APPROACHING RISK HOLISTICALLY LEADS TO SUCCESS FOR CANADIAN AGENCY
APPROACHING RISK HOLISTICALLY LEADS TO SUCCESS FOR CANADIAN AGENCY
Greg Belton, president of Hunter Keilty Muntz & Beatty, attributes the firm's success to strong internal growth and strategic mergers. Pictured from left to right are Robert Keilty, managing partner; Brooke Hunter, managing partner; and Greg Belton, president.
In October of 1998, Hunter Rowell, which was established in 1888, and Keilty Muntz & Beatty, with origins dating back to 1889, merged to form Hunter Keilty Muntz & Beatty. Greg Belton, president and co-chief executive officer of HKMB, attributes the company's success to a "focus on strong internal growth coupled with very strategic mergers, which have brought together unique, yet complimentary strengths of three very strong firms."
In 1987, while they were still in their late 20s, Greg Belton and John Hawkrigg, left their jobs in marketing at Wellington Insurance Company to purchase Muntz & Beatty, Inc., a firm that was established in Toronto in 1889. Using borrowed money, "we worked diligently to pay down our debt, grow our revenues and to learn the nuances of the insurance brokerage business, says Belton." By 1994, they had doubled the size of the agency and saw an opportunity to merge with another well-established downtown firm, Guthrie Keilty Bickerstaff. Robert Keilty and Neil Morrison, who were two of the nine shareholders at GKB, became partners with Belton and Hawkrigg in the new merged entity, Keilty Muntz & Beatty.
"By 1998, four years after our merger, we had doubled our revenues through strong internal growth," Belton says. "With tremendous consolidation taking place in the distribution side of our business, we identified an opportunity to significantly enhance our market position through a merger with one of our very strong competitors, Hunter Rowell, a firm which dates back to 1888. Bryce Hunter, a chartered accountant and now chairman of HKMB, was the fifth generation of his family to head up the Hunter Rowell firm. His daughter, Brooke, who joined the firm with significant international brokerage experience, having worked in Hong Kong, Sydney and Vancouver, brought significant depth and additional skills to the management team."
Capitol Solutions Corp., a separate entity established by HKMB, was set up to convert out-of-the-ordinary capital markets into revenue. Neil Morrison, HKMB managing partner (right), heads up Capitol Solutions Corp. Mark Decker (left) is the director of capital markets.
Today HKMB, located in the heart of Toronto's financial district, is one of Canada's two largest independent brokers with 130 employees and $100 million in premiums, 90% of which is commercial and 4% of which comes from life and benefits. (To put that in perspective, the agency handles more than 0.5% of the total premiums written in the country and more than 1% of the total commercial premiums.) The brokerage continues to show strong internal growth. Last year it grew in excess of 15%.
"We have tried to concentrate our growth on areas where we have the dominant or significant market position, one of which is the automobile leasing sector," Belton explains. "We have worked to develop numerous enhancements to our product and service offering as a way of enhancing our value to our customers."
A holistic approach to risk
"In our opinion, risk management can no longer be viewed from the narrow perspective of what we traditionally think of as hazard risk," Belton notes. "We do not believe that we can continue to grow and succeed in earning new business simply by cutting our competitors' premiums. By developing a more comprehensive understanding of a company's risks and its combined financial impact, we work to put together an integrated risk program. That includes strategic, financial and operational risks. We go beyond just reviewing insurance policies and work with our customers to craft the most efficient portfolio of risk financing solutions, which may include a blend of traditional insurance, finite risk, securitized coverage and identifying natural hedges in an organization as an offset to risk. Our exposure to this broader definition of risk came through our involvement in the automobile leasing sector when automobile leasing companies began to seriously look at the concept of securitization."
"By providing innovative and customized solutions for large and complex risks, we are able to deal with the highest level of management in our customers' companies."
