For Richard Ollis, running the insurance agency his great-grandfather founded 135 years ago in Springfield is a proud legacy. He said independence and local ownership are in the DNA at Ollis/Akers/Arney, the oldest insurance firm locally.
“We’ve used remaining independent and employee ownership as our strategy,” Ollis said of the agency now servicing nearly 7,500 accounts. “I believe that someone that lives in the community, works in the community, and owns a share and a stake in the business is going to serve clients more effectively than some big corporation.”
His emphasis on local ownership stands in contrast to a rising trend in the insurance industry: mergers and acquisitions among commercial insurance brokers. Ollis said he gets a couple phone calls a month soliciting just that.
And last year was the most active year yet, with Optis Partners, an investment banking and financial consulting firm, tracking 649 deals. Reports show 2020 numbers are on trend for more of the same despite the COVID-19 pandemic.
Optis’ analysis finds 58% of the 2019 deals were done by 10 companies, with Acrisure, Hub International, AssuredPartners, Broadstreet Partners and Gallagher Insurance in the top spots.
Bucking that trend and keeping independent agencies independent is what led Ollis to run for a seat on the Missouri Association of Insurance Agents Board of Directors. He joined the board as a representative for Greene, Christian, Dallas, Hickory, Polk, Stone, Taney and Webster counties this fall. His term lasts three years.
“One of my goals of serving on the MAIA board is to help others, if they chose to, find a path to remain independently owned rather than being gobbled up by one of these venture capital companies,” he said.
Lance Smith, president of PJC Insurance Agency, also has observed the trend, but he’s found advantages if an agency chooses the right partner.
The 51-year-old PJC sold to Sunstar Insurance Group LLC in 2016, Smith said. He and PJC Chair Raylene Appleby retained equity in the business through the sale and remained in their management positions.
“We did it largely for increasing our market presence, increasing the insurance carriers we can represent and having better, deeper relationships with those carriers, and increasing service offerings for our clients,” he said. “You can do a lot more when you’re part of a larger organization.”
But he agrees with Ollis’ concern about mass buyouts by private equity or insurance aggregators.
“A lot of these people that are buying agencies are just trying to acquire revenue, and they don’t care about the cultural fit,” Smith said. “When you look to purchase businesses that are well ran, quality and there is a strong management team in place, you don’t change things. Or else, why are you buying it anyway?
“We did not go out trying to find the highest bidder. We did this from a strategic and quality standpoint.”
One of the industry’s fastest-growing insurance brokers is Michigan-based Acrisure. According to Optis, it’s grown from roughly $650 million of revenue in 2017 to $2 billion today and has penned more than 500 acquisitions in recent years with a focus on small and midsize markets.
Pending completion of the deal next year, a merger between Willis Towers Watson PLC and Aon PLC will create the largest broker, at $20 billion in revenue, according to Atlanta-based Reagan Consulting. The second largest is Marsh, at $17 billion in revenue, followed by Gallagher at $5.7 billion.
“Consolidation is an accelerator toward a world where the benefits of scale will provide a compelling competitive advantage,” said Reagan Consulting President Kevin Stripe, in an email release. “Independent brokers need to adapt quickly or face irrelevance.”
Connell Insurance Inc. President and CEO Jeff Seifried said the brokerage explored several offers from large agencies earlier this year. He joined Connell in July after leading the Branson/Lakes Area Chamber of Commerce & Convention Center.
“I think we had about five different offerings and at the end of the day, the decision was made to at this moment, hire a CEO and manage the growth that we’re seeing,” he said. “It’s good business practice to understand what is out there to get a better understanding of the valuation of your business.”
Seifried said with his hiring, co-owners Tim Connell and Randall Gammill stepped back from day-to-day operations. Connell’s brother, Pat, founded the firm 50 years ago.
But he said a future sale is always on the table.
“There are good insurance companies and there are great insurance companies and the difference of that is seen by the consumer and that’s what makes the free market great,” he said.
Ollis said for many agencies, sales to large insurance aggregators tend to happen because owners have failed to plan for the next generation of ownership.
“In many cases, they are paying a premium for these agencies,” he said. “That’s attractive.
“Frankly, many agencies have done a poor job of planning for perpetuation, so when the principals or the owners get to an age where they’re ready to either semiretire or retire, because they didn’t do a good job of bringing young people to their company, the only option is to sell out.”
Ollis said his strategy to maintain a growing independent agency includes recruiting and training the next generation and focusing on culture.
“If we recruit and develop talent, we’ll write more new business than if we just focus on writing new business,” he said. “Over half of all agencies are not hiring enough advisers to meet future growth objectives and fewer than that have defined training/mentoring programs.”
That long-term planning can be seen in Ollis’ local mergers in the past five years. In 2015, the firm joined with Branson’s Akers & Arney Agency, and in 2018, Bolivar’s The Paul Long Agency joined Ollis/Akers/Arney. The company also has opted to be employee owned, establishing an ESOP in 2008.
“There are so many business owners who would prefer to perpetuate their company to a young person or young people in their community, but the problem is, they don’t start early enough hiring and grooming those people to take over the company,” Ollis said.
That’s part of the work he wants to do on the MAIA board.
“It’s essentially providing education and resources around perpetuation planning for people, for capital, for education, for financial literacy – so folks understand how to financially run a company and manage a company,” he said.
Seifried and Smith agree this is often the driving factor for a sale.
“As the insurance industry shifts and you’ve got a lot of smaller independent agencies that don’t have an exit strategy in terms of the ownership, it leads to a natural exit strategy,” Seifried said. “There’s nothing wrong with that.”
Ollis contends an independent agency better serves its community, and is more involved in nonprofit giving and civic leadership.
“Locally owned companies that have a stake in their community serve clients more effectively,” he said.
Commercial Street vintage furniture and clothing shop Gypsy Girl Junk moved across the street; Equality Healthcare LLC expanded; and authorized Apple product retailer Simply Inc. (OTC: SIM) relocated its sole Springfield store.
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