Western Financial chief exec outlines acquisition strategy

Western Financial Group is looking at expanding in urban centres and across various product lines, such as commercial, farm and employee benefits, brokerage president and CEO Kenny Nicholls tells Canadian Underwriter.

“We have a strong representation in all lines, it’s just a question of us wanting to define more volume in them,” Nicholls says. “Given the heightened activity in M&A, we’re also exploring other avenues to achieve our growth ambitions.”

For example, Western has been developing other distribution channels such as embedded insurance and digital, which allows the brokerage to cover a lot of regions across Canada where it doesn’t have a physical presence. Western is now in its fourth year of operation with its digital channel, and has generated three consecutive years of 100% growth, Nicholls reports.

“By early next year, we will be at over $100 million in premium through that channel alone,” he says. “And we’re not even seeing any signs of slowdown.

“Now, I want you to imagine $100 million in new premium over a four-year period. That’s the equivalent of us buying 10 new small brokerages with much less capital.”

Nicholls made his comments in a wide-ranging interview about acquisition strategy, technology, talent and industry collaboration.

Western is licensed in all provinces and the overall acquisition strategy has been to “find opportunities where we’re not present,” Nicholls says. After that, it’s all about culture fit and potential, meaning the business itself or the community in which it’s situated (product line and/or geography).

“Our approach is to maintain the legacy by the owners and apply our own know-how, our systems and some products as well to improve market share,” Nicholls says. “Coming back to culture, that’s extremely important.

“Because at the end of the day, when we buy brokerages, [they] come with people and that’s the biggest component of a brokerage. So, we want to make sure that our values are similar, as well as our commitment to customers and community.

“When we evaluate, if any of these are not present, we just walk.”

 

Branch integration

Nicholls also discussed Western’s branch integration with Huestis Insurance and Associates Ltd. (HIAL) following the full acquisition of the brokerage last year. Western closed a deal to purchase the remaining shares of HIAL, effective May 1, 2023. In February 2021, Western took a non-controlling interest in the Saint John, N.B.-based brokerage.

“It did result in one of the largest acquisitions in our history — 25 locations, over 200 dedicated people,” Nicholls says. “But in a part of the country we didn’t know much about — the Maritimes.”

By including employees in the planning process, Nicholls says he finds a higher integration success rate. After a year of ownership, Huestis remains a Western subsidiary and the plan is to have full integration by 2025 or early 2026, Nicholls tells CU.

Why does the integration take so long? Nicholls says he has to ensure new employees don’t receive less compensation than before the acquisition (which rarely happens). It’s also important to align systems between the two brokerages.

“Luckily enough with Huestis, they are under the same system as us — [Applied] Epic. Maybe not exactly the same version, but at least it makes it a little easier.”

Other considerations include comparing data and brand name considerations.

Nicholls remains optimistic about the brokerage’s M&A plans and future success. “Western has now recorded its two best years of organic growth in our entire history,” he says. “And our profitability has never been as healthy.

“All the while, starting to see a softening in rates. Oftentimes, we’re seeing we’ve swam against the current.”

 

Feature image by iStock.com/skynesher