Area insurance firm defies Wall Street's struggles with $229M IPO

Tampa insurance holding company Baldwin Risk Partners started the year with a big win — acquiring one of the most established and respected insurance firms in Florida, Lykes Insurance, in March. Founded in 1925, Lykes handles some $125 million a year in premiums.

With 2019 winding down, Baldwin Risk Partners, now BRP Group, recently scored another large victory: It completed an initial public offering and raised $229.6 million when it debuted on the Nasdaq on Oct. 24. Shares of the firm started at $14 and ended the day at $16.37. It’s one of the largest IPOs of a Tampa-based firm in several years and the first commercial insurance brokerage to go public in at least 15 years. Net proceeds of the IPO, after factoring in underwriter discounts, were $214.1 million, says a BRP Group spokeswoman. 

“This is us putting a stake in the ground and saying we are going to build a forever company in Tampa,” says CEO Trevor Baldwin, 33. “We’re pretty excited. It’s been an amazing ride.”

And the company’s not done winning.

BRP Group, according to public filings with the Securities and Exchange Commission, aims to become one of the 10 largest insurance brokers nationwide within 10 years. Internally, Baldwin says, that goal is called Top 10 in 10. It’s already one the fastest growing insurance brokers, posting a 66.4% increase in revenue, from commissions and fees, from $48 million in 2017 to $79.9 million in 2018. Using a partnership model to grow by acquiring other insurance brokers, BRP Group has added 25 broker/firms since 2016 and is talking with at least another 20 more potential partners.

Those deals include the noted acquisition of Lykes, which it paid $36 million for, the SEC document shows. A month after the Lykes deal BRP Group acquired Millennial Specialty Insurance, a Texas-based firm that specializes in apartment renter’s insurance, for $45.5 million. BRP Group also bought MSI for its industry-leading cloud-based software, the report adds.

The successful IPO is an obvious victory for the company and its employees. It’s also a significant moment for Tampa Bay in finance, given most IPOs lately are tech-related and born in Silicon Valley. And some high-profile IPOs have been squashed before listing amid a rise in investor scrutiny and a shift from chasing unicorns to targeting uniform profitably. Others have seen share prices collapse after going public and underperforming. (See WeWork, Uber, Lyft, Peloton, Endeavor.)

‘There’s no question there’s a heightened level of accountability and pressure. But we embrace that.’ Trevor Baldwin, BRP Group

“It’s definitely unusual to see an IPO in Tampa,” says Hill Ward Henderson attorney Dave Felman, a banking, corporate and securities lawyer. “For a company to have success and have an IPO here and stay here, not sell to a private equity firm or another company, this is the kind of company we want in our community.”

Felman, admittedly biased, has an insider’s view of BRP Group: He’s done legal work for the firm, particularly in acquisitions, invested in the stock and knows most of the executives and their families well. Even Felman’s son, Matt, works for BRP Group.

Buddy system

A look inside BRP Group’s IPO public filings, the S-1 report, reveals not just a financial road map for investors, but it also details the inner workings of a gazelle-like insurance firm’s approach to winning business, retaining employees and maintaining a competitive entrepreneurial spirit. (The S-1 filed Sept. 23 is extensive, even for sometimes wordy and jargon-y Wall Street, at some 190 pages and more than another 100 pages in an index and addendums.)

The core of the strategy is what the company calls Azimuth, its True North and guiding principles. “We believe that our highly differentiated culture, guided by the Azimuth, contributes greatly to our success and the scalability of our business model,” the S-1 states.

Key attributes of the Azimuth, the company says in the S-1, include growing commissions and fees, delivering exceptional client experiences, driving operational execution and efficiency, and fostering a culture where colleagues can learn, grow and thrive.

Since 2011, when the current iteration of BRP Group was founded, the company has held the Azies — an annual awards show for employees. Awards and recognition points for Azies can go toward a list of perks, from extra vacation days to charitable donations. The company, in building its culture it says leads to industry-leading employee retention rates, has other annual awards. The list includes Bragging on a Buddy, for peer-to-peer recognition of performing above and beyond while demonstrating an Azimuth attribute and Smarty Pants, praise for a colleague from a client or external partner.

BRP Group has more than 400,000 clients. It has more than 500 employees and 160 producers, or risk advisors — revenue generators the company, in the S-1, calls “fiercely independent, relentlessly competitive, insurance geeks.” It has 40 offices in four states and works in four operating groups: middle market, which is private risk management, commercial risk management and employee benefits for mid-to-large-size businesses; main street, which offers personal insurance, commercial insurance and life and health insurance; Medicare, which is consultation for government assistance programs for seniors and Medicare-eligible individuals; and specialty, which handles programs requiring complex underwriting and related needs.

The company, in an S-1 section called “How We Win," lays out some of its biggest obstacles and how it will address them. Among the five bullet points in how we win is “exceptional shared services.” That’s the firm’s back office support that allow its wide network of agents/risk advisors, essentially entrepreneurs, to “focus on selling new business and client engagement.”

The winning ways also cites an “ongoing commitment to talent development,” which, in part, stems “from an appreciation for the skills required to sell insurance properly.” The company develops talent through more than 100 in-person and webinar classes per year. Extensive training is also an employee retention tool.

Pressure cooker

Another employee retention tool? The IPO.

Every full-time employee is now a shareholder, Baldwin says, adding to the firm’s  winning, all-in-it-together mantra. Some 100 employees and their spouses, partners and kids joined top executives on a trip to New York City to ring the ceremonial Nasdaq opening bell Oct. 24. Other employees watched it on a live-stream in offices where IPO parties were held.

Even with the success — and capital — from the IPO, a question lingers: Why go public, given the investor scrutiny, quarterly earnings demands and added regulatory and compliance costs and headaches? “There’s no question there’s a heightened level of accountability and pressure,” Baldwin says. “But we embrace that.”

That’s partially due to Baldwin and his leadership team’s challenge-themselves, work hard-play hard drive, and partially because the company is an anti unicorn. On the latter, Baldwin points out, BRP Group is a sustainable business with profitable growth. It’s also in a fragmented industry ripe with opportunities — that the IPO capital will help it tackle faster.

The company telegraphed those opportunities, and its potential to investors, in the S-1.

“We believe we have all the core elements in place to achieve our goal of becoming one of the 10 largest insurance brokers in the country within the next 10 years,” the report states. “We play in the right niches, each with favorable growth trajectories and defensible market positions. We have a proven ability to hire and develop sales talent. Our partnership model is seen as highly attractive to entrepreneurs and we believe it provides us access to an enormous market opportunity.”