Feb 2, 2004 – Mystic Capital to roll out Research Coverage on Insurance Brokers

http://mysticcapital.com/press/020204_MysticCap_rep.pdf

http://www.snl.com/Interactive/
SNLFinancial
reprinted from SNLInteractive page 1
February 02, 2004
By Paul Henderson
Financial adviser Mystic Capital Advisors Group is about to roll out research coverage of the insurance brokerage sector, Managing Director
Kevin Donoghue told SNL Financial
on Feb. 2.
Mystic Capital, an M&A group focused on the insurance distribution sector, will add research to its current suite
of services, Donoghue said, which currently includes buyer and seller representation on M&A, business valuations, perpetuation and succession
planning, and bank and insurance joint
ventures.
The firm’s target clients are insurance
agencies and brokerage firms, managing
general agents, program administrators,
insurance aggregators and wholesalers, as
well as banks, insurance companies and
third-party administrators.
Mystic Capital was founded in October 2001 by three former employees
of Hartford Financial Services Group
Inc., including Donoghue himself, who
worked to develop Hartford unit BMG
Capital Advisors Group into a national
M&A practice.
Senior Vice President James Bethea,
who has been with the company for
two years, will lead the fledgling research effort. Bethea currently oversees
the company’s Midwest region practice, based in Columbus, OH. Prior to
joining Mystic, Bethea worked for five
years with Bridgestone/Firestone Inc.,
where, according to the company’s
website, he “was an integral member of
several operational project teams.”
Bethea will cover Hilb Rogal and
Hamilton Co., Hub International Ltd.,
Arthur J. Gallagher & Co., U.S.I.
Holdings Corp., Willis Group Holdings Ltd. and Brown & Brown Inc.
In an interview, Donoghue and
Bethea told SNL that the move is a natural extension of its product offering,
one it hopes will give it a competitive
advantage.
“We thought we’d bring a little
more to the table than the folks that are
out there, and it’s just a way of distinguishing ourselves from our competitors,” Donoghue said.
Mystic Capital’s overall outlook for
the sector is positive, the two said, at
least in the short term.
“We see that on a broad base
amongst the six, the pricing is still
strong, they’re still benefiting on the
upside from positive pricing trends,”
Donoghue said. “But we’re seeing that
that trend is certainly growing at a
slower rate if not capping out. The ’04
outlook is bright, but ’05, absent some
major organic initiatives, could put
some of the folks at a question.”
However, the firm is more favorable
toward those that “are a little bit more
disciplined” with regard to M&A.
“That seems to be their growth for
some of them, kind of getting away
from organic growth and focusing
mainly on M&A,” Bethea said. “That
long-term might come back to bite
some of them.”
As an example, he noted Hilb Rogal
and Hamilton’s acquisition of Atlantabased Hobbs Group LLC in July 2002.
“That was a big acquisition for them,”
he said. “They’re still trying to implement that, but they’re going out and
making other acquisitions.”
“You have to be disciplined,” he
added. “You don’t want to bite off more
than you can chew.”
Donoghue cited Brown & Brown
and Willis Group as two of Mystic Capital’s favorite names at present.
“Brown and Brown is probably what
we see as the most diligent acquirer out
there,” he said. “They stick within a
formula, and they take it across the
country. All the key generals within the
organization are focused in the same
direction, and they know how to integrate. From a professional standpoint,
we think they are the most professional,
diligent acquirer.”
Willis, meanwhile, “has been very selective in what they do.” The company
seems “to be focused on a more international platform and building out on that.”
He added that Willis “is so underappreciated in relation to the group,
and with their size they should be trading at a premium versus a discount.”
The firm plans to market its research
to its current client base, although it
hopes to attract some buy-side interest.
“Initially, it’s going to be M&A
clients, but we would hope that there
would be some fund managers, etc.,
that would be interested in it.” He
noted, however, that “the sector is just
so small in relation to what they’re
looking at, whether they would want to
buy [the research] or not, who knows?”
Mystic Capital plans to roll out its
initial quarterly report on the group
within 24 hours. „
Financial adviser focused on insurance distribution
to roll out research coverage of brokers
© 2004 SNL Financial LC
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