California’s ‘New’ MGA Yates: Having Fun, Going National

Thirty-three year-old Scotsman Paul Thomson was on the last leg of his “five-year plan” to get into the insurance business in the U.S. He went through Harvard Business School. He got the financial backing of more than a dozen high-powered, high-net-worth individuals, many fellow graduates of Harvard. The last step was to wrap up interviews with about 100 managing general agents in consideration of a purchase.

Thomson said he talked to about 30 potential investors, and narrowed that list down to a group that includes the head of European markets for KMPG, former president of CBIC World Markets Group, a well-known business book author, a head of Harvard Business School.

“Every single one of them has built a business themselves,” Thomson said.

With his investors, Thomson formed the venture capital firm Scottish American Capital and earlier this month this group made public its purchase of 80 percent of Tustin, Calif.-based Yates & Associates, an established West coast MGA specializing in excess and surplus lines. Thomson, an Orange County, Calif.-resident and principal of Scottish American, becomes the president of Yates, with the agency’s founder, Jim Yates, retaining 20 percent ownership and staying on for at least the next three years as chairman.

Prior to founding Scottish American, Thomson was head of finance and strategy at Web firm Box UK. Before that, he worked for the Royal Bank of Scotland, which owned the two largest auto insurance companies in the United Kingdom, and he handled the bank’s business with Lloyd’s of London. He got much of his basic training in the insurance industry while with Pricewaterhouse Coopers as an accountant auditing insurance companies.

Other members of Scottish American include: Steve Hollis, European head of markets for KMPG; Paul D. Rogers, former president of CBIC World Markets Group, which focuses on debt and equity investments in private companies; business book author Neil Rackham know for his SPIN Selling series; Peter Francis, head of J. M. Huber Corp., a diversified supplier of engineered materials, natural resources, and technology-based services; Ralph James, executive director of executive education at Harvard Business School; and Michael O’Connell, managing director of M2O Investments, a family investment fund.

Thomson and Yates have a plan to expand nationally, after first building on the MGA’s California base. The plan calls for adding 10 underwriters within the year while also scouting for agencies to buy across the country.

The way Thomson and Yates talk about their plan, they will operate a bit differently than other MGAs and have some fun along the way — which is actually in keeping with the tradition at Yates.

Thomson said Yates, the company, and Yates, the man, give Scottish American a strategic advantage in the form of experience and existing relationships. Yates himself started in the insurance business in St. Louis in 1957, and he has been on the MGA side of the business for 25 years. Yates launched his MGA in 1987.

“Yates is as well known in California as the big national brands,” Thomson said, adding that his search for an MGA was national in scope and took at least a year.

The Yates name is being kept, though the “& Associates” is now gone, and added to the business cards and web site is a new logo: a part-lion, part-eagle figure known as a griffin outlined in the stars and stripes of the U.S.

The 77-year-old Yates said he was motivated to sell his firm because he wanted to relax and he liked “the idea that they wanted to maintain Yates.” He said he also sold because “the price was right,” though neither he nor Thomson would disclose the sale price.

Young and Fun

The young, fit Thomson has a great deal of energy, and speaks quickly and clearly, with a Scottish accent. And when he speaks , he speaks with the enthusiasm of a kid with a new toy.

Yates has bit of kid in him, too, as he has shown with his marketing over the years. Yates became known for his humorous, and what some might call outlandish, advertisements. One ad featured Yates in a hot dog bun covered with mustard, and the slogan, “We want to be your # Bun!” and puns like, “Last year was no picnic and now everyone’s trying to ketchup,” and, “We’ll be frank.”

Another ad had Yates as Groucho Marx, complete with eyebrows, glasses, mustache and cigar, and the slogan “Earning High Marx for…”

“This is starting to get fun again,” Yates said, admitting that the fun had been waning for him recently.

Asked if he’d seen the somewhat rowdy Yates’ ads, Thomson said with a snicker, “I saw the one where Jim was a hotdog.”

But will Thomson continue the tradition? “Have you heard of haggis?” Thomson quipped, referring to a Scottish sausage.

For Yates, some of the fun has returned with Thomson’s push to bring young employees into the firm.

The firm of roughly 40 now has a few brokers under age 40 working there, and that’s a first in company history in Yates’ recollection. Yates can now have brokers represented in “under 40” groups, such as the National Association of Professional Surplus Lines Offices’ Next Generation membership. “We never could before,” Yates said.

The agency’s lighthearted approach is on display in its revamped website, www.yates-assoc.com, where brokers and managers are portrayed in caricatures, and part of the welcome text reads: “We are also fun to deal with — check out our cartoon bios. Dealing with your clients is stressful enough, so we provide superior service and a little bit of humor. Give us a try, or you may just hear about us from your competitors.”

As the web site suggests, Thomson likes to do things differently. He doesn’t have his own office. He sits at a desk in the middle of the office, surrounded by brokers and customer services representatives.

“I don’t’ have an open door policy. I have a no door policy,” Thomson said.

Thomson likes to get out of his non-office to join brokers when they visit customers. “I’m building the organization that I want to work in,” he said.

Thomson’s desk in the middle of the office is crowded with reports. He has four computer screens lined up close together-two above and two below. On one screen he’ll have a customer list, on the other the results of a recent newsletter sent to customers, and on another he’s compiling information between the two sets of data. On the fourth screen he may have something entirely separate open in, say, Google Docs. “I just love modeling,” he said.

Growth Plan

On the serious side, Thomson said the timing of the purchase of Yates is not tied to any expectation that the soft market is about to end.

“Our plan is not predicated on soft or hard markets,” Thomson said. “For us, you don’t need it to harden. When it happens, it happens. And when it does harden, we are preparing our agents now so they can go out there and outperform.”

Beside the market is nowhere near hardening, according to veteran Yates. “No, it’s not hardening,” he said. “That’s a long way out.”

“We’re hiring very aggressively,” Thomson said, adding that Yates has already hired three new brokers.

“There’s a real opportunity for people to come here and grow a business,” he added. “We’re investing a lot of money in the business itself.”

Thomson and Yates say the plan is to eventually look for other agencies to purchase across the nation. “For the first year we’re only going to concentrate on California,” Thomson said. “But we’re definitely looking to acquire.”

What type of businesses will they be looking at? “I’m interested in the guy in Washington with a five person team,” Thomson said.

And, it would appear, with a sense of humor.