Storefront marketer grows by acquisition
Confie Seguros reaches $200 million in revenues
catering to the Hispanic market
By Susan R.A. Honeyman
In most of the storefront personal lines insurance agencies of Confie Seguros, they speak Spanish. In some, English is the predominant language. But across nine states and close to 300 storefronts, the main language they speak is growth.
In fact, the brokerage has gone from startup to almost $200 million in annual revenues in just four years. It's done this during this generation's worst recession and in an industry that's been contracting rather than expanding. It's done this in the high-volume, low-commission lines that can be challenging to do profitably. Also, it is closing in on many of its year-five business plan goals, but doing so a year early.
Growth has come from acquisition and, to a lesser extent, through organic means—pursuing the vision of several experienced insurance professionals who saw an opportunity and decided to run with it. Neither founder John Addeo, 63, who stepped down from the CEO helm in January to become executive chairman and continue to guide acquisitions; Joseph Waked, 46, formerly CEO of the California operations who assumed the company CEO position in January; nor Founder-President Mordy Rothberg, 42, is of Hispanic background, but they understand business. In this case, that means properly serving a large, underserved community.
From concept to business
The concept for Confie Seguros began in 2006 with Rothberg, who had been researching the insurance needs of Hispanic consumers for two years. It was an outgrowth of research he began while working at IDT Corp., a technology company which has a very large Hispanic customer base. He noticed that although this community is the fastest-growing ethnic group in the country, its needs were not being met. "The Hispanic market is very fragmented with a lot of 'mom and pop' operations" that lack access to a broad group of carriers, and does not market to the community very effectively," Rothberg says. What was needed was a broker to sell insurance the way this population wants to buy and to do it efficiently on a large scale.
While Rothberg was doing his research, Addeo was enjoying time away from a 35-year retail insurance career that had included creating, raising capital for and selling several startups, as well as involvement in 200 successful acquisitions. He'd recently built Alliant Resources Group into a $200 million-revenue, middle market broker that involved 12 acquisitions—including one that served the specialized commercial insurance needs of the self-governing Native American communities. Prior to that, Addeo partnered with Barney Mizel in building USI to $300 million in revenues by acquiring 90 insurance brokerages. He was not looking for a job.
When he met Rothberg, "I was retired and reluctant to do this," Addeo says. But the idea was just too good to pass up. "As I learned more about the Hispanic consumer and the opportunities that this company presented, I saw a great opportunity to come back in and help build a powerful, dynamic, customer-centered company." By the end of 2007, they'd secured $75 million in private equity financing from Genstar Capital in San Francisco, and were ready to launch in 2008.
In 2006, Rothberg also met Westline Insurance COO Joe Waked, who was heading his company's California acquisitions team, and the two men found that they shared similar business visions. Two years later, Confie Seguros acquired Westline, which had revenues of about $50 million through 35 storefronts, primarily in Southern California, and Waked had joined Addeo and Rothberg as head of Confie's West Coast operations. Westline is now "Confie Seguros California."
Growth through acquisitions
From its California beginnings, Confie Seguros ("Trust Security" in English) set out to become a national insurance distribution company offering auto, homeowners and small commercial coverage primarily to the Hispanic customer and growing mainly through acquisitions. However, it quickly became clear that the same barriers to growth and profit that Hispanic agencies face—fragmentation, scale and limited access to carriers—are also faced by small agencies that serve Anglo markets.
So, along with agencies that cater to Hispanic populations, the company acquired brokers that have a different focus. "One of our largest acquisitions, Cost-U-Less Insurance, we acquired in October 2010. They had 80 stores in Northern California and did virtually no marketing with Hispanic customers," says Waked. It was a similar story with Vern Fonk Insurance. While the company applies the same basic, successful model to each office, it also respects local differences and needs.
"We are not a cookie-cutter organization. Consumers of insurance vary from state to state, so we adapt certain practices, approaches and strategies to a particular market," says Waked.
Branding is an example. Confie operates under the name "Freeway Insurance" in about 80% of the markets and may eventually use that name nationwide. However, many of its Washington and Oregon storefronts were acquired from Vern Fonk and continue to use that name because it has a lot of market recognition. The same is true in New Jersey, where the "Royale Insurance" name continues to have value. "When everyone agrees the time is right," they will migrate to more uniform branding nationwide and take advantage of national advertising opportunities, Rothberg says.
