Sweet Carolina

Sweet Carolina

INSURANCE by Jean Gruss | Lee/Collier Editor

As the economy struggles, one Gulf Coast-based insurance firm's expansion to North Carolina turned out to be good timing. Still, Florida remains a lucrative place to write policies.

In 2005, as Florida limped out of another hurricane season, Gary Trippe headed to North Carolina.

The chairman and CEO of Fort Myers-based Oswald Trippe and Company Inc., one of the state's largest insurance brokerage firms, decided to speed up plans to expand in neighboring southeastern states.

The move is starting to pay off, though it hasn't come without its challenges. The benefits of geographic diversification become especially clear during periods of declining economic activity, such as what's occurring now along the Gulf Coast.

"We were reeling off of the storms [three years ago]," Trippe recalls. As a result, insurance companies were cutting the number of policies they allowed brokers such as Oswald Trippe to write. Insurance brokers typically represent a dozen or more companies and make money on commissions when they sell these companies' policies. Oswald Trippe's streak of 15% annual revenue growth was at stake.

By contrast, insurance companies were eager for brokers to sell policies in places such as inland counties of North Carolina, where hurricanes and other unpredictable catastrophes were rare. Trippe says he had been planning the expansion of his company there for years and the limits on new policies in Florida spurred him to act. Oswald Trippe acquired a small firm in Cornelius, N.C., 20 miles north of Charlotte.

Since then, Oswald Trippe has acquired other insurance brokerages and now has four locations in North Carolina, including Wilmington. And it's looking to expand just south of Charlotte and over the border into South Carolina.

But that doesn't mean Oswald Trippe is putting Florida on the back burner. In fact, Trippe says he's considering a deal to acquire a company in Miami and he's keeping an eye out for opportunities in Palm Beach and Orlando. Currently, including its headquarters in Fort Myers, Oswald Trippe has 12 offices in Florida stretching from Ocala to Sarasota, Naples, Miami and Fort Lauderdale.

The economic downturn in Florida could provide Trippe with opportunities to acquire firms that otherwise might not have been willing to sell out during the boom. He favors firms where an elderly owner has failed to devise a succession plan for his firm and wants to cash out.

Meanwhile, Trippe has beefed up the company's management ranks. He recently hired Gray Davis, formerly the president and CEO of The Hartford of Canada, to be the firm's chief operating officer. He and President John Pollock run the day-to-day management of the company, allowing Trippe the time to make acquisitions and oversee the expansion.

The competition apparently senses opportunity. One firm, Naples-based Gulfshore Insurance, opened an office in Fort Myers last year in the heart of Oswald Trippe country. Today, 30% of Gulfshore's business comes from Lee County, says Brad Havemeier, senior partner at Gulfshore Insurance (see related story).

Goin' to Carolina

While North Carolina represents an opportunity to write more policies, the challenge there is that rates are substantially lower than in Florida. Since Oswald Trippe's business is based on commissions off the value of those premiums, it will take time before that area is a big revenue generator for the company.

So far, the business in North Carolina represents just 7% of Oswald Trippe's revenues, which totaled $30 million last year. In five years, Trippe estimates revenues from that area may represent 12% of the total.

Still, North Carolina's economy is holding up relatively well. Says Trippe: "The economy is not in a downturn as significant as Southwest Florida."

Trippe says the four offices in North Carolina are performing according to projections, but says the integration of the operation has been surprisingly thorny. For example, it took months to get the telephone companies to transfer a customer in North Carolina directly to Trippe's Fort Myers office. It also took months to change customers' insurance payments to new Oswald Trippe accounts. Those issues have been resolved, but they consumed management's time. "There are always surprises and challenges," Trippe says.

When it expanded in North Carolina, Trippe selected smaller communities outside Charlotte such as Cornelius, Hickory and Denver where it could replicate its successful model. That model is based in part on boosting local community service organizations and local businesses by donating money and encouraging employees to join their boards. To lead the expansion, Trippe hired Denis Bilodeau, a former vice president and managing director with The Hartford. Bilodeau was based in Charlotte and oversaw the insurance giant's personal-insurance operations in 32 states.

For example, once a year, Oswald Trippe organizes the Blue Chip Community Business Awards luncheon in Fort Myers where it invites customers, business associates and community leaders for an elaborate lunch and it flies in a nationally recognized motivational speaker.

While large cities have business organizations that routinely hand out awards, they're more unusual in smaller towns. So when Oswald Trippe hosted its first Blue Chip awards luncheon in the Lake Norman area of North Carolina last year, 160 people showed up.

Oswald Trippe does little advertising, preferring to rely on its community activies.

Managing the downturn

Oswald Trippe now has to contend with the economic downturn in Southwest Florida. That's exacerbated by the fact that nearly three years without storms have brought competition back to the market, pushing down premiums.

Trippe says he detected the downturn in August of last year on premiums related to personal and property insurance and the slump cut Oswald Trippe's growth projections by more than half. Company revenues grew 7% from $28 million in 2006 to $30 million in 2007.

Trippe expects the downturn to continue and he's budgeted a 6% increase in revenues in 2008 to about $32 million. Much of that revenue growth will occur as a result of acquisitions, Trippe says.

Meanwhile, the company is operating as efficiently as possible by pushing automation of routine tasks and growing its processing center in LaBelle, a small town in Hendry County.

The cost of doing business in LaBelle is much less than along the coast and Trippe has expanded the operation to nine employees who handle an increasing amount of paperwork for agents. "It frees up our commercial sales people to interact with customers," says Trippe. Oswald Trippe's commercial business represents 60% of its revenues, with the remainder personal insurance (30%) and employee benefits and financial services (10%).

Gulfshore insurance moves up coast

Surrounded by water or swamps, Naples-based Gulfshore Insurance is expanding the only direction it can: North. The company opened an office in Fort Myers last year, encroaching on territory long dominated by Oswald Trippe and Co.

Gulfshore Insurance was formed in 1970 in Naples and has grown in excess of $18 million in annual revenues last year. For a long time, it served its Lee County clients from its headquarters in Naples. But today, 30% of its business is in Lee County and in May 2007 the firm opened an office in Fort Myers, says Brad Havemeier, senior partner with the insurance brokerage.

One of the ways executives differentiate Gulfshore Insurance is by stressing that the firm focuses exclusively on clients in Southwest Florida. While Havemeier is careful not to single out Oswald Trippe or any other competitor, he says: "We're a community based agency serving Southwest Florida exclusively." He adds: "We're not out of state."

Like all good insurance brokers, Gulfshore Insurance touts its customer service and geographic proximity to clients. "The difference in all of business is in the execution," Havemeier says. "You win over a period of time and develop client loyalty." Gulfshore Insurance now has 11,000 clients and 100 employees. Business customers represent about 65% of the firm's sales, with personal lines (20%) and benefits (15%) making up the remainder.

Company snapshot

Oswald Trippe and Company Inc.

Headquarters: Fort Myers

CEO: Gary Trippe

Revenues 2007: $30 million

Revenues 2006: $28 million

Number of offices: 16

REVIEW SUMMARY

Company. Oswald Trippe & Co.

Industry. Insurance

Key. Geographic diversification is often beneficial, but long distances can also present operating challenges.