Beecher Carlson: Energized for Growth

Atlanta-based broker just keeps going and going while striving to maintain service excellence

The “Energizer Bunny” of property/casualty insurance brokerages worldwide — that seems an apt description for Atlanta-based Beecher Carlson, which is ranked as the seventh-largest privately-held independent agency in the Insurance Journal Top 100 for 2007.

That’s a ranking it expects to beat through strategic acquisitions, on the one hand, and through continuing to grow business with its existing clients on the other.

The privately-held firm has been on an amazing roll in recent years, enjoying what it claims to be 113 percent compounded annual growth over the last three years.

Revenues have climbed from $12.3 million in 2004 to $55.8 million in 2006 while 2007 revenues closed at $75 million.

“All the acquisitions and large account investments we have made that are greater than two years old are profitable ventures for us,” said Steve Denton, Beecher Carlson president. “We have continued to invest in our products and industry verticals and our expected break-even point on each new investment is now 24 months. Not a lot of brokerages can make that claim.”

The question facing Beecher Carlson, which employs 450 and has 23 offices in the U.S. and one in Bermuda, is how long can this bunny just keep on going and going and going?

Currently the sky appears to be the limit — although the firm’s own executives and clients acknowledge it will be a challenge to continue providing quality service if its growth continues unabated.

But right now, its key customers seem happy.

“We’re probably one of their founding customers,” says Hector Mastrapa, vice president of insurance risk management at Marriott. Marriott has had a relationship with Beecher Carlson for more than 20 years — its second-longest relationship with a client. Beecher manages its captive and actuarial work.

“What has made this work is our compatibility with their sense of service. With Marriott being a service company, we demand that kind of service ourselves from our customers. A marquee name like Marriott garners a certain amount of attention in the marketplace. Beecher has been able to deliver that over these many years.”

The Marriott executive says the key is that Beecher Carlson listens. “I don’t share this lightly. They maintain a level of service that has met or exceeded our expectations. It’s not always a honeymoon; it’s the kind of organization with which we can talk turkey. A year ago they lost some key personnel on our account but they moved very quickly to meet our needs. Not only do they have specialization in hospitality but in ART — things such as programs that maximize cash flow, captives and other alternatives.”

Mastrapa’s not alone in his effusiveness. Sheila Small, assistant treasurer at Verizon, started doing business with Beecher Carlson not long after the Spitzer investigation broke.

“I can tell you they have delivered,” says Small. “They are a very seasoned, experienced group of people who are not out of school. They’re very knowledgeable, well known, and I’m never embarrassed to bring them in front of our CFO, CEO and board of directors. At the end of the day I never feel that I know more than they do.”

Bill Lyons, vice president of risk management and asset protection at Petco, praises both the service and support Beecher Carlson offers. “That’s what I like about them. I look at them as an extension of my department rather than as a vendor. They’re exceptionally responsive in loss and claims control. That’s just so critical. We’re a very lean risk management program, so having this expertise really helps us run that much smoother.”

Given this kind of praise, it’s no wonder that Beecher’s management bubbles with self confidence, claiming, among other things, that it has the best customer retention rate of any brokerage in the United States. In the right circumstances, “we’re able to move earnings per share for our clients,” says Tom Golub, chairman and CEO, who, with investor Austin Ventures, bought the firm from American Re in November 2003.

“When we walk into a customer, we probably know more about their business than they do,” says Golub. “We’re able to translate that expertise into reduced cost of risk for them.”

Less is More

Unlike the world’s largest brokerages, Beecher Carlson says it doesn’t want to be all things to all people — quite the opposite, in fact — and has no interest in growth for growth’s sake. “At Beecher Carlson, less is more,” the company’s Web site says. “A lot more. By focusing on a few select industries, where we have deep expertise and resources, we get your business. And we get it better than anyone else.”

The firm maintains that it competes with only four other firms — predictably, Marsh, Aon and Willis — and one other national firm, Lockton. “These are the only other firms legitimately in the risk management business,” says Golub. “Ultimately our customers are looking for expertise, not size.”

Beecher Carlson specializes in several industries: construction, energy, health care, gaming and hospitality, retail and telecommunications. “Many of these are industries that are growing rather than going backward,” says Golub. Explaining in part why the firm says it can move earnings per share, “most of the industries we’re in business with have lower profit margins and by definition higher turnover rates. Our customers are very results oriented. The question is, ‘Can we help them drive down and maintain a low cost of risk compared to industry standards?’ And that’s exactly what we’re achieving for each of our customers.”

