Last month, Tampa insurers BRP Group reached a deal to acquire a California agency it says will add $81.8 million in annual revenue to its ledger. This is the largest acquisition in the company’s 11-year history.
It is also normal in the way the BRP Group does business.
In 2020 and 2021, the public company spent $2.1 billion acquiring 32 companies large and small, adding more than $440 million in revenue. As a result, the BRP Group and its subsidiary, Baldwin Risk Partners, have doubled their activity since 2019.
At the time, the company had 600 employees, including 200 risk advisors; 50 offices in seven states; and 450,000 customers worldwide. Three years later, the company had nearly 2,800 full-time employees and 100 part-time employees, including 460 risk advisors; 120 offices in 20 states; and 900,000 customers worldwide.
“Our first and foremost goal is to build a business that can grow organically by double digits year after year,” said CEO Trevor Baldwin. In doing so, Groupe BRP becomes “a destination employer for the best professionals in our industry”.
Baldwin’s father, Lowry, co-founded the company in 2011 and is still its chairman. Their aggressive acquisition strategy is not uncommon in the insurance world, but it still poses challenges as the BRP Group continues to add new businesses and new customers while trying to grow its own revenue. organic.
To achieve this, the BRP group recently announced its entry into the home insurance market in Florida. Baldwin said the company will grow this business slowly, but he sees a void that the BRP Group and all of its newly acquired talent can fill.
“You take care of your colleagues, they take care of your customers,” he said. “You take care of your customers, and everything else takes care of itself.”
During a recent Zoom interview, Baldwin discussed how the BRP Group is handling its many acquisitions and the issues facing homeowners insurance in Florida. This conversation has been edited for length and clarity.
Insurance is by nature a more conservative industry. Is buying 16 companies a year a conservative approach to growth?
Compared to some of our peers, it is. I’d say there are about 40 active acquirers in the insurance distribution space, some of whom are making over 50, 60, 100 acquirers a year. We tend to focus on bigger, better companies with a track record of double-digit growth and existing owners who aren’t looking to retire, but see the value of partnering up. to a larger scale insurance business. The combination of our talent, our know-how, our collective wisdom, allows us to accomplish things together that we could not otherwise do alone.
You acquired insurance companies, technology-focused companies, companies that care for both Medicare patients and wealthy individuals. That seems like a pretty broad portfolio.
Our goal is to be able to have a platform that allows us to serve our customers throughout their life cycle, both from a personal and professional point of view. Everything from the relatively nascent college graduate who moves into their own apartment and needs tenant insurance; high net worth executives and families with complex insurance needs; a fledgling start-up backed by venture capital; to a large-scale global enterprise. And all the rest.
Track trends affecting the local economy
Subscribe to our free Business by the Bay newsletter
We’ll break down the latest business and consumer news and information you need to know every Wednesday.
You are all registered!
Want more of our free weekly newsletters in your inbox? Let’s start.
Explore all your options
Are rising interest rates hampering your ability to make acquisitions?
No. The increase in interest rates has an impact on the cost of debt. This could have a downstream impact on valuations. But being a public company, having relatively broad access to capital markets and compared to our private equity peers with relatively modest leverage, we are very happy with our positioning.
You have a fully dedicated integration team that you call Navigators. When you buy a business, how do Navigators come into play?
We are developing a bespoke welcome website for all new colleagues. Thus, on the day of the announcement, they have access to read and learn more about our culture, our organization. We have an HR team that usually visits the location and spends time welcoming these new colleagues into the organization. We integrate them into our IT and cybersecurity infrastructure. We educate them on the broader platform and the breadth and depth of the resources and capabilities they have access to. This is a fairly comprehensive 9-12 month process to fully integrate these companies into BRP’s ecosystem and culture.
You said the Florida landlord market is in the worst shape you’ve ever seen in your career. Can you explain that and explain your decision to go for it?
The industry pays about $1.20 for every dollar of revenue it collects from Florida landlords (insurance). The simple economics of this business model don’t work. There are a number of structural and regulatory issues related to certain loopholes that create challenges for Florida homeowners regarding roof claims and other issues that allow the homeowners insurance policy to be used in a manner for which it was not designed or priced. We’ve seen four or five Florida landlord company insolvencies in the last six months. It is likely that we will see more. There are pockets of housing in Florida that can be profitably insured, and we think we have a good read on this niche. Capacity is limited, coverage conditions are reduced, prices are increasing dramatically, and we believe we can solve a real challenge for a portion of our customers who have the right underwriting characteristics and attributes.
Florida is a tempting market, but finding the key to that lock seems like a real challenge.
Without real reform, the Florida homeowners market generated about $14 billion in premiums last year. We think it would need to grow to around $17 billion to break even, and probably $19-20 billion to deliver sustainable profitability that would attract long-term capital to the space. This would suggest another one-third increase in owner prices before reaching a sustainability level.
Do rising home and property values ultimately mean you’re seeing more premiums?
It will give more premiums, but I would say that’s on a risk-adjusted basis, that $20 billion. So, as the value of homes rises, insurance premiums naturally rise with them, but so does the cost of repairing and replacing them. So that doesn’t solve the underlying economy. On the contrary, with the inflation that we see, it will only exacerbate the problems.