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Program partners

Markel acquires THOMCO, gains strength in array of niches

By Elisabeth Boone, CPCU

What happens when two specialty market leaders join forces?

Plenty … especially when their names are Markel and THOMCO.

In January of this year, Markel Corporation completed the acquisition of Thompson Insurance Enterprises, LLC (THOMCO), a program administrator based in Kennesaw, Georgia. THOMCO became a unit of Markel Specialty and continues to operate independently under the leadership of Greg Thompson, president, and Bob Heaphey, chief operating officer.

Established in 1977 as a wholesale operation by Roy Thompson, Greg's father, THOMCO is a program administrator for more than 20 national programs in a broad array of specialty niches. Greg took over the firm in 1979 and since then has played a key role in directing its growth. In addition to its Kennesaw headquarters, THOMCO has offices in Denver and Kansas City, Missouri, and employs more than 100 people.

As a respected program administrator that itself has expanded both organically and by acquisition, THOMCO may have seemed unlikely to become part of a large international organization like Markel.

In fact, Greg Thompson says, the opportunity to join forces with a specialty market leader while remaining independent was a key factor in THOMCO's decision to become part of Markel Specialty. Another advantage, he notes, is access to Markel Specialty's wide array of niche programs for the 4,500 retail producers who place business through THOMCO.

For Markel's part, the acquisition represents a significant step in the 82-year-old organization's measured approach to building a global specialty insurance network. (See "The Markel Style" in the December 2005 issue of Rough Notes magazine.) Markel has been a publicly traded firm since 1986. Like THOMCO, it is managed by descendants of its founder.

Friendly competitors

"From Markel's perspective, we've been friendly competitors of Greg's for a number of years," says Britt Glisson, Markel's chief administrative officer. "Before assuming my present position a couple of years ago, for a long time I ran Markel's commercial program segment. We competed directly with THOMCO in several classes of business, and over the years I came to respect how Greg ran his business and the relationships THOMCO had with its producers," Glisson explains. "I got to know Greg personally through a joint reinsurance contact we had and thought he would be a tremendous addition to Markel on several fronts."

When the owners of THOMCO made it known that they were seeking a buyer, Markel's management was eager to talk, Glisson says. "We saw a terrific organization with great people, great products, and great agency relationships, and a company that we thought would be a perfect complement to Markel's commercial program offerings. We thought the acquisition would definitely put Markel on the map in the program administrator marketplace where THOMCO is so strong."

Not surprisingly, Greg Thompson holds Markel and Glisson in the same high esteem as they hold him and THOMCO and is equally enthusiastic about the opportunities the acquisition will afford his organization.

"We've always admired Markel," Thompson says. "They've been a competitor of ours, and, as Britt says, we've had a chance to get to know each other over the years and have developed a great respect for each other.

"Something that attracted me to Markel is that the organization has an outstanding reputation, not just in the insurance marketplace but in terms of how they treat their people and how they treat the people in acquisitions," Thompson continues. "I was the first employee of THOMCO, and I've been an owner for 33 years. THOMCO is my baby. I've spent a lot of nights and weekends in my office, and there's no way that I would turn over the ownership of my company to anyone who would give my people anything less than stellar treatment. When I was exploring the sale of THOMCO and thinking about my legacy, I thought that Markel was the right home for us," Thompson says.

"On top of everything else, Markel is a very financially stable and prosperous company," he remarks. "THOMCO has represented some excellent insurance companies, but sometimes a carrier gets into trouble and we've had to move a book of business from Company A to Company B. Being acquired by Markel, I thought we would not have that issue because of how conservative and well-financed they are."

Although he was ready to sell his interest in THOMCO, Thompson says, he wasn't ready to retire.

"After being an owner of the company for 33 years, I'd gotten to the point where I wanted to sell my ownership, but I didn't want to leave the company," he explains. "I love what I do, and I wanted to keep doing it. In looking for a company that could acquire my ownership and would have the same attitude toward our people and toward building a long-term, viable organization, I thought Markel was the right fit."

Pointing to yet another factor, Thompson says, "There are two people in our office, John Clark and Monica Clark (they're not related), whom my partner and I perceived to be the next generation of our company's leadership. They are both senior vice presidents and have been with THOMCO for more than 20 years, and they're both excellent underwriting managers," Thompson says. "It was important to me that they would be in an environment where they would feel comfortable and would have the opportunity to continue growing and succeeding. We thought that a conservative insurance company environment like Markel would afford John and Monica that opportunity."

A win for agents

It's clear that THOMCO and Markel both see themselves as winners in this transaction. Between them, the two organizations transact business with thousands of retail agents and brokers around the country. What advantages can these vital partners and their clients expect from the combination of two specialty powerhouses?

"I believe it's going to have a number of important benefits," Thompson asserts. "A challenge we have faced in competing with other markets in our specialty niches is that we have not heretofore been able to offer profit-sharing to our independent agents—give them the opportunity to share in the underwriting profits on the business they place with us. We have received profit-sharing payments, but we were unable to pass that money along to our agents because we needed the funds for capital expansion," he explains.

"One of the big advantages of the Markel acquisition is that for qualified agents who place a specific volume of business with us, we will now be able to offer profit-sharing. This will give them an incentive not only to place more business with us but also to write more business that is profitable from an underwriting perspective," Thompson points out. "We believe this will give us a huge advantage that heretofore we did not enjoy. Previously, when we were competing with an insurance company that offered profit-sharing, we were at a disadvantage."

THOMCO's agents also will benefit from a switch in billing methods, Thompson says. "Previously we collected premiums on an agency-billed basis. In today's market, especially on smaller commercial accounts, many agents prefer to have the insurer handle the billing for them. We've seen this trend growing over time, but we weren't able to offer our agents direct billing because it requires sophisticated and expensive systems, and we hadn't gotten to the point where we felt we could make that kind of investment," he explains. "Markel has the ability to provide direct billing, and now our agents can take advantage of the time and cost savings afforded by this method."

Glisson points to another big plus for THOMCO's agents: a significantly expanded product portfolio. "Markel has a lot of products that THOMCO's retailers can offer their clients, and we plan to engage in a strong program of cross-selling with the idea of leveraging those relationships into more premium," he says.

Retailers also will benefit not only from expanded products and services, Glisson remarks, but also from the sharing of ideas and strategies that will take place between THOMCO and Markel.

"We're combining brainpower among the product people in our organizations to make our product offerings the best of breed," he says. "We'll bring together the best elements of our respective products and create a superior product that will benefit the customer and thereby benefit the retail agent."

Culture counts

It's obvious that Markel and THOMCO are compatible in all the ways that matter.

"When a team of Markel people came down last fall to do due diligence on our company, they met with a number of our managers and went into great detail about how we do business and how we run our company," Thompson recalls.

"In describing our organization and comparing it with theirs, more than one Markel person used the phrase 'parallel universes,'" he says. "The cultural fit is nothing short of amazing. We're bringing together two companies that are built on integrity; treating employees, agents, and customers right; and doing business in a highly ethical manner.

"Of course," Thompson continues, "there are many differences between Markel and us. Markel is much larger; it's a publicly traded company, and as such it must deal with regulatory issues that didn't affect THOMCO as a privately held entity. Despite its size, however, there's a humility about Markel that you don't find in a lot of large, successful companies. Its people are always learning, always asking questions, always searching for a better way. That's always been a core value at THOMCO, and, as we confront the challenges of an uncertain economy and an insurance market in flux, we couldn't have a stronger partner than Markel."

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