Smith Brothers Insurance Managing Successions at a Growing Insurance Agency

Smith Brothers Insurance Managing Successions at a Growing Insurance Agency

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Abstract

In October 2014, Joe Smith, the CEO of Smith Brothers Insurance, reflected on the fact that his business was caught in the midst of three separate succession challenges. Smith Brothers was an insurance agency owned by Joe and his sister, Kim, in Connecticut that had achieved strong growth over the previous decade.

First of all there was the “book succession” that occurred when insurance agents retired. Agents nearing retirement over the next 10 years at Smith Brothers had built long-standing relationships with business clients and these relationships generated a large portion of Smith Brothers’ revenue. Then there was his own succession to consider. Joe was 48 years old, and his sister, Kim, was 53. Collectively, they owned 92% of the company (a small subset of employees owned 8%). Neither Joe nor Kim was ready to retire, but they knew it was essential to start thinking about this inevitability. Finally, there was an industry-wide succession going on as the owners of other agencies were approaching retirement and were looking to sell out. Smith Brothers had acquired numerous businesses over the previous five years that had fueled the company’s rapid growth. Agency valuations in the industry were rising and Joe wondered whether Smith Brothers could, or should, continue to make acquisitions.

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