Securitization is a financing and risk transfer technique that involves a corporation selling a portion of its assets to a separate legal entity that is financed directly through public and private capital markets. It provides leasing companies with an alternative source of funds, (e.g., the capital markets) and helps them to achieve off balance sheet treatment, which frees up their capital, in addition to several other benefits. HKMB managing partner Neil Morrison heads up Capital Solutions Corp., a separate entity set up to convert "outside the box" capital markets opportunities into revenue by using traditional insurance products in new ways. Capital Solutions looks to enhance existing HKMB client relationships by offering an insurance or financial guarantee as an option to the client's putting up its own capital for a business risk it wishes to avoid or mitigate. To date, those products include automobile residual value insurance for banks, credit unions and auto lease companies, "FASB 13" cover for equipment lessors, credit enhancement for securitization conduits, specialty surety products and finite risk programs in Canada and the United States.
"If one of our clients is able to 'borrow' an insurance company's balance sheet and secure lower cost of funds or 'wrap' their financing obligations, we add real value to the relationship," Morrison explains. "These arrangements also entail direct interaction with our client's top management, which goes a long way to reinforce our value."
Capital Solutions hired Mark Decker, an investment banker who had worked for major banks in London, Paris and New York. "We're dealing with Blue Chip firms with large assets who use sophisticated financing tools," say Belton and Morrison. "We need credibility with both the client and also the prospective insurer." Decker confirms that "nothing we do at Capital Solutions is off the shelf. Each transaction has its own unique characteristics, timing pressure, and firm objectives. Pricing is not the focal point. It will either work or it won't for the spread available. Our success is contingent upon having a high 'probability of execution,' which can be very intense."
The brokerage has a number of specialty areas that are approached with the same intensity as the capital markets area. There are a number of production groups within the company that focus on one industry sector such as high-tech, life sciences, sports, entertainment and culture. For example, the agency has an impressive list of clients in the sports and entertainment field including the SkyDome, home of the Toronto Blue Jays and the Air Canada Centre, home to the Toronto Raptors and the Toronto Maple Leafs. Smaller commercial accounts or those with premiums of less than $25,000 are handled by a separate department, The Insurance Place. Most of this business in consolidated with two insurers.
Focus on international business
"Another significant and growing part of our business is our focus on international business," Belton says. "We have a group within our office dedicated exclusively to this task. We do a significant volume of countersigning of policies for business referred to us by U.S. insurers and U.S. domiciled agencies. We collect and remit applicable taxes and perform claims reporting and other services as required. We also act as the full servicing broker on larger commercial accounts that are referred to us by brokers from outside of Canada. For Canadian businesses that have exposures in the United States and elsewhere, our commitment is to provide seamless global service in every major commercial center on six continents. Our international country database contains information on the regulatory, cultural and environmental considerations relevant to a properly structured global insurance risk management program."
HKMB is set up as a professional partnership. "This allows us to attract the best people," says Belton. "The average age of our 17 shareholder partners is 39. Our clients seem to appreciate the depth of talent we have been able to attract to our firm and the accountability that ownership brings to the equation.
"If there is an increasing concentration and reduction in the number of global firms, we feel that we are well positioned with our size to provide a viable alternative to the global publicly traded brokerage firms."
Belton concludes that by providing innovative and customized solutions for large and complex risks, "we are able to deal with the highest level of management in our customers' companies. We are not getting the business on price because we offer a number of services, some of which are unique to our firm. This helps our retention by making it much more difficult for someone to compete on an 'apples for apples' basis. Insurance buyers are becoming more demanding and sophisticated," Belton notes. "They won't and shouldn't reward prepackaged solutions. We've tried to raise the bar in terms of both coverage, service and information management. We provide claims advocacy, often the most overlooked area of our business, for all of our clients. By earning the confidence of our customers, we can become part of their due diligence team for mergers and acquisitions and provide innovative e-commerce solutions to the growing numbers of customers who want to be serviced and communicated to electronically.
"Many of our high-tech companies want to communicate exclusively via e-mail, so it is important for us to constantly enhance our capabilities in this area. We have also launched a number of business-to-business Internet solutions for clients where the transaction flow with our customer dictates that we communicate in the most efficient manner possible."
HKMB's success is based on a "solution" approach to each client's needs--an approach that emphasizes service and a holistic approach to risk. The company becomes true partners with its clients. HKMB is truly deserving of recognition as our Marketing Agency of the Month. *
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E-mail: hkmb@hkmb.com