup.com. More from Audra M. Szollosy

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