Tech Advantage

One of Beecher Carlson’s strengths is its attention to technology and here, too, it appears to listen to its customers. The firm has been innovative in developing IT-related products and services, working hand-in-hand with customers as it develops them — rather than developing them in a vacuum and presenting them as a fait accompli.

Two products in particular stand out. PULSE, which it introduced in late 2006, is a browser-based solution that automates all functions of a medical malpractice insurance policy. The other, NOVUS, also a browser-based system, speeds the development of accurate directors and officers and executive liability policies in a completely transparent environment.

Beecher-Carlson believes PULSE shows its ability to listen to the specific needs of an industry and design IT products for a specific risk management practice. Developed to manage large physician programs, it allows doctors, heath care facilities and allied health professionals to self-service their accounts, complete applications, receive quotes and bind medical malpractice insurance — all online.

NOVUS, launched in September 2005, demonstrates the wherewithal of Beecher Carlson to develop solutions dealing with systemic problems corporations face in their pursuit of the most suitable coverages — in this case, historic lack of transparency in D&O and executive liability coverage arena. The product’s development dovetailed with the Spitzer investigations into contingency fees, which stoked corporate fears that brokers were being less than honest about their compensation structures.

“NOVUS is enormously innovative and timely because, post-Spitzer, it dealt head-on with the concerns that, whatever a broker said its compensation structure was, there was something going on behind the scenes in terms of that compensation that wasn’t being fully disclosed,” says Steve Anderson, executive managing director in charge of the product at Beecher. “Historically, the client didn’t feel involved.”

With NOVUS, the client sees every document that comes in from underwriters at exactly the same time Beecher people do; underwriters post everything directly to the system and the client file. “In fact, if our own account executives are out of pocket for whatever reason as any particular documents come in, our corporate clients may well see the information before we have a chance to digest it,” says Anderson.

Beecher Carlson claims to be the first to market in developing a transparent, real-time system that clients can watch as a broker builds D&O and executive liability policies from square one.

It was primarily because of NOVUS that WCI Communities, a Naples, Fla.-based developer of master planned communities, became a Beecher client just last year. “We were using the system even before we became a client,” explains Calvin Ellis, chief financial officer. “Most brokers offer a similar system now, but we went with Beecher because of their level of service and commitment to clients and because the system is extremely user-friendly and intuitive. It requires minimal training, and there’s a lot of flexibility in terms of access to our policies and other important documents. We’re extremely happy, and as a result we’re looking at expanding our relationship across their lines of coverage.”

Expertise Over Location

Another ingredient in its successful formula is that Beecher Carlson doesn’t insist that its corporate customers deal first and foremost with its executives in its closest office; rather, the customer is free to deal with the firm’s expert for whatever the issue is, regardless of where that executive is located.

Beecher Carlson says this approach helps in two ways: First, clients get the expertise they want immediately; second, it helps the firm attract executives because they don’t have to sell products with which they may not be familiar or that don’t interest them.

“If someone in the brokerage business has spent his or her entire life in health care and suddenly is forced to focus on selling and servicing something else, some of those people aren’t going to be very happy with that,” says Denton, president. “As we hire people, they understand they won’t be geographically limited, and that’s one of the things that helps attract people to us.”

Growth and Quality

Maintaining current levels of service and expertise will be a challenge as Beecher Carlson continues its unprecedented growth.

Says Marriott’s Mastrapa: “Our concern is that they’re growing so fast that we’re going to lose the attention that we’re used to. Happily, for the moment, our team is very focused on our needs; currently they’re maintaining the level and quality of service that we expect, but we continue to monitor it.”

Golub says he’s keenly aware keenly of the tough balancing act Beecher Carlson is trying to pull off.

“We’re always trying to determine the highest levels of growth we can achieve without sacrificing quality,” he says. “Once you lose quality, it’s just really hard to get it back, and we want the next 450 people we hire to be of the same or higher quality than the ones we have now.

“We tell our customers, ‘The list of things we can do for you is shorter than the list of things we cannot do for you,'” Golub adds. “We want to be the best at what we do.”

“[I] had some concerns at the beginning,” Verizon’s Small says. “Interestingly, some of the people we had been working with at another brokerage firm had started working with them. So I asked Tom, ‘Why would I be interested in the working with the same model? I shared with him some of the reasons I had been unhappy with these executives. He said, ‘We have a different business model; why don’t you give us a try?’ And so far it has worked out well.”

Well enough that the Energizer Bunny can just keep on going and going.

Topics Agencies Risk Management