A Framework for Strategic Clarity
The last several years have brought an unprecedented level of disruption to the insurance distribution marketplace. 2024 marked the end of a five-year period in which over 900 mergers or acquisitions were announced annually. By one estimate, over $20 billion of annual revenue changed ownership over this time.
Meanwhile, the leaders of family-owned agencies are faced with a host of challenges. Competition for new policyholders is stiff, and the inflation of agency valuations has made both M&A and internal perpetuation more difficult than ever.
In a time with so much economic and geopolitical uncertainty, one would be hard pressed to find an insurance agency owner who would trade places with the CEO of one of his commercial property and casualty clients. The insurance sector remains resilient, with organic growth rates remaining in the high single digits, buoyed by a softening but still firm property market. The disruption from the extensive consolidation has also created opportunities for agency owners to pursue producer lift-out strategies. There is a wide range of strategic options available, but how should agency leaders decide on the best path?
Proactive planning
Proactive planning starts with a comprehensive assessment of strategic goals across the company’s ownership, management team and employee base.
The adage that “change is the only constant” certainly applies to independent agencies navigating the current landscape. Management teams that think beyond the next couple of years have the potential to control their destinies. Those that instead choose to rely on their status quo risk external factors like time and market dynamics, potentially forcing them into making critical decisions without a contingency in place. Proactive planning starts with a comprehensive assessment of strategic goals across the company’s ownership, management team and employee base.
Understanding the current state of each stakeholder group will help illuminate a firm’s possible paths forward. For example, ownership could consist of a few individuals eager to experience a liquidity event, or one generation in a family that hopes to pass the business on to the next generation. Members of management could be weighing whether to embark on an M&A strategy versus hiring individuals away from a competitor. One company may have a broad producer base while another has a few seasoned standouts eyeing retirement.
Aided by careful analysis, leadership should be able to answer the following questions throughout the planning process:
• Are we open to outside investors, and what are the different types of capital available to us?
• Is our internal perpetuation model sustainable?
• Is the next generation of management prepared to step in when needed?
• How are we going to continue growing while investing in top talent?
These questions cover a range of subjects, including corporate advisory, capital raising, and wealth management. Agency leaders need key strategic partners to answer these questions and to navigate the uncertainties that lie ahead. BMO's Insurance Distribution and Corporate Advisory teams partner together to deliver an individualized, outcome-agnostic, analytical approach to help decision-makers determine what's next.
Disclaimer: Banking products are subject to approval and are provided in the United States by BMO Bank N.A. Member FDIC.
To learn more, contact our Insurance Distribution Banking team.
Paul Thivierge
BMO Commercial Bank
(630) 659-9154
paul.thivierge@bmo.com 