Confie's success in the Hispanic market rests on understanding the community's needs and adjusting its strategies accordingly. It starts with bilingual staff members to sell and service clients; simply translating a flyer doesn't work. The storefronts are integrated into the community, so "you might find tamales are being sold in the same building," says Rothberg.
The preference for storefront purchase, though, transcends cultural lines and actually applies to most consumers. "When they want to purchase auto and homeowners, they may do research on line, but they want to purchase it from a person who can actually walk them through the various endorsements and exclusions. It's not like buying an airline ticket—insurance is more complex than that. You are buying security and legal protection for your family or yourself, and you want to buy it from your agent," says Rothberg.
Hub and spoke strategy
Confie's growth comes largely through successful acquisitions and opening additional storefronts. Agencies usually agree to be acquired because owners want to cash out or because the agency is not sufficiently profitable. Confie provides a variety of options that can allow an owner to stay and build up the storefront or leave.
The team describes the management strategy as "Hub and Spoke," with a centralized platform that stretches out to support the 300 storefronts, which will eventually grow to more than 1,000 locations.
A small, independent personal lines agency lacks the resources to compete in advertising and marketing with a captive State Farm or Allstate storefront agency. It may have difficulty with the technology required to sell and service personal insurance or with the resources for back-room operations. Without sufficient business volume, it may have to work through an MGA to properly place much of its business. It boils down to this: Growth and profitability are difficult without scale, and Confie Seguros has grown by acquiring and providing the scale to reduce costs and increase market share that these storefront agencies often need.
In California, its brokers have access to more than 30 insurance markets, while other states have access to between five and 50 markets.
Today, Confie Seguros operates in nine states: California, Arizona, Texas, Washington, Oregon, New York, New Jersey, Florida and Nevada, with plans to expand to Colorado, Illinois, Georgia and the Carolinas. Ultimately, the goal is to have a brick-and-mortar presence in most states and all major metropolitan areas and to expand its product line to include term life and other coverages, effectively becoming a national one-stop shop for all consumer insurance needs, says Waked.
Rothberg is sometimes asked whether this consolidation is ultimately hurting small agencies and their employees, and he has a ready reply: "We're builders of business not destroyers of business," he says. Confie employs more than 1,600 people.
"A lot of the best talent we have will come through acquisitions, since their employees know the local market and they know how to sell insurance. We want to give them the resources and help with the training to get even better," Rothberg adds.
Biggest challenge: We're hiring
But so much growth creates its own issues. According to Waked, Confie's greatest challenge is to continue to fill management jobs with the right people. The broker spends a lot of time and effort on recruitment and training.
"We are constantly looking for ambitious, smart and committed management to expand our talent," because the company's growth depends on that, Waked says. "An insurance background is less important than leadership, attitude and intelligence," he says.
These days, the words "We're hiring," are welcome in any language.
Succeeding with Hispanics
For years, the Hispanic community has been the fastest-growing ethnic minority in the country, but that growth had been largely beneath the radar until the late 1990s, when Latinos became more prominent in politics and in business. Today, the Hispanic community is recognized as a huge market, and companies that were ahead of the curve in understanding that have a big advantage, says Joe Waked, CEO of Confie Seguros. He attributes a lot of his company's growth to this market.
The executives at Confie Seguros shared several of their insights into this market:
• While a common language doesn't necessarily mean a common culture—Cubans may not see the world or make purchasing decisions exactly the same way as Mexicans or Puerto Ricans or Ecuadorians—most Hispanic customers still share the same preferences in how they like to buy personal insurance.
• In general, Hispanic customers like to conduct business face to face. Thus, storefront operations are important.
• Latino clients want to buy insurance in their neighborhoods, in close proximity to stores and businesses that serve the community.
• Buying insurance is a family affair. Hispanic customers seldom come in by themselves to buy.
• The Hispanic market is very loyal to those businesses that serve them properly.
• Latino customers prefer to do business with people who speak their language. Even those who are also fluent in English are more comfortable conducting business in their native tongue. The option also is a sign of respect that many Hispanic customers appreciate.
For more information:
Web site: www.confieseguros.com
Susan R.A. Honeyman, a freelance writer based in New Haven, Connecticut, is vice president of Word Hive Communications.
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