Confie Eyes More Expansion, Push Into Standard Lines

In the coming year Confie Seguros plans to up its buying spree and expand into standard personal and small commercial lines, while broadening its demographic from being primarily Hispanic focused, the president of the Buena Park, Calif.-based insurance agency said on Thursday.

Growth is all Confie Seguros has known since its inception in 2008, building up to today what can be considered a massive portfolio of more than 300 regional auto insurance brokerages. It has market positions in California, Arizona, Texas, Florida, Washington, Oregon, New York, New Jersey, and Nevada. This year it has plans to expand in states including, Illinois, Georgia and the Carolinas.

Confie Seguros has reported annual revenues of more than $200 million, but according to President Mordy Rothberg the firm’s plans put it on track for more than twice that over the next few years.

“The plan is to grow from $200 million to $500 million in the next three to five years,” he said.

Perhaps a larger goal, and one Rothberg feels is complementary to Confie’s plans for revenue growth, is to expand into personal lines, a segment that Rothberg referred to as “fragmented” and “ripe for expansion.”

“We have an opportunity to expand – and I think it’s a natural progression – into the standard personal lines and the small commercial markets,” Rothberg said.

He added, “We want to be the first national personal lines broker in the U.S.”

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It’s certainly a hefty market. Private passenger auto insurance constituted just over a $160 billion market in the U.S. in 2011, while homeowner’s insurance was measured at $63.4 billion, according to the Insurance Information Institute.

While Confie has plans to grow internally, it’s the external growth through acquisitions driving its expansion.

Confie has been on a buying spree that may be gaining steam. In 2012 Confie made 22 acquisitions. In December the firm acquired four regional insurance brokerages in Florida and Nevada.

Their spree may have been helped by the fact that 2012 was big year for acquisitions as capital gains were due to rise, generating a big rush for people to sell their businesses. Despite that boost, Rothberg is confident the number of purchases Confie makes in 2013 will exceed last year’s total.

“We hope to do over 30 this year,” he said, adding the goal is to acquire over $50 million in revenues. “We have a whole new universe to really expand.”

Already underway with its merger and acquisition plans, at the start of January Confie again targeted Florida: Second City Insurance, in Holiday; Insurance of Lauderdale Lakes, in Lauderhill; and, Harmony Insurance, in Kissimmee.

Standard personal lines is not entirely new for Confie. Thanks to its continued M&A mindset, Confie has some non-Hispanic, standard preferred business in upstate New York, New Jersey as well as in Washington.

“I think you’re going to see in 2013 a big push in that direction,” Rothberg said. “A lot of the deals that we are going to be doing are in the standard preferred, small commercial segment.”

And Confie isn’t just looking to buy agencies. They are partnering with firms as well, giving them resources and capital to help them grow, Rothberg noted, adding, “We have a very flexible model based upon the needs of the different brokers.”

Some of Confie’s planned internal growth may come with the backing of its carrier partners, such as Safeco and Travelers, as well from conversations presently going on with new carriers, according to Rothberg.

“We have approached a number of carriers who are very excited about our plan,” he said, though he declined to say which carriers Confie is talking with.

Among the host of news Confie’s president delivered when speaking about expansion, perhaps one of the most notable is an expansion of Confie’s demographics, considering Confie had little competition in the non-standard, Hispanic segment that is largely responsible for propelling the firm to success.

“We’re not losing focus the Hispanic consumer, but we’re expanding our focus,” Rothberg said.

This all comes just two months after Confie announced its purchase by ABRY Partners. It was announced in November that the Boston-based private equity firm acquired a majority of the equity in Confie from San Francisco, Calif.-based Genstar Capital. ABRY focuses on business and information services, media, and communications investments. Since 1989, ABRY has completed more than $36 billion of leveraged transactions and other private equity and mezzanine investments, representing investments in approximately 450 properties.

Terms of the deal were not disclosed. J.P. Morgan Securities LLC and RBC Capital Markets advised Confie Seguros on the transaction, while Alexander W. Sica of Sica Consultants Inc. advised ABRY Partners.

Sica said the deal with ABRY brings more capital to help with Confie’s goals.

“I think they’ll continue to grow,” said Sica, who worked on several acquisition deals last year involving firms like Arthur J. Gallagher, Marsh & McLennan and Brown & Brown. “Their goal is to be the first national broker focused primarily on personal lines. I think they’ll be every bit of that and more.”

An industry analyst not involved with the ABRY-Confie deal said he believes that it will provide Confie with the momentum to move forward with its ambitious plans.

“They’ve got good credibility, and a good backer with capital and an identity that will allow Confie to acquire and integrate agencies to work toward their goal,” said the analyst, who asked to have his name withheld.

He added: “I think the idea of covering the waterfront in terms of personal lines makes sense. To some extent the purchase decision around insurance is one decision. By and large people seem to sort of get the car insurance first, and whatever agent they get it from that’s their guy. And five years later they buy a house and they probably go to that guy.”

Despite the numerous agency consolidations over the years, there is no threat of a shortage of agencies a firm like Confie can buy. After declining from 44,000 in 1996 to 37,500 in 2006 the number of independent agencies has grown to 38,500 in the past two years, according to a recent study issued by the Insurance Agents & Brokers of America.

Asked why he’s so confident Confie will continue to expand, Rothberg quickly noted that Confie was formed at the height of one of the worst economies in U.S. history, and despite that it grew.

Confie’s growth plans could be further aided by a brightened outlook in insurance. Two weeks ago I.I.I President and Economist Robert Hartwig in put out his report on the results for the first nine months of 2012 showing profitability in the property/casualty insurance industry rebounded sharply during that period “propelled chiefly by a sharp drop in catastrophe losses and a marked acceleration in premium growth.”

However, the results for the period do not include the impacts of Hurricane Sandy, which hit the Northeast U.S. at the end of October. In fact the story overshadowed “what has otherwise been a broad based improvement in property/casualty insurance industry performance in 2012,” according to Hartwig’s report.