Consolidation intensifies for smaller firms With the recent acquisition of Aurrea Signature, the cohort of large and medium-sized players in life and health insurance distribution continues to shrink. However, consolidation will continue, say MGAs who are betting on the acquisition of smaller firms to grow and bring in new blood. BY ALAIN THÉRIAULT
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ith transactions large and small, MGAs are consolidating rapidly. In March 2020, HUB Financial acquired LSM Insurance, an online distributor of life and health insurance products for people who are hard to insure, based in Markham, Ontario. And, in recent months, consolidators such as property and casualty insurance giant HUB International, have been acquiring group benefits firms at a dizzying pace. Between January and early March 2020, HUB had already bought the group benefits consulting practice of Morneau Shepell for $70 million, the group benefits firm Azur, Benefex Consulting of Alberta and RHC Insurance Brokers of British Columbia. With its acquisition of Aurrea Signature, IDC Worldsource Insurance Network (IDC WIN) equipped itself with a real distribution structure in the Quebec market, rather than opening a simple satellite office. The acquisition raised the concerns of some advisors in the province who feared that their support in the French language would weaken under the new ownership. In an interview with Journal de l’assurance, IDC WIN president Phil Marsillo, sought to alleviate these concerns. His message: the MGA, supported by its parent company Guardian Capital, aims to integrate more fully into the culture of the Quebec market. “Since I am from Quebec, I am very aware of the Quebec market and the need to have all the information in French, and not only by translating the documents. We have to think in French too, because there are expressions that do not translate. It was our intention in acquiring Aurrea, to have French-language management in place throughout Quebec, not just in Montreal,” said Marsillo who is also Director of Public Relations/Media Relations for MGA association CAILBA. Another reason to acquire Aurrea was for the generation of leads for advisors through Pro Spect Insurance. “The leads generation is important to us,” said Marsillo. “We want to see what we can take from Aurrea and develop across Canada, and what Aurrea can take from IDC to adapt to the Quebec market.” Lorne Marr, who owned LSM, joined Hub Financial Inc., a subsidiary of Hub International stated when the transaction was announced that he looks forward “to helping Hub Financial build the most robust lead generation program in the industry.”
Yan Charbonneau, CEO of Lévis, Quebec-based MGA, AFL Groupe Financier called the acquisition of Aurrea a game-changer in the Quebec market. Charbonneau is also currently a Vice President and Treasurer of CAILBA. “As IDC WIN’s activities have been very limited in Quebec to date, it is as if we are witnessing the arrival of a new major player,” said Charbonneau. Far from worrying about this, he said he believes this transaction is part of the natural development of the industry. “As in recent years, consolidation will be the most important development axis for MGAs,” said Charbonneau. AFL has embarked on a strategy to acquire group benefits firms. The first step was the acquisition of the group benefits division of Patry, Poulin, Trahan & Associés in 2019, which brought AFL $20 million in group premiums. AFL says it is in the process of closing a few other transactions this year, and Charbonneau said he is targeting a short-term volume objective of $100 million in group insurance, not only by acquiring blocks of business and brokers, but also via cross-selling personal insurance via its property and casualty insurance activities. Organic growth still has its place Michel Kirouac, vice-president and executive officer of Groupe Cloutier, said the firm has made very few acquisitions so far. Kirouac is also Quebec Director of CAILBA “Among other things, we are developing by analyzing how we could do more business in each of our divisions, or how to increase the number of products per representative.” Groupe Cloutier is also looking for more ways to recruit. “We recruit around 70 to 90 advisors a year. We rely heavily on this activity for our growth,” said Kirouac. Consolidators also benefit from organic growth. Acquired in 2017 by Canada Life (then Great-West Life), Financial Horizons Group ended fiscal 2019 with strong results, marked by “organic growth beyond the growth derived from our acquisitions,” said Nick Pszeniczny and David Stewart, respectively CEO and COO of the MGA, in an interview with Insurance Journal.
APRIL 2020
INSURANCE JOURNAL 29