What Consolidation, Carrier Relations and Character Mean for Building a Solid M&A Strategy
As one of the most acquisitive U.S. insurance brokerage firms over the last year, PCF Insurance Services added more than 89 agency partners in 2021, up from 36 in 2020.
For 2022, PCF says it’s on track to add more than 100 partners by focusing on intentional growth to accelerate the trajectory of its partners. Leader’s Edge sat down with Jewkes and Marino to discuss PCF’s approach to acquisition, M&A market trends, and changing dynamics in carrier relationships.
Marino: We have new agencies rolling under the PCF umbrella from all geographies, in all lines of business on a quarterly basis. Staying in regular communication with our carrier partners has become a necessity. Our carrier team hosts monthly meetings with our largest trading partners to keep them apprised of meaningful acquisitions, expansion in new lines of business, and large client movement. As our U.S. footprint grows, we can now provide our agencies with a national perspective on market trends and carrier appetites, giving them information they couldn’t obtain as a local independent agency. In return, they deliver the local, community-based agency approach that carriers really value. This makes PCF a true hybrid of national scope with local access. We understand that deep client relationships tend to deliver better risks to our carriers. If we deliver above-average risk to our trading partners, we can expect to secure best-in-class terms for our clients and ultimately deliver meaningful returns to our stakeholders. In this way, we can be true partners to both our clients and carriers.
Jewkes: Historically, one thing we’ve observed was carriers have been resistant to consolidation and have been strict or rigid about appointments; however, now, they have loosened up and faced reality that this acquisition environment is here to stay. And you can either jump in the game or get left behind.
It has brought some carriers to the table in ways they haven’t been willing to engage in before, and it forced carriers to play ball with what M&A means for data, systems and aggregating premium.
Marino: Looking at the carrier relationships that existing independent agents have and what they’re trying to achieve by joining a bigger firm certainly plays into the strategy. Every carrier has their own appetite and strategy on how they want to trade with their brokers. Each new acquisition has its own nuanced book of business; understanding which carriers they access and how that book feeds into the broader PCF family is always a consideration in the diligence process.
Jewkes: PCF is built on a partner-centric operating model where agencies are empowered to manage their business to achieve the greatest growth and success possible. Our agency partners are able to maintain their preferred management system, though we do believe in the power of data and have established a preferred vendor approach. We advocate for coordination and incentivize agency partners to convert to our two agency management systems. Importantly, we have adopted the “carrot” approach—if you convert, you’re going to have data teams that can support you to get better pricing and so on, but no partner is required to make a change.
It’s important to have a data layer that allows you to see the businesses you have to build, to report that back out to your partners, and to demonstrate to them that you know what their business is composed of and how it’s operating—and that you can support them from a data and analytical perspective. We believe our approach optimizes for both partner entrepreneurship and coordination via data.
Jewkes: There are several ways that we are pushing technology development to our partners, principally via software tools and data. We provide access to multiple layers of software that enhance technology infrastructure, including insights into an agency partner’s book composition, renewal risks, opportunities for rate increases, competitor benchmarking and more.
Marino: Assessing their current carrier relationships and understanding how PCF can be additive to their strategic vision and help them grow organically.
Jewkes: It’s a two-way street—they choose us, and we choose them. But for us, it comes down to a few things. First, entrepreneurship. Second, a proclivity for teamwork—are they geared for sharing and for learning. And third is integrity. We’re looking for people to do business the right way—by their clients, by their employees, and by their carrier stakeholder partners.