Lykes Insurance executives like the growth potential in Florida, especially the Gulf Coast — despite the sour economy. They are backing it up with aggressive growth plans.
Business. Lykes Insurance, Tampa
Key. Firm seeks to grow its brand awareness on the Gulf Coast and statewide.
The Lykes family runs one of the most prominent Tampa business dynasties of the past century, with a portfolio that at times has ranged from banks and berries to smoked sausages and steamships.
Insurance has also been and still is a key part of the Lykes Bros. Inc. domain. But despite the weight of the Lykes family name, its insurance business, founded in 1925, has sometimes struggled to develop the same kind of top-line brand awareness.
John Brabson, a longtime Lykes Bros. executive and former chairman of the board, is on a mission to transform that image. The strategy, now going into its third year, mixes a statewide marketing campaign with pinpoint expansion in offices and personnel.
“We have been good risk managers of the Lykes interests,” says Brabson, president and CEO of Tampa-based Lykes Insurance, which has 65 employees. “But we have not been aggressive in going after new business.”
Brought out of semi-retirement in 2009, Brabson is married to a granddaughter of one of the seven Lykes brothers who founded the family business in 1910. He brings a stellar resume to Lykes Insurance.
Brabson previously ran Tampa-based Peoples Gas System. Peoples Gas was a Lykes entity that grew into the largest privately owned natural gas distribution company in the country under Brabson's watch. TECO Energy bought Peoples Gas in 1997.
Brabson's experience transferred well to Lykes Insurance. After a flat 2010, Brabson says Lykes, with about $10 million in annual revenues, is poised to grow its new business by 20% in 2011. Moreover, the company has a customer retention rate of 92%, above average for the industry.
Lykes also recently expanded its physical space. In addition to Tampa, it has offices in Fort Myers and Miami. Lykes opened an office in Winter Park last year and earlier this year it hired a sales agent for Sarasota.
The company's expansion plans further allowed it to increase its stable of underwriting partners, including FCC Insurance Group in Sarasota. FCCI executives say Lykes holds similar humble values and likewise puts a premium on the relationship side of the business. “They have been a very good partner for us,” says Bill Speaker, an FCCI regional senior vice president.
Finally, the Lykes expansion strategy is proof of a mini-trend in the insurance industry. That's when companies in large markets, like ones in Tampa, have been forced to look for growth in nearby smaller markets, like Sarasota or Bradenton, because of the recession. Several Sarasota insurance brokers say they have run into the Lykes name recently around town.
The out-of-town agents, says Rob Brown with Atlas Insurance, haven't necessarily set up new local offices. But they are competing. “They are coming for the larger companies,” says Brown. “The ones with a lot of employees.”
Nonetheless, Brabson has been around long enough to know that just showing up won't be enough to win the battle for new business.
For one, the insurance sectors Lykes focuses on — agriculture, personal lines and employee benefits — are hyper-competitive. Brabson, however, is convinced a price war with other firms is a nonstarter. He contends a customer won over only on price isn't a likely long-term client.
“Obviously, the cost of insurance is very important, but it is only one of the factors that should be considered,” Brabson says. “We feel it's more important to understand the total needs of the client.”
Another challenge to long-term client growth, meanwhile, is to find spot-on sales producers to go after it. The right sales agent for Lykes, says Brabson, is someone who can deftly combine an entrepreneurial mindset with a strong sense of teamwork.
While that might sound elementary, if not cliche, in practice finding that producer has been elusive. Brabson has hired five since 2009, including three over the past year. Still, Brabson says he has the support staff capabilities to handle at least 25% more volume, if he had the right producers on the streets.
“We've got the resources,” says Brabson. “I want the guy who will understand how to use them.”
Brabson entices the kind of producers he seeks partially by bucking an industry trend: A commission for a producer who retains an existing client equals the commission for a new client. Many other firms, in contrast, will pay a commission at least two times greater for new clients over retained ones. The structure recognizes the reality that it can be just as hard to keep a client in a price-driven environment as it is to get a new client, says Brabson.
Lykes faces several external challenges, too.
For starters, many believe the Florida insurance industry is a hurricane disaster away from implosion. “Citizens (Property Insurance Corp.) is now the insurer of first resort instead of last resort,” says Brabson. “Florida has got to solve that.”
The other issue that impacts potential growth at Lykes is what many other businesses face: jobs, or the lack thereof. For Lykes, the fewer employees there are on a payroll of a client or prospective client, the smaller the premium.
While job growth and insurance industry regulations are mostly out of Brabson's control, enhancing the Lykes Insurance brand is in his control. In that regard, the company is at the tail end of a yearlong print advertising campaign that focused on Lykes' partnership approach with its clients. The campaign cost about $50,000.
Back in it
Brabson intends to continue the marketing campaign in the next fiscal year. He says while the Lykes name is well known in and around Tampa, its insurance arm remains somewhat unknown in the greater business community.
That anonymity was the plan for the insurance firm's first 60 years or so. It was founded in 1925 mostly to handle risk management for the Lykes Bros. holdings, which back then included citrus, cattle, meatpacking, banking, natural gas and shipping. Lykes Bros. was one of the largest diversified businesses in Florida for most of the 1900s, so there was plenty of insurance work to go around.
In the late 1980s and early 1990s, says Brabson, Lykes Insurance executives decided to go for more non-Lykes business. That effort went through stops and starts until 2009, when Lykes Bros. board members reached out to the semi-retired Brabson.
Lykes left the business fulltime in 2001, after four years as chairman of the Lykes Bros. board. He played some golf, and he was a partner in a development firm behind several successful condo projects in the Bay area.
“But I was ready to get back,” says Brabson. “I enjoy being back in the game.”
That joy spreads to some big early victories with Lykes Insurance, including when the firm won clients over bigger competitors Marsh & McLennan and Aon Corp.
Those kinds of wins resonate with Brabson, who climbed Mt. Kilimanjaro in 1997 and reached the base camp of Mt. Everest in 1998. He carries that competitive streak into Lykes Insurance. “We don't want to be the biggest,” says Brabson. “We just want to be the best.”
John Brabson's career with Tampa-based Lykes Bros. has been spent in the firm's natural gas distribution and insurance companies.
He has had a long run of success with Lykes, especially with Peoples Gas. Peoples grew from $20 million in annual revenues to more than $300 million while Brabson was there, from 1976 to 1997. Brabson was chairman, president and CEO of Peoples from 1989 to 1997.
Brabson's Tampa-area business and community board affiliations, both past and present, are also impressive. The appointments include:
• Council of 100, past board member;
• Downtown Tampa Partnership, past board member;
• Outback Steakhouse, board member, 1992-2007;
• St. Joseph's Hospital Foundation, chairman, 1994-1997
• Tampa Bay Partnership, chairman, 1998-1999;
• Tampa General Hospital, current board member;
• Lykes Bros., current board member
• Tampa Hillsborough Economic Development Corp., advisory board member