Two key executives involved in the acquisition of Topa Insurance Group by Altamont Capital Partners who spoke about the deal were emphatic about one thing: wholesalers will continue to be the center of the company’s distribution model.
Altamont announced on Wednesday it signed a definitive agreement to acquire Calabasas, Calif.-based Topa Insurance Group from its long-time owner, Topa Equities Ltd.
Terms of the deal weren’t disclosed, but John Donahue, president and CEO of Topa Insurance Co., would say that there are no plans to change the distribution model of the company, which does business exclusively though the wholesale market.
“No, we love our wholesale market,” Donahue said when asked if the company will continue doing business with wholesalers. “If anything, we plan on growing that and expanding that as opposed to shrinking it. We’re committed to the wholesale market.”
Sam Gaynor, a principal of Altamont, also said the San Francisco, Calif.-based private equity firm will support Topa’s efforts to continue to grow wholesale partnerships.
“This will be our foundational wholesale specialty P&C carrier in the U.S.,” Gaynor said.
Gaynor declined to get into specifics of the terms, and said it’s too early to talk about capital plans.
“I will say it will continue to have a specialty focus,” he said. “I would say there’re very strong wholesale relationships that the company has, so part of our strategy would be working with the wholesalers to understand what product gaps we have in the market.”
Altamont has over $2.5 billion of capital under management, focused primarily on middle market businesses in industries including business services, consumer, financial services, healthcare, industrial, retail and technology.
Highly recognizable names in its consumer portfolio include Billabong, Dakine and Fox Head.
Topa represents Altamont’s seventh platform investment in insurance and insurance services and its 19th overall insurance acquisition.
Altamont’s financial services companies include Atlanta, Ga.-based McLarens, a claims management and property loss adjustment business, Irving, Texas-based Celestite, a non-standard auto managing general agency, Atlanta, Ga.-based Embark General, a managing general agency, and Accelerant, a U.K.-based agency.
“We really like the specialty insurance model,” Gaynor said.
While Altamont will assume majority control, Topa Equities will maintain a minority equity stake in the business following the closing.
Topa is the parent company of Topa Insurance Co., and Dorchester Insurance Co. Topa wrote a reported $130 million of gross written premium in 2018 that it sold through wholesale brokers and managing general agents.
Founded by John E. Anderson in 1956, Topa Equities Ltd. is a private, family-owned, diversified holding company. Headquartered in Los Angeles, the company owns more than 25 subsidiaries with primary locations in Southern California, Hawaii and the U.S. Virgin Islands.
Topa has four main lines of business: beverage distribution, automotive retail, insurance and real estate.
Donahue said he got the sense that Altamont liked the management team, and so he and Topa’s other executives aren’t planning to go anywhere.
“All indications right now are that they’ve been very, very supportive of our team, very interested in our team,” Donahue said. “I anticipate no material changes at all in terms of the team and the dynamics and who’s on board.”
Donahue couldn’t say whether Altamont will add to Topa’s capital?
“All I know is they’re a very large fund and they’re very financially focused,” Donahue said. “We think that there’s a lot of opportunity in terms of doing things that we weren’t doing before.”
One of areas of anticipated growth for Topa is the cannabis insurance market.
Topa, which offers cannabis products in more than a dozen states, has reported the claims experience in the cannabis business are showing good signs early on.
“We’re bullish on that market,” Donahue said. “We’re very pleased with our topline there and very pleased with our bottomline, and we plan on smartly growing that over time.”
He then went back to his emphasis on Topa and the wholesale market.
“We want to grow even more exclusively with our wholesalers,” Donahue said. “We’re all in.”
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