Westland Insurance Group Ltd. has laid the foundations for further consolidating Canada’s property and casualty insurance brokerage industry by tapping the credit arm of Blackstone Inc. for $1.2-billion.
Founded in 1980, Surrey, B.C.-based Westland has made a string of acquisitions to build one of the country’s largest P&C brokerage networks, with 2,200 employees selling home, auto and other insurance products from 190 offices in seven provinces. The industry remains highly fragmented, with more than 4,000 privately owned P&C brokerages across Canada.
Westland chief executive officer Jason Wubs said in an interview the company plans to continue growing through takeovers, with a focus on acquisitions in Eastern Canada, and expanded its year-old partnership with Blackstone Credit, an arm of the New York-based alternative asset manager, to finance this growth. “We’re thrilled to deepen our relationship with the Blackstone team, which will support our goal of becoming Canada’s leading independent insurance brokerage,” he said.
This week, Westland received a $250-million debt facility from Blackstone Credit, which has US$188-billion of assets under management. Parent Blackstone oversees US$731-billion.
The new capital was tapped after Blackstone Credit committed $950-million to Westland last January through a large debt financing and purchase of a minority equity stake in the company. Mr. Wubs said the decision to partner with Blackstone Credit, rather than a traditional private-equity fund that would eventually want to cash out on an equity stake in the business, reflected Westland’s goal to remain a family-controlled company.
Westland acquired two brokerage firms last week – Bunnell Hitchon Insurance Brokers, a 130-year-old firm with offices in the Ontario cities of Brantford and Milton, and Rigby Insurance in Calgary, a family-owned brokerage. In December, Westland purchased family-controlled Reider Insurance, one of the largest P&C brokers in Manitoba.
“The Westland team has built an exceptional insurance business, which has evolved from a regional player to a leading national broker,” Michael Carruthers, Toronto-based senior managing director at Blackstone Credit, said in a news release. “We’re excited to expand our partnership and support key future growth, including acquisitions,” he said.
Consolidation in the P&C brokerage industry is driven by a number of factors, Mr. Wubs said, including rising customer expectations for digital and personal service, the aging demographic profile of brokerage owners, and consolidation among the P&C insurance companies, which want to do more business with few brokers.
Insurance industry analysts say industry consolidation has boosted the valuations on P&C brokerages, which leaves many entrepreneur-owned firms – particularly businesses founded by the baby boomer generation – open to selling their businesses.
“As large brokerage aggregators seek economies of scale, we expect to see continuing consolidation in the insurance brokerage space,” said John Potter, a partner at PricewaterhouseCoopers, in a recent report. “This consolidation has led to high multiples for insurance brokerage targets and shows no signs of stopping.”
In the Canadian P&C industry, customers pay approximately $75-billion annually in insurance premiums, with 70 per cent of this businesses flowing through brokers, according to Westland’s statistics.
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