Insurance companies could affect broker valuations with acquisitions
Published: October 28, 2017
Updated: July 24, 2018
Author: Luke Jones
CATEGORY: Industry News
Brokerage valuations have been impacted by insurance company acquisitions, experts on the CEO Panel of the Insurance Broker Association of Ontario Convention said on Thursday. However, the potential selling price of brokerage can also be affected by growth and profitability factors.
“Insurer acquisitions have had an impact on valuations, so for brokers who are looking to sell, this is a positive thing,” said Heidi Sevcik, president and chief executive officer of Gore Mutual Insurance Company, said during the discussion.
The CEO Panel is held each year as part of the IBAO Convention and was this year moderated by Jim Harris. He asked Sevcik if she thinks acquisitions of brokerages undertaken by insurance carriers could disrupt business valuations:
“For brokers who are looking to acquire, we appreciate that this presents challenges but this was going on long before Gore Mutual ever started considering acquisitions and I am pretty sure that Gore Mutual is not really a big influence on acquisitions,” Sevcik suggest at the Convention, held at the Shaw Centre in Ottawa.
Gore Mutual is an example of an insurance producer purchasing a brokerage. On June 28, the company announced an agreement to acquire Howard Noble Insurance Limited, an Ontario-based brokerage with locations in Alliston, Barrie and Collingwood.
“Noble insurance has been our business partner since 1946,” Sevcik said. “This acquisition was really about continuing that partnership and more importantly, securing that broker in the broker channel.”
She talked about industry experts talking about the “tremendous amount of change that’s impacting our industry and nowhere do we see it more than in the broker ownership changes and quite often those changes lead to companies losing their books of business either to a competitor or to a direct or agent company,” Sevcik noted. “So yes, we are participating in this change.”
RSA Canada CEO, Martin Thompson, said his company also acquired brokers that are now part of its network, including Johnson Inc.:
“Our Johnson business is an area where we actually get to connect directly with the consumer and what we try and do is gain insights on how consumer behaviour is changing in that business and transfer those insights back across to help shape our thinking in terms of what we do in the broker channel,” Thompson said.