🔒Pandemic doesn’t slow Smith Brothers Insurance’s national acquisition spree

With an eye on growth, Smith Brothers Insurance has been expanding by acquiring small, independent insurance agencies in multiple states in recent years.

And the COVID-19 pandemic hasn’t slowed down that trajectory for the Glastonbury-based firm, which is also celebrating its 50th anniversary this year.

“[Mergers and acquisitions] will be part of our strategy over the next decade,” said Joe Smith, chief executive officer at Smith Brothers Insurance.

His father, Bob Smith, originally founded the firm with his brother, Brian Smith, in 1971 from the third floor of his Hartford residence.

Today, the agency has 210 full-time employees, operates 14 offices across four states — Connecticut, Massachusetts, New York and New Jersey — and ranks as one of the nation’s top 100 independent brokers. The mostly family-owned business has grown at a rate of more than 15% annually over the last two decades under Smith’s leadership, most of which he has served as its top executive along with his sister, Kim Connelly, as chief operating officer.

“We ‘frick and frack’ very well,” Smith said of their relationship. “We trust each other and that’s the key.”

‘Picky and choosy’

There are over 36,000 independent insurance agencies in the U.S., but their numbers are sliding as the industry continues to consolidate.

A once-in-a-lifetime demographic trend — aging Baby Boomer agency owners reaching retirement age — and a flood of private equity funding entering the sector are two big factors fueling this activity, Smith said.

“There’s been an enormous amount of investor money that’s come into the independent agency world and created a heavy temperature,” he said.

But while other firms may be taking a Pac-Man approach to buying up targets, Smith is pursuing the opposite tactic.

“We’re really picky and choosy about who we decide to bring on board,” he said.

Over the past eight years, Smith Brothers Insurance has acquired 17 insurance agencies, though the firm has eyeballed over 250 businesses during that time period, he said. Over the past year, and despite the disruptions to business posed by the pandemic, the company acquired Oxford Insurance Agency to expand its Massachusetts footprint, and Shank & Falvey Insurance, with two locations in upstate New York.

These purchases, like others in the past, allow Smith Brothers to diversify its client base, product offerings and add new capabilities.

Today, its business mix is roughly 60% property and casualty insurance, 20% health insurance and 20% in various niches like surety bonding and financial and business succession planning, he said.

Clients range in size from very small family-owned firms to those with thousands of employees.   

As a privately-held company, Smith Brothers Insurance doesn’t disclose how much it pays to buy insurance agencies, but each deal typically involves a mix of cash payment and sometimes an equity ownership stake.

Collaborative leadership style

Leadership, said Connelly, is something her brother exhibited from an early age.

“He was always a leader, in school plays and sports, whether he was doing something right or something wrong,” Connelly said with a chuckle.

Older by five years, she joined her brother at the firm in 1989. At the time, Smith Brothers had two locations, one in Hartford run by Brian, who specialized in life and health insurance products, and the other in South Windsor, where Bob Smith specialized in property and casualty coverage.

“I was close with my father, both as a dad and as a business confidant,” said Smith, who began working in the office as a teen.

After graduating from St. Anselm College in New Hampshire with a major in economics, he decided the insurance industry was a good fit for both his “love” for small, growing businesses, and his personality.

“My style of leadership is very collaborative and this industry lends itself to that since it’s very relationship based,” he said. “That really motivates me.”

From the mid-1980s on, the company thrived as a result of organic growth, talent recruitment and product diversification.

At the turn of the century, he and his sister, who both worked in multiple positions within the agency, eventually succeeded as its leaders and initiated a growth strategy into new business lines and geographies through acquisitions.

For example, the agency expanded into liability insurance for architects and engineers with its 2012 purchase of Camilleri & Clarke Associates, then a Wethersfield-based firm and Connecticut’s largest writer in this niche.

Today, Smith Brothers Insurance offers commercial coverage to a wide range of sectors, from manufacturing, hospitality and real estate to more specialized ones like jewelers and law firms.

“The diversification in our revenue streams gives us balance and allows us financial health over time,” Smith said.

Being in the backyard of Hartford, the “insurance capital of the world,” Smith said, has also been advantageous.

“We’re the distribution arm of the big insurance companies and they’re our partners,” he said. “There’s a big overlap in our working together in the business world as well as in the community.”

The founding Smith brothers early on set a precedent of “paying it forward,” he said, through charitable works within the community, such as the Boys & Girls Club in  Hartford. That tradition continues today, said Smith, who has three children, two currently in college and one in law school, with his wife, Lisa, his high-school sweetheart and a former elementary school teacher.

In 2013, with other “basketball dads,” he launched a nonprofit KidsForKidsCT.com, which organizes 3-on-3 basketball tournaments and other athletic events in which kids from grades 3-12 are the main volunteers and participants.

So far, the nonprofit has raised about $250,000 that has been donated to mostly local charities selected by the kids themselves.

“The objective is to teach kids how to give back to the community and understand the concept of philanthropy,” he said.