Leading By Creating

Top 100 Agency Profile
Agency Name: Confie Seguros, trading under Freeway Insurance
Headquarters: New York, N.Y.
Year Founded: 2008
Additional Locations: California, Arizona, Washington, Oregon, Texas, New York, New Jersey, Nevada and Florida
2010 Total P/C Premium Volume: $380,000,000
% Personal: 100%
2010 Revenues: $125,000,000
Principals: John Addeo, CEO
Mergers/Acquisitions: 15+
No. of Employees: 1,500
No. of Insurance Carriers Represented: 40+

In Spanish, “confie” means “confidence” or “trust.” That one word echoes the principles used by the founders of Confie Seguros, the fledgling company that is now part of Insurance Journal’s 2011 Top 100 Independent Property/Casualty Agencies list. And it’s barely four years old.

How a company this young has grown to a point where it places No. 21 on the Top 100 list is no small feat. Starting with an idea and a financial partner, Confie Seguros, founded in 2008, has grown exponentially. The company reported $380 million in total P/C premiums written for 2010, and is generating on a run rate basis over $160 million in revenues. Not a bad way to start a business.

So how did the company climb so high in such a short time? If you ask the management team, comprised of John Addeo, CEO, Mordy Rothberg, founder and president, and James Schlomann, chief financial officer, it’s all in the focus. This company’s focus — the Hispanic market.

History

That specialization began with founder Rothberg, who studied the needs and habits of the Hispanic customer for a number of years. Six years ago, he developed what is now the company’s current business plan targeting the Hispanic market. He tested the marketplace, learned the buying habits of the Hispanic customer, and developed a product niche around the results.

He also looked at location. “We identified eight to 10 geographic areas we wanted to be in that had a large Hispanic market. Nevada was one of them.”

In early August, the company announced the acquisition of Las Vegas-based Family Insurance Center, an insurance brokerage that the Confie Seguros team believes has a strong platform that will allow for further expansion throughout Nevada.

Joining him in 2007 was Addeo, no stranger to the insurance brokerage world. Addeo has over 35 years of experience in driving successful acquisitions and business operations at companies such as Alliant Resources Group, a company he founded and built to over $200 million in revenue, driving 12 acquisitions. Addeo also served as chief operating officer of USI Insurance Services, where he led 90 acquisitions of insurance brokerages, growing that company into the sixth largest in the United States.

Confie Seguros boasts a strong partnership with Genstar Capital, its San Francisco-based private equity firm, of which Confie is a portfolio company. With Genstar’s financial backing, Confie Seguros was established in 2008, when the company acquired its first platform — Westline Corp., based in California, a state densely populated by a Hispanic population. Westline was a good choice — it’s become the largest distributors of non-standard auto insurance products, now operating 30 retail offices in California.

Just under four years later, the company is operating in nine states — California, Arizona, Texas, Oregon, Washington, New York, New Jersey, Nevada and most recently Florida.

In October, Confie Seguros announced that it entered the Florida market with the acquisition of Trustway Insurance Agencies, an insurance brokerage with 28 retail locations throughout the state.

Today the company trades under the name Freeway Insurance, which is the name of its operations in California, Arizona, and Texas, and what will be the name of the company once it goes national. Why Confie Seguros then? “The goal was to be the trusted advisor to the Hispanic community with regard to insurance-related products,” says Rothberg.

Management

Being a trusted advisor starts with a winning team. At the helm are some of the most veteran players in the insurance brokerage community today. Schlomann has been in the insurance brokerage business for over 35 years, as has Addeo. Rothberg adds another 17 years of business development and strategy expertise. The company’s general counsel, with over 30 years of insurance experience and controller with more than 25 years rounds out a veteran cast, giving Confie Seguros a depth of experience at the senior level that is tough to match.

“We were fortunate in putting together a great corporate team that understands the insurance business, and partnering with outstanding operators in the field,” says Addeo. Part of that team includes Joseph Waked, CEO of the Freeway, California office, and John Klaeb, the company’s chairman, whom Addeo says are “two of the best operators in the business.”

The mutual admiration is apparent to anyone who talks with the team. Rothberg cites Addeo’s string of over 200 completed acquisitions as a primary reason the company has its own string of successes, while Addeo directs attention to Rothberg’s exceptional business strategy and plan to reach the Hispanic market.

What is clear is the company has tapped a virtually untapped market and is poised to expand into the country’s first national insurance brokerage giving customers access to several different markets — as many as 50, depending on the location.

“It’s exciting, and it’s a lot of work,” says Addeo.

“We’re on call 24-7 during this buildup process. It’s a 24-7 requirement.”

Required also is scoping out acquisitions and meeting with business partners on their own turf. “We’re on the road 60 percent to 70 percent of the time,” says Rothberg. “You can’t build a national company in your home office.”

The Niche

From the beginning, the focus was on the Hispanic customer and acquiring companies that served that community. CEO Addeo says Rothberg’s focus on the Hispanic market was ideal. He cites the dynamic growth in the Hispanic population — it’s the fastest growing segment of the population at about 16 percent of the total U.S. population, which represents roughly 50.5 million people, according to a Pew Research Center study of the U.S. Hispanic population. The study predicts the population will grow to 29 percent by the middle of this century.

