Wholesaler Southwest Risk Gets New Majority Owner

GCP Capital Partners has completed a $23 million investment to purchase a controlling interest in ClearView Risk Holdings LLC, whose principal subsidiary is Southwest Risk LP, a Dallas-based wholesale insurance broker that specializes in certain property/casualty coverages, including real estate and construction risks.

Bob Deutsch, managing director of GCP, said the company believes the insurance brokerage industry presents an attractive investment opportunity. "The companies in general are trading at relatively low multiples, so you're able to buy them at lower price-to-earnings multiples than historically you've been able to," he said in an interview. "If you look at public comparables, while the trading multiples are up a little bit, they're still down from historic norms. The same thing transcends over into the private world."

Deutsch said a second factor is that earnings are low because premium rate levels are low. The industry appears stuck in a soft market, but it is unlikely to get much worse, he said. "Our view is that if you have a good business model, as we think is the case with [Southwest Risk], we believe that earnings down the road will be substantially larger than they are today," said Deutsch. "So you bring those together, and you've got a compelling investment proposition."

Deutsch said Southwest Risk captured GCP's attention because it has been able, over the past four years, to grow its business even though the market has been soft. "They also have a creative set of solutions for their retail clients, and those attributes give them a sustainable competitive advantage in the wholesale brokerage space."

Southwest Risk will change its name to ClearView Risk. Leading the operations will be Bryan Wilburn, founder and chief executive officer of Southwest Risk, and his management team. Before the transaction, Southwest Risk was wholly owned by Houston International Insurance Group. Wilburn and HIIG are co-investors.

ClearView Risk provides insurance services to retail agencies with risks located throughout the United States. It specializes in transactional placements of commercial property/casualty coverages, along with the development and implementation of niche programs using traditional and alternative risk transfer strategies. Wilburn said in a statement that the company plans to grow into a larger, more-diverse wholesale broker offering a wide variety of property/casualty placements. "Over time, we will grow both organically and through strategic acquisitions," he said.

Stephen L. Way, chairman and CEO of HIIG, will serve as ClearView Risk Holdings' chairman. "The liquidity that results from this transaction will be used for future acquisitions of underwriting agencies and general corporate purposes," Way said in a statement.

GCP Capital Partners manages three U.S. private equity funds, one in Europe and a U.S. venture capital fund. The five funds total $1.9 billion in committed capital. GCP said it has made significant private equity investments in business services, education, energy, financial services, insurance and telecommunications. Other insurance industry investments include Ironshore, Alterra, and Acrisure, a Michigan retail broker, according to Deutsch.

(By Ron Panko, senior associate editor, Best's Review: [email protected])