Constellation Affiliated Partners has bought cyber and professional lines-focused wholesale broker and MGA INSUREtrust as it continues to execute its strategy of building a diversified portfolio of products on a tech-enabled platform organically and through M&A, The Insurer can reveal.
- RedBird-backed platform completes ninth deal since launch last year
- Run-rate premium of circa $1bn at end of 2020 with mid-$60mns Ebitda
- Targeting 10% organic Ebitda growth across platform
- Looking to build out existing verticals and add capabilities in areas such as property
- INSUREtrust adds cyber and professional lines business
The transaction is the ninth since New York-based Constellation launched last year after securing long-term backing from private equity firm RedBird Capital Partners.
And in an interview with this publication, the firm’s CEO Bill Goldstein said the acquisition fits with its strategy of diversifying by product as it further builds out its professional liability capabilities, following its deal to buy real estate sector-focused Norman Spencer last year.
He described INSUREtrust as having built a “stellar reputation” in the cyber market, with a commitment to developing technology to drive its business.
“We strive to engage with companies that fall within our guiding principles of innovation, technology and product excellence,” Goldstein said. “The INSUREtrust brand embodies all of these elements in one, award-winning package.”
Atlanta, Georgia-based INSUREtrust was founded in 1997 by Steve Haase and distributes cyber liability, technology errors and omissions and miscellaneous professional liability coverages.
The firm was an early mover at the time of its launch in developing, underwriting and marketing an insurance policy to cover emerging commercial risks associated with use of the internet, such as privacy and security breaches.
Haase will retire following the acquisition by Constellation, with current president Christiaan Durdaller adding the role of CEO of INSUREtrust, overseeing strategy, products, partnership and production.
Other management changes include the promotion of Erin Burns to head of brokerage, with Hunter Maskill elevated to the role of managing director.
Burns will continue to represent the firm at industry events and oversee educational resources for agents and clients including the INSUREtrust Agent Academy, while Maskill will continue his brokerage work and oversee claims response and MGA products in addition to increased management duties.
Durdaller said that the partnership with Constellation would allow the MGA to broaden its tech-enabled solutions and continue to develop its risk management platform.
“Constellation offers us a unique combination of the ability to keep our management at the local level, while also bringing the industry expertise of Bill Goldstein and Brian Norman along with the support of an additional $1bn in gross written premium.
“Technology, independence and distribution were the focal points for us in our search for the right partner, all of which are achieved through Constellation’s platform and we couldn’t be more excited to become a part of it,” the executive added.
As previously reported, Constellation has grown rapidly through a series of M&A transactions since its launch last year, including its largest deal in Allstar Financial and its acquisition of Coastal Insurance Underwriters (CIU) and Cybercom to close out the year.
Constellation CEO Goldstein outlined the firm’s strategy to The Insurer as it looks to further build out its platform.
“We are building an attractive book of non-correlated products across different geographies with a diversified group of carrier partners,” he said.
That would help it manage through different stages of the insurance cycle and ensure it is not heavily concentrated in a segment susceptible to large catastrophic events.
“A second key pillar is that we’re really focused on tech enabling the business by developing our in-house underwriting platform with little paper processing on an end-to-end basis with deep data and analytic capabilities,” Goldstein added.
“Organic growth is the number-one value creator and we’re looking to target organic Ebitda growth of 10 percent across the platform. We’ll look to continue to be acquisitive in 2021 but M&A for us is very much about selectively targeting and focusing on parts of the market where we want to build out our business”
Constellation Affiliated Partners CEO Bill Goldstein on the platform’s growth strategy
Constellation will lean on the technology capabilities of Allstar and CIU/Cybercom as it develops its tech stack.
But the strategy is not one of full integration, with acquisitions retaining their brands and a degree of autonomy within a “highly collaborative, partnership-oriented and entrepreneurial” framework, he said.
The “semi-integrated” approach will see centralised corporate functions and tech-enabled business processes on the platform.
Traditional corporate functions are run by a corporate leadership group, but Constellation has also established a Presidents Council, to encourage collaboration between program and business leaders across the different MGAs around commercial opportunities and go-to-market strategies.
With run-rate premium volumes of around $1bn at the end of 2020 and Ebitda in the mid-$60mns driven by the spate of acquisitions, Goldstein said the strategy going forward is to generate strong organic growth, as well as to engage in targeted M&A.
“Organic growth is the number-one value creator and we’re looking to target organic Ebitda growth of 10 percent across the platform.
“We’ll look to continue to be acquisitive in 2021 but M&A for us is very much about selectively targeting and focusing on parts of the market where we want to build out our business,” he explained.
There will be a strong focus on going deeper into some of its existing verticals – such as professional liability – but also on establishing capabilities in other areas such as property.
He added that the platform is agnostic about whether its MGAs and programs are on an admitted or non-admitted basis and whether they are distributed through retail or wholesale channels.
Although Constellation has a “very robust” M&A pipeline, Goldstein said that there is no set target on deploying capital or adding a specific amount of Ebitda through acquisition each year.
The platform’s private equity backer RedBird Capital Partners, founded by former Goldman Sachs partner Gerry Cardinale, has a focus on building high-growth companies with flexible, long-term capital provided in partnership with its entrepreneur and family office network.
It invests with an entrepreneurial, company-building mentality, with an emphasis on capital appreciation and compounding equity returns over longer holding periods than the typical private equity cycle.
“They’re a fantastic equity partner and super supportive of the vision of the business and management,” said Goldstein.
“There’s ample capital available to execute on our strategy and if we see something that fits our criteria, that has the ability to either bring great tech or tech enabled business and that diversifies our products with good people and good culture we’ll engage on it – but it needs to be additive to our platform and reflect our focus on bringing together some of the best specialists in the industry.”