Bigger Hands

REVIEW SUMMARY
Company. Ted Todd Insurance
Industry. Insurance
Key. Forging your own way and taking advantage of opportunities are two keys to success.

How did Ted Todd Insurance become the largest Allstate Insurance agency in the country?

The namesake insurance broker who got his start in a booth at the Edison Mall in Fort Myers now oversees an Allstate franchise with 50 employees working from seven offices stretching from Fort Myers to Sarasota and Boca Raton, generating $6.5 million in gross revenues in 2011.

Todd, 56, grew his Bonita Springs-based business by seizing opportunities that came his way. But he also changed the way insurance brokers do business, from the locations he chooses to the way he rewards employees. “We're in a growth mode,” Todd says.

For example, unlike most insurance brokerage firms, he pays his agents salaries, not commissions. And he moved away from operating small offices in several locations, preferring to consolidate operations in one bigger office with modern amenities, reasoning that employees would be happier and more productive.

But Todd has also benefited from good timing. In 2006, Allstate permitted its agents to sell insurance from other carriers. Besides Allstate, Todd sells insurance products from 15 other companies. And Allstate Bank has financed Todd's acquisitions of existing agencies, including six last year.

In addition, Allstate began allowing agents to merge their offices. Todd says having one big office rather than several smaller ones scattered across an area is more efficient.

“We're talking about expanding more,” says Todd. He's scouting opportunities in other Florida cities, including Tampa, Jacksonville, St. Augustine and Vero Beach. While Todd sells mostly personal lines of insurance such as home and auto, he's exploring commercial business, too. He estimates gross revenues will jump 29% this year to nearly $8.4 million.

Sears roots
Todd joined Allstate in 1985, when retailer Sears owned the insurance company. Armed with a pager and working out of a booth at the Sears store inside the Edison Mall, Todd grew his book of business to 2,100 accounts.

In 1989, Todd opened his first office in 500 square feet in the Gateway area of Fort Myers. He was the second Allstate agent in Florida to open his own office, already revealing his knack for seizing opportunities.

Todd moved his office to the fast-growing Bonita Springs area in 1997, where Florida Gulf Coast University, Southwest Florida International Airport and two colossal shopping malls were rising from the agricultural fields of south Lee County. The move paid off as more people moved to the area during the housing boom.

But unlike traditional insurance brokerage firms that pay commissions to agents, Todd paid them salaries. As he sees it, the problem with commission-pay structures is when business is good he overpays and when business is bad they leave. By contrast, Todd pays agents annual salaries that range from $80,000 to $150,000. “It works, and it makes sense to me,” he says.

Todd says salaried employees are more focused on helping customers than being constantly worried about their personal finances to make a fast buck. What's more, competitive salaries attract a higher caliber of employees, necessary because Todd targets more affluent areas such as Boca Raton. “I need people who can be your new best friend,” Todd says.

Todd has also bucked the trend of operating small offices with a tiny lobby and a couple of desks. Instead, he combines agents into one larger office in a high-end development with open floor plans and luxury touches such as wood floors, crown molding and high-end ergonomic furniture. “No chair is less than $750,” he says, adding that the new furniture at the renovated West Palm Beach office cost $25,000. The idea is that a modern, comfortable work environment produces happier employees, which results in happier customers.

Seizing opportunities
Throughout the growth of his agency, Todd has repeatedly taken advantage of opportunities that came his way.

For example, when Allstate allowed agents to sell products from other insurance companies in 2006, rival brokerage firms were paring back as their exposure to Florida grew. “A nice prescription for success is when your competitors quit selling their products,” Todd smiles.

In 2010, after former Florida Gov. Charlie Crist ordered Allstate to write thousands of new homeowners policies in Florida, Todd was ready with a marketing plan and staff and wrote $8 million in homeowners' insurance premiums that year. “That growth funded our ability to expand,” he says.

When Allstate Bank changed its rules to allow it to fund Allstate agents' expansion plans in Florida last year, Todd used that financing to acquire six agencies. Todd got a further boost when Allstate in June permitted its agents to merge offices.

Besides the fact that larger offices are livelier, acquiring smaller offices and combining them means lower overhead expenses and greater efficiency. In fact, of the 20 people who worked in the six offices Todd acquired last year, only two employees remained.

Meanwhile, the poor economy presented opportunities to hire talented individuals who might not otherwise been available during a boom. That was important because Todd had to hire trusted people to whom he could delegate as the company grew. “He's the thinker, the idea guy,” says Al Hernandez, the company's controller who joined the company last year. “He's the guy who can view what's happening from 45,000 feet.”

While he has delegated more of the day-to-day tasks at the company, Todd remains hands-on. For example, even though he recently took a vacation to South America, he's never too far away. “When he's on vacation, the emails and the texts still come,” says Hernandez.

One opportunity Todd has chosen to pass up is writing policies for Citizens Property Insurance Corp., the state's insurer of last resort and the biggest property insurer in Florida. With a few exceptions, Todd says he can find homeowners insurance on the private market for his customers.

Besides, the Citizens' rates are unsustainable and the insurer is vulnerable to catastrophes, putting customers at risk. “It's not the right thing for the state of Florida,” says Todd, who adds that the state's finances could be ruined if a monstrous storm hits a populated area.

More acquisitions
Besides Tampa, Todd says he's seeking to acquire footholds in areas such as Jacksonville and Vero Beach. He seeks to buy agencies that he can combine to generate at least $10 million in premiums in each market, with the opportunity to grow further.

When Allstate permitted agents to make acquisitions and merge offices, Hernandez started calling on agents who might be willing to sell. “I started by calling agents who had been around for a while and were at the tail end of their careers,” Hernandez says. “They were in a harvesting mode and weren't spending a lot of money to acquire new business.”

But well-established agents on the cusp of retirement often have a loyal clientele. “We wanted to cherry pick. They were good books of business,” Hernandez says.

Hernandez says the firm is attracted to well-heeled areas like Boca Raton. Besides covering more million-dollar homes, there are opportunities to provide additional insurance on their assets such as jewelry and art as well as umbrella policies that protect more assets. “We do very well in that niche,” Hernandez says. Besides, he adds, “they don't leave you for a 10% increase.”

To fund these acquisitions is easier with Allstate Bank because the bank understands the business better than traditional lenders. That's important because insurance brokerage firms don't have the collateral assets that traditional lenders seek, such as real estate. “It's difficult to get financing for any business,” says Todd.