🔒Aging biz owners create opportunities, risks for insurance industry

1 of 2

Glastonbury-based Smith Brothers Insurance LLC has acquired eight insurance agencies in the last five years, the latest being Bayberry Insurance of Groton this fall, making Smith Brothers one of the largest independently operated insurance and financial services organizations in Connecticut.

And it's not done yet.

With about 150-plus employees, mostly in the Nutmeg State, including 90 in Glastonbury, Smith Brothers has ambitions to double in size over the next five years, through organic growth and more deal-making, said Joe Smith, president and CEO of the firm founded in 1972 by his uncle and late father. Driving that opportunity, in part, is demographics. There are myriad small insurance agencies with aging owners looking for succession plans and who have business niches and staff attractive to Smith Brothers.

Smith estimates a solid decade ahead of agency owners looking to exit their business.

That seems to be supported by an October report by BlumShapiro and the University of Connecticut, “The Baby Boomer Effect,” which found that 42 percent of small business owners in Connecticut are 55 and over, a number that is estimated to reach 47 percent in 10 years.

“With business owners aging, the pace of sales and transfers of ownership will likely increase,” the report said.

The insurance brokerage industry in particular is experiencing a significant amount of mergers and acquisitions, especially in the last decade and more so recently, said Mary Christiano, director of communications in Connecticut, New Hampshire, New York and New Jersey for Professional Insurance Agents, a nationwide trade association representing professional, independent property/casualty insurance brokers.

About 13 percent of independent insurance agencies were involved in M&A activity in the past two years, up from 11 percent in 2012, according to an industry study published by Independent Insurance Agents & Brokers of America and leading independent agency companies. Deal-making was particularly prevalent among larger firms gobbling up smaller competitors, which are facing increasing challenges of maintaining business viability, the report said.

Aging agency ownership and a lack of awareness for agency continuation are major concerns, Christiano said.

“We're very concerned about perpetuation in the industry,” she said, noting the graying effect isn't unique to insurance brokers. “We are challenged to have new people come into the industry.”

Insurance isn't a job young people think about when they grow up, she said, yet there are myriad opportunities.

“If you're entrepreneurial in spirit, it's the great American job,” Christiano said of helping people and the many jobs in the field, from sales to actuarial, customer service, investigations and more.

Locally, the Professional Insurance Agents of Connecticut Inc. is working with Goodwin College in East Hartford to help train students for insurance careers through insurance-specific course work and paid externships, helping to bring new people into the industry.

Smith Brother’s value proposition

Smith Brothers, with offices across Connecticut and one in Northampton, Mass., is one of the firms looking to take advantage of Connecticut's and the region's aging workforce. It wants to expand throughout New England if the right opportunities present themselves, Smith said.

The firm has made acquisitions across the state in recent years including in Groton, Chester, Waterford, Wethersfield, Rocky Hill and Southington.

Smith said his firm is attractive to sellers who have a niche in their community or particular business sector, but don't have the same resources to be a total risk-management company for families and businesses — what Smith calls a one-stop asset protection model that differentiates his firm in the market.

The company provides insurance, surety, risk management and employee benefits to individuals and businesses, including financial services through a separate limited liability company, Smith Brothers Financial.

Pamela Atkins, who founded Bayberry Insurance in 1989, announced in October that joining Smith gave her clients access to more products and services, including health insurance, financial planning, income protection and surety bonds in one place.

Smith has kept the names of most of the firms it acquired while placing them under the Smith Brothers umbrella as affiliates, except the smaller Charter Oak, which rolled into Atlantic Insurance, which is now located in Niantic, and Elliott Insurance Group, which was rolled into Smith Brothers in Glastonbury.

It also has kept the acquired firms' offices, except for Wethersfield-based Camilleri & Clarke, whose owner wanted to sell his building and relocate into Smith's nearby Glastonbury office.

The acquisitions have all been positive, each having a purpose, Smith said.

“If you can pick up a niche that you didn't have before or you get good people, then it kind of helps itself in the future,” he said.

Camilleri & Clarke, for example, specializes in professional liability insurance and risk management for architects and engineers, a professional group Smith Brothers didn't serve before that acquisition. The deal made Smith Brothers the largest architects and engineers specialty agency in the state, Smith said.

“Ninety percent of what we do is not what I would call turnaround,” Smith said. “It's more buying quality organizations with good people and so we make no changes.”

Broadly speaking, “If you look at it across the agency, we're a generalist, but if you look at it within the divisions, we have specialties all over the place,” he said.

With employee benefits, for example, Smith has a staff lawyer to help clients with Employee Retirement Income Security Act or the Affordable Care Act compliance, he said.

Smith said commercial business comprises the bulk of the firm's revenues, which it doesn't disclose, and personal insurance and financial services the bulk of its clients.

The firm retains its family influence. Smith's uncle, Brian, is chairman emeritus, involved in promotions and community involvement. Brian Smith's son, Scott, is director of the design professional's practice and Joe Smith's sister, Kimberley Connolly, is executive vice president and the equivalent of chief operating officer.

Read more

2016: The year of the deal?

Kask takes BlumShapiro's reins amid changing accounting landscape