Rothberg’s research revealed a number of things. Chiefly, his research showed that the Hispanic community is very much underserved when it comes to financial services products. Addeo says it uncovered another fact — the Hispanic customer wants to purchase insurance face-to-face. “When Mordy put the business plan together, we realized we had to acquire companies that were brick-and-mortar retail outlets,” he says.

“There was a crying need to serve the Hispanic customer,” says Addeo. “No one was focusing on consolidating insurance brokerage to address the needs of the Hispanic customer.” There was the company’s niche.

Vision and Strategy

That realization is just one more tick in the Confie Seguros win column, for Rothberg also discovered that the brokerage landscape in the Hispanic market is largely comprised of mom-and-pop firms. “Not only is this market ripe for consolidation, but the mom-and-pops don’t have the resources to provide the proper services and support to service our consumer,” he points out.

From the start, acquisition was the focus of the company’s growth. “For acquisitions, we have a hub-and-spoke strategy,” says Rothberg. “Once we have a platform in a marketplace, we rely on those managers to run the business. We will identify an acquisition target and corporate will do the due diligence, money and resources, but they’ll be responsible for integration.”

There is organic growth, and CFO Schlomann suggests that the company’s beginnings could just have easily reached this same level of success growing organically. He points to the opening recently of 10 stores in Arizona, which he says turned profitable within six to 15 months. “Obviously at the beginning, we were restricted by cash flow and financing, but as we were testing this, we believe we could have built platforms like these in certain states and started opening up offices.”

That would have required a fair amount of capital, and Schlomann points out the company would have lost money for 12 or 15 months, but would have still ended up with highly profitable offices. He may be on to something — the company’s store openings in Houston, Arizona, and Washington have all proven his theory.

One of the more significant openings was that of a service unit consisting of a staff of 150. The bilingual staff is in charge of responding to the needs of Confie Seguros’ non-standard auto customers, which Addeo says no other company in the country has.

All this attention to detail aligns with the company’s focus on the Hispanic consumer. Addeo says, “We are geographically desirable. We advertise on programs on Spanish channels. We advertise in Spanish. We monitor all our ad activity. We know what works, what doesn’t work. We know when to advertise and when not to.”

Rothberg seems to have nailed the company’s target market. According to Addeo, the company has 150 offices in California alone. “If we quadrupled that, we wouldn’t saturate the marketplace.”

Growing Pains, Challenges

With all that growth comes some significant challenges. Keeping up with staffing needs has been tricky, as has handling integration issues with each acquisition. Add to that the bilingual requirement, which has limited the hiring pool for the company.

Still, Confie Seguros has experienced dramatic growth despite some shaky times in the economy. Addeo thinks the reason lies in how they choose businesses to acquire.

“We go into certain territories and try acquiring a firm we believe has the operating expertise, a platform we can leverage growth off of, an outstanding reputation, the highest integrity, they work well with insurance carriers, and they treat their people properly,” Addeo says.

Part of that growth could lie in the fact that the company hasn’t seen any significant setbacks in its four short years of existence. Rothberg indicates that the individual strengths that the senior management team possesses are in part responsible for the incredible string of good fortune.

That’s not to say there weren’t some situations in which the company could have made a bad decision. Again, Rothberg credits his fellow management team for creating a checks-and-balances system. “Some of the best deals we did were the ones we didn’t do,” he says, laughing.

A few deals he was pushing for in particular stand out. He says Addeo’s background in acquisitions saved them from bringing in new business that wasn’t a good fit for their overall strategy. “John’s been a tremendous mentor. Some of the deals I was pushing and wanted to do, John pointed out the downsides to them. We were very fortunate we didn’t do those.”

Future Growth

Even a few raw deals may not have slowed the progress of the company. Currently, Confie Seguros has managed to operate average revenue of over $160 million, and capture the leading market positions, all on a corporate overhead of less than 2 percent of revenues. “We consciously did that,” says Schlomann. “We wanted to keep corporate lean, and it is lean.”

That aligns with the five-year plan includes opening 2,500 locations. Addeo says it’s more of a five-to-10-year plan, but Schlomann is confident in the company’s ability to grow given the already stellar history of growth. “We’re on target. The next five-year plan will have significant expansion through new store openings. The ‘2,500 stores’ is a lofty goal, but not an undoable goal from our experience.”

Getting there is half the battle, and the team already has its eyes set on a number of options.

With their initial goal of building critical mass in densely populated Hispanic communities already well implemented, Addeo and company are looking to achieve a revenue goal of $250 million. “We’re on track to do that,” says Addeo.

That includes opening the 2,500 locations, which Schlomann thinks will happen sooner rather than later, having lived through and built a company during some of the leanest financial times in the history of the United States. “Our partners have absolute confidence in our ability. I don’t see why we couldn’t significantly accelerate our store openings. We did 10 new stores in a year when cash flows weren’t quite that strong. Now that we’re at the levels we’re at, there’s no reason why we can’t open 50 stores in a year.”

No reason indeed.