AFL Insurance Brokers, the London-based Lloyd’s broker, was looking for an MGA platform in the United States and found the perfect partner last month when it purchased Zodiac Insurance Services, which specializes in professional, entertainment and event insurance.
It wasn’t a quick decision because both companies wanted to make sure they had a good business and cultural fit before they embarked on a more permanent relationship. After all, cultural issues are often cited as the biggest reason that mergers fail to create long-term value.
“We’ve taken our time. This isn’t something we’ve put together over three months,” said Zodiac President David Wash, who founded the Shamong, N.J.-headquartered company in 2011. It provides specialty products as an insurer, broker and Lloyd’s coverholder, licensed in 48 states.
“We first met almost a year ago, and we have spent the better part of a year traveling between London and the States. We’ve gotten to know each other personally, we’ve gotten to know each other professionally….,” said Wash in an interview with Insurance Journal.
Traditionally, in the world of mergers and acquisitions, people tend to focus on how much they can get for the deal. But, in the case of AFL and Zodiac, Wash said, the companies focused on more important considerations, such as “Do we like doing insurance together?”
“I can tell you, after a year, that we do,” he added. “And I would put 99 percent of my prediction that the venture will be successful on the fact that we took our time upfront, everybody dove in, we’ve seen each other, warts and all, and we’re still excited about moving forward together. That tells me that this is going to work.”
Bob Finch, AFL’s chief executive officer, agreed that the Zodiac acquisition works both strategically and professionally, while “it really does work on a personal level as well.”
North American MGA Platform
It was always part of AFL’s plan to find a North American MGA platform, with a specialty focus, Finch said in the interview.
“Our acquisition of a majority stake in Zodiac is a milestone in AFL’s growth as we further execute our strategy to diversify into the MGA space,” said AFL Chairman Toby Esser in a statement issued by the company when the acquisition was announced. “Demand for bespoke products and specialty programs is increasing in the USA and internationally.”
The strong business that Wash has created with Zodiac “is an excellent platform for further expansion…,” added Esser. (Financial details of the transaction were not disclosed.)
Zodiac specializes in entertainment insurance for mobile rides and amusements, including inflatables, zip wires and trampolines – anything that can be packed and transported in a truck.
“We have clients that go to places like the White House,” Wash said in the interview.
Zodiac also provides some professional liability classes for insurance professionals such as reinsurance intermediaries, captive managers and MGAs.
At the Beginning
The courtship between AFL and Zodiac began when Zodiac hired AFL as its London broker. Wash said: “We wanted to see how did they do what they do!”
Finch noted that AFL was impressed with Zodiac’s underwriting discipline, its methodology and the team of people that Wash has built. “We found a first-rate operation and thought it was a fantastic foundation upon which to build.”
Wash emphasized that the only partner Zodiac would have considered was a company in the London market. “Over the past five years, our business model has morphed into wanting to be a coverholder first and an MGA second – meaning the center of our world is the London market,” he affirmed.
“So for me, it was not so much about selling an interest in the company as it was about having a London desk, having a boots-on-the-ground relationship,” Wash said, noting that such a relationship provides quicker turnaround of a risk.
Importance of London Foothold
Wash said that a London foothold is the best way to build programs and maintain programs. “We do difficult classes, and knowing that insurance companies can be fickle, London is really the only way to go if you want to build something that’s going to last.”
He explained that the way London syndicates risk (with a panel of company market insurers and Lloyd’s underwriters) is an absolute necessity “because if an appetite for a risk changes then your whole program won’t be sunk and it’s just one component that has to be replaced,” Wash said. “If you have a good product, and it’s making money, you’ll replace that component pretty easily.”
Joining AFL gives Zodiac “a true London desk, a deep commitment to the Lloyd’s market…,” said Wash in a statement released by AFL at the time of the merger announcement.
Zodiac’s management team will remain in place, and the company will retain its independence as an MGA, operating as a separate legal entity.
Finch said AFL hopes to bring huge value to Zodiac and vice versa, offering the quote: “The whole is greater than the sum of the two parts.”
“We can help Dave grow his business but also revolutionize the way that it’s transacted, bringing efficiency with our technology, as well as giving Dave the support and guidance that he hasn’t had to date,” he said.
“I know first-hand, having recently brought in partners at a senior level and surrounding myself with a great leadership team, how much of an impact that can have personally and for the business,” Finch emphasized.
Finch said his team also will be introducing the team at Zodiac to overseas brokers and relationships. “We’ll be using our London market access and capacity relationships to help design and produce new products and lines for Dave to distribute.”
AFL will be providing Zodiac with its technology-driven solutions, which Finch described as the “DNA and at the heart of everything we’re doing – from operations and back office to the frontline, for both retail and wholesale.”
AFL invests a huge amount of time, energy and resource into insurtech and supports insurtech startups, he continued. “We’re very connected and engaged with the insurtech community. That’s a deliberate strategy so we can try and institutionalize innovation as a mindset here.”
Further, he said, everything that AFL learns about insurtech and is able to integrate into its London business will now benefit Zodiac.
“We believe we can bring our ways of processing business and selling insurance to Dave and his team to help liberate them – to go out and build their business,” Finch added.
And last but not least, Zodiac will benefit from AFL’s membership of the Worldwide Broker Network, the largest global network of independent brokers, enables larger independents with multinational clients to be offer to meaningful solutions, he said.
Since 2011, when Zodiac was launched, Wash has built a team of nine people who work very hard and “are pleased to have new friends and colleagues, who will help us grow,” he said.
“It’s good to have partners, it’s good to have associates, people that you can bounce ideas off, people that can support you, people that you like and like to work with. I might even get to take a day off here and there,” Wash continued with a laugh.
With a 30-year career in the insurance industry, Wash certainly isn’t cynical, nor jaded. He expressed excitement that Zodiac is now an international company, working with a respected partner who will help him grow the business. “There is much to learn in an international business – it widens your world.”
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