Broker acquisitions remain active; stock prices drop slightly

Stock Prices: After four straight months of gains in the brokerage sector, stock prices fell 1 percent during the December/January period. This is particularly notable since the sector traded up 6 percent in October/November and 10 percent in August/September. The sector as a whole is trading at 91 percent of their 52-week high. Hub’s stock was up 9 percent during December/January. The company announced two acquisitions and the sale of its San Francisco-based Talbot Financial hub to a buyout group including four members of management. One of four hubs created after the acquisition of Talbot from Safeco in 2004, Talbot Financial had been classified as a discontinued operation during the third quarter of 2005. With 40 employees and revenues of approximately $5 million, Talbot Financial provides a broad range of financial services to banks and financial institutions.

M&A Activity: Momentum carried over into the New Year, as brokers remained active on the acquisition front. Fifteen transactions were announced in January following 20 in December. Non-standard auto agencies were in the spotlight in January when insurance carriers acquired five agencies. The largest transaction came on Jan. 12, when First Acceptance Corporation acquired certain assets of Insurance Plus Agency II Inc. and Yale International Insurance Agency Inc. for $30 million in cash. These agencies sell private passenger non-standard automobile policies primarily in the Chicago area with 73 retail stores that operate, and will continue to operate, under the names Insurance Plus and Yale Insurance. First Acceptance did not acquire any policies in force. The transaction was financed through a $30 million revolving and term loan credit facility. Cornerstone Management Partners Inc. and AssuranceAmerica Corporation also made acquisitions of non-standard agencies. Banks jumped into the action as well. Sandy Spring Bancorp Inc., Northrim BanCorp Inc., TowneBank, Sky Financial Group Inc. all announced transactions during the month.

Raising Capital: Stone Point Capital announced the capitalization of Mercator, a newly formed, independent wholesale insurance broker. Mercator will provide wholesale and specialty insurance solutions for mid- to large-sized retail insurance brokers through the implementation of a new business model for wholesale insurance placements. Mercator currently has 25 employees located in New York, Atlanta, and Florida and is in the process of opening offices in Chicago and San Francisco. The management team of Mercator will be led by John Addeo as chairman and Christopher Treanor as president and CEO. Addeo recently retired as CEO of Alliant Resources, the 14th largest retail insurance broker in the U.S. Treanor, who left Marsh in December, was formerly CEO of Marsh’s worldwide placement operations.

LMC Capital LLC is a national investment banking firm focused exclusively on the insurance industry. The firm can be contacted at (704) 943-2600, by e-mail at Info@LMCCapital.com or visit the firm’s Web site at www.LMCCapital.com.

Topics Mergers & Acquisitions Agencies