One80’s Power: Business diversity key driver behind acquisitions

One80 Intermediaries' Matthew Power has said having a presence in a “broader swath” of the marketplace is the cornerstone of the firm’s M&A strategy.

As president of the acquisitive wholesale broker and program manager, Power is focused on pursuing a diverse rather than narrow portfolio.

“From an M&A perspective, overall, I think the market continues to be robust from our standpoint,” Power explained in an interview with The Insurer TV on the sidelines of the Program Manager 2023 Conference.

“Diversity has really been key to One80. We are already in a number of different businesses and that gives us a great competitive advantage from a portfolio effect because we are in the travel business, we're in the warranty business, the affinity business, life, employee benefits, property and casualty, of course, and we have international revenue that comes in.

“So we see a much broader swath of the marketplace than those with more of a narrow focus.”

While conscious of the impact of spiking interest rates on M&A activity more generally, this isn’t a direct concern for Power and he doesn’t envisage too much of a slowdown with regards to existing M&A plans the intermediary and program manager has for 2023.

“I think what you will have is fewer acquirers because I think that there are some newer entrants that find themselves or will find themselves to be debt trapped,” he said.

“Their ability to grow organically could be impacted by market conditions, so there's so many factors that can have an influence over this consolidation – not just interest rates.

“There really is a revolution taking place in the MGA space. That said, I think that multiples are not really the only reason companies sell. I think that more often than not, companies are selling for issues related to perpetuation, the ability to enter an organisation where opportunities are going to be broader, and ability to grow, and so there are multiple factors that go beyond multiples and interest rates,” said Power.

One80 Intermediaries has announced two acquisitions already this year. In March it announced the acquisition of Manchester Specialty Programs, a US underwriting and program management firm specialising in all-lines coverage across the healthcare sector; while in February, One80 announced it would enter the employee benefits space with the purchase of Executive Benefits Group.

Navigating the harder reinsurance market

Having a diverse portfolio is something Power believes gives One80 an advantage while navigating the harder reinsurance market when it comes to program launches and the renewal of existing programs.

“I think that there are programs that are in certain spaces and I think about transportation as an example. You have to watch them very, very carefully because of the market cyclicality, some of the drivers of profitability in certain sectors of the market will change quite quickly,” explained Power.

“If you become too top-heavy in any one sector, you can find yourself in a really bad place really quickly. So the diversity is what's really, really important when we consider bringing on new MGAs that are complementary to one another,” he added.

Adding value as a broker is also critical in a hard market and Power makes the point that a lot of young brokers working in the industry won’t have experienced these dynamics before.

“First and foremost is the young people that have never been through a hard market before. We try to give folks a lot of coaching,” he said.

“It's got to be approached with a sense of humility, in that you are now delivering a very different message than the one that you were trained, or have experienced historically. It's really important to understand that market cycles are the reality of our business.

“The relationships you have with a client or sub producer, it's going to have to last a long time through multiple markets, so I think that educating young people as to the realities and the drivers of the market is very important,” said Power.

Turning to the approach retail brokers need to take, Power emphasised the importance of educating clients on market conditions to ensure relevancy and add value.

“Overall, I think the important thing that we need to keep in mind in terms of the current market cycles, is that it’s not going to be the same in 12 months, or 18 months, or 24 months. So, the market cycles that we experience are rarely ever alike, in terms of causation, duration, or ultimate resolution,” he said.

Power concluded by saying this “challenging market” has been defined by a degree of capacity constriction, the interest rate environment, Covid-19 and geopolitical risk – “it’s all around us”.