Perpetuation planning is just one of the many mountains that independent agency owners must climb. Father and son duo Lee and Greg Lottes of Lakenan Insurance in St. Louis, Missouri, reached that peak in 2014 and they ultimately decided to sell to Sunstar Insurance Group, a financial holding company that acquires majority equity ownership positions in independent insurance agencies.
“It was a big decision for us,” said Greg Lottes (pictured), president of Lakenan Insurance and president and corporate chief operating officer of Sunstar. “We were looking at several different acquirers at the time, from the larger national brokerages to some bank-owned brokerage firms, but ultimately, we weren’t really attracted to the model they had illustrated. But when Sunstar came along, we were very interested and keen to learn more about [Sunstar chairman and CEO] Casey Bowlin’s vision.”
Bowlin founded Sunstar in 2012 as a holding company with a vision of providing financial capital, operating resources and strategic oversight to a portfolio of highly autonomous insurance agencies. Acquired agencies are able to maintain much of the independence they had prior to selling – in terms of name, branding, operations, etc. – but they’re supported by Sunstar’s unique business model, which is centered around local agency management, sales and service coupled with the enhanced operating efficiency of a common back office administrative platform.
“If you’re an independent agency owner who wants to continue to work in an environment where you can grow your agency, and collaborate and work with forward-thinking colleagues, Sunstar is a very appealing model,” said Lottes, who was appointed president of Sunstar on August 01, 2018 – four years after the Lakenan acquisition. “The way that Sunstar has positioned itself in the marketplace is: we’re really looking to work with high quality agency principals that want to stay in the game, grow their agencies, and build on what they’ve successfully created, while still maintaining a lot of independence they had prior to selling. That’s really the secret sauce in how we’ve been able to grow as a firm.”
Since its inception in 2012, Sunstar has built a portfolio of 17 insurance agencies across six states (Alabama, Arkansas, Georgia, Kansas, Missouri, and Tennessee), all of whom trade under their original names, and it now has over $850 million of premium in force. Moving forward, the firm plans to continue growing its revenues through an aggressive acquisition strategy.
“You see all sorts of different acquisition strategies,” Lottes commented, “but I would describe Sunstar’s as more qualitative than quantitative. We’re not focused on doing lots of deals to buy revenue. Rather, our core philosophy is: ‘Let’s get the good folks on the bus, and the revenue will follow.’ I think that’s a big distinction between Sunstar and a lot of our competitors. We’re not driven by revenues. We certainly want to grow through M&A, but we want to take a more qualitative, strategic, and calculated approach.”
In terms of ‘getting the good folks on the bus,’ Sunstar recently announced an expansion of its corporate leadership team, with the additions of chief marketing officer Kerri Roberts, vice president of technology Travis Lee, and vice president of carrier relations and strategic partnerships Nicolas Colicchio. The addition of these three new growth roles will be “foundational,” according to Lottes, in helping Sunstar pursue its M&A strategy and continue its expansion into new markets.
“It’s funny. Years ago, when Sunstar was new to the industry, there wasn’t really a need for a deep corporate structure. By design, our model works well because each division (agency) manages the day-to-day operations, client-facing duties, and the administrative and staffing functions,” said Lottes. “However, as the company has evolved and grown, we’ve certainly recognized the need to have people in dedicated [corporate] positions versus our old approach of people wearing multiple hats.
“Ultimately, Casey and I acknowledged that if we want to grow the company, we need the right people on the bus. Sunstar is at a size now where we can’t just divide and conquer. We need people that are solely charged with these important initiatives that we have within the company. Through our growth, we’ve acknowledged and recognized that there are some potential deficiencies down the road, and if we don’t get the right folks involved, those potential deficiencies are going to turn into problems. I think any good organization, if they can recognize their faults and address them, they’re going to succeed – and that’s ultimately what we’re trying to do by adding these talented individuals to our corporate leadership team.”
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Moving forward through 2022, Sunstar’s growth strategy will continue to revolve around strategic and controlled M&A, as well as strong organic growth driven by well-resourced producers. 2021 was a record year for the firm in terms of closed deals and overall revenue that was acquired, and Lottes expects the same “equally crazy” M&A activity this year.
“With the hardening of the market, I think a lot of agency principals are recognizing that being connected with a larger firm that can bring in more insurance markets, more resources, and more expertise, is certainly not a bad thing – as long as it’s the right fit,” Lottes commented. “Sunstar is certainly open for business, and I think 2022 is going to be a solid year for us. We’re very financially sound, we’ve got significant dry powder on the sidelines, and we’re in a position to move quickly and close deals probably faster than a lot of our competitors, which I think is certainly an advantage in our world as well.”
