An Exclusive Conversation With One80 Intermediaries

Video Transcription

George Bucur: Hello, my name is George Bucur and I’m a director within MarshBerry’s financial advisory practice. Specializing in serving specialty firms such as MGA’s (managing general agent), MGU’s (managing general underwriter), wholesale brokers, and program managers and we’re here today with Matt Power, CEO of One80 Intermediaries. Matt, welcome.

Matt Power: George, thank you it’s great to be here.

Bucur: Excellent, and it’s great to be talking with you. Specifically, we wanted to have Matt come on and perform this interview because One80 Intermediaries has been the most acquisitive firm in the specialty P&C (property and casualty) sector over the last two years with 25 transactions. Matt, can you tell us a little bit about how you got into the sectors? I think most of the viewers will find it unique in terms of where you come from.

Power: Well sure, George, I spent about 30 years at American International Group (AIG). I had begun my career at Kemper Insurance Company prior to joining AIG, but the preponderance of my career was with AIG in a number of senior leadership roles. I was the head of the New England region. I was responsible ultimately for the east coast and Canada, and around 2005 I actually joined Lexington Insurance Company where I was President of the risk specialist companies and then ultimately Executive Vice President of Lexington (Insurance Company). That experience was fascinating in that it exposed me to so many different facets of the insurance industry. Lexington (Insurance Company), particularly I traded with so many specialist brokers. People that were really deep in specific niches and I learned a lot about the types of specialty brokers that today One80 in fact is acquiring. I felt that part of our approach really needed to be building a platform that was diverse in terms of the revenue streams that attracted, that was rich in uncorrelated revenue coming into the organization, but one that could really differentiate itself for clients and brokers in terms of individuals or groups that really had deep expertise in particular genres. So today, One80 is relatively expansive we’ve organized into brokerage, contract binding programs and specialty. Specialty is really where a lot of our underwriting expertise resides. We’re in areas like consumer electronic warranty. We’re the largest travel accident health trip cancellation MGA in the United States. We’re the largest marine MGA in the United States. We have a number of really unique specialties that really provide a rich fabric as an organization, but again bring really diversified revenue into the platform. I think that’s important because we are in a business that is typically exposed to a lot of market cyclicality– price changes, economic influences– and that diversity in my view is designed to build an organization that can grow in any market cycle because you’ve got businesses that account to cyclical to one another, or that are simply so uncorrelated that a dip in the property casualty rate environment is not going to be relevant perhaps to our warranty business or our business in Canada et cetera, et cetera. So, it’s a really unique franchise that we’re building, and it’s been an exciting couple of years as we’ve acquired a number of firms and continue to.

Bucur: Yes, and MarshBerry has had the pleasure of representing several of those firms as well. You know what’s really been amazing to me is One80 Intermediaries was set up in 2019, and currently you’re running I believe on a pro forma basis over 300 million in revenue, net revenue that is, with 1300 colleagues across the US and some other areas. Matt, when you look at opportunities in the marketplace, what are some of those critical factors? You already talked about the diversified play from a business structure and operating capacity of the various firms you’re talking with, but what other aspects of those firms are you evaluating when you look to say, is this something we want to invest in or not?

Power: Well, that’s a great question and I think you know I go back to the early part of your question. You know, when we really launched the company, or the outline of the company, in 2019 most of that year was spent on business plan: making strategic hires, branding, building websites. We really got to work in earnest in the fourth quarter of 2019 and really formally launched One80 in January of 2020. So, the really building process has really been just over two years which, you know, it is remarkable growth indeed. When we talk to prospects, I will tell you that the most important issue for me is culture. It has to be a cultural fit and I believe that focus on culture has served us extraordinarily well because when I look at my management team, I look at the leaders that comprise the entities that we have acquired at One80. They are highly synergistic. We’re incredibly close-knit group. Everybody’s growing in the same direction. We’ve walked away from deals, and I would hope that the potential sellers think long and hard about culture because if you make a wrong decision on culture, you’re going to be living with the consequences for some time. Secondly, underwriting acumen. 30 years at AIG, I think a lot about underwriting profit. I think a lot about you know coverage terms and conditions, and making sure that we’re delivering product that is sustainable, right? So, if you’re simply chasing the cheapest price or the most stripped-down coverage, that’s really not what we’re interested in. We’re interested in folks that have underwriting acumen, that have a long-term track record of profitability. A few examples I mean, we acquired a firm, International Excess Program Managers (IEX), back about two years ago. IEX is the largest MGA for last mile logistics couriers and alike in the United States that’s a very very difficult line to deliver an underwriting profit on a consistent basis, yet they have delivered a consistent underwriting profit for virtually 20 years and so that that really speaks to the underwriting integrity and quality risk selection that takes place at IEX. Similarly, we’ve acquired program managers in MGAs that operate in some equally difficult areas of the business. When I can see someone that has lived and breathed a specialty that has delivered consistent underwriting profits to the insurer, that to me is a is a sustainable business and so, culture and underwriting integrity I think are paramount. Secondly, how synergistic will it be to the business. A lot of our businesses have found, within One80, great opportunities to create new revenue streams. For example, Brokers’ Risk was an acquisition we did about a year ago. Now Brokers’ Risk was primarily operating as pool administrator and MGA for school districts. Now on the other side of the equation we have a firm called, Safeware, that does consumer electronic warranties. So, when Covid hit, in fact, all the kids went remote in the public-school systems that we were insuring, and they suddenly needed Chromebooks and laptops and electronic equipment and the like. The school districts, in fact, became sources of revenue for extended service plans on that equipment. If the kids lose or break that equipment, the school district and the aggregate was protected. So, it’s an example of the type of synergy that can start to emerge between entities. So, I think about the balance of the portfolio, the balance of the revenue streams that are coming in, so that we’re not too top-heavy in any one particular line. But that’s another really important consideration that we think about during the M&A process. But again, the number one consideration for me is that a cultural fit. Will this team integrate well with what we’re creating and add value to what I think is a highly differentiated platform?

Bucur: Absolutely, and Matt it really has been impressive to see your background, your talents, and putting that all together in relatively a short period of time. I think it’s really resonating in regards to your capabilities and that culture that you support that resonates with other individuals that you’re partnering with. So, thank you very much for your time, Matt, we are about out of time ourselves and I want to say thank you. And to our viewers, if you have any questions about what we’re seeing in the overall M&A marketplace or questions about One80 Intermediaries, specifically, please do not hesitate to reach out. Until next time be well.