By JACK ROBERTS, editor in chief of Risk & Insurance®
The 123-year-old claims management firm said that it was selling its international operations, with the exception of its U.K. subsidiary, to Cunningham Lindsey Group Limited LLC, an international loss-adjusting and claims management company.
The management of GAB Robins' U.K. operations is currently in discussions with its majority owner, Brera Capital Partners LP, to buy out GAB Robins U.K. No price was disclosed.
"We're going to be an even stronger marketer of loss-adjusting, TPA and managed care services here in North America," said Edward Troy, GAB Robins' chairman and chief executive officer.
In 1999, GAB Robins was acquired by Brera, a private-equity firm based in New York. After 10 years, it's not surprising that the fund would be looking for an exit strategy for its investment. Brera will still own the North American operations. Troy said his focus will be on growth along with expense control for the coming year.
M&A DOWN THE ROAD
There is also speculation among competitors in the marketplace that the North American operations may also be positioned for a management buyout in the future. The deal was a bit odd, this line of thinking goes, because the company wasn't sold as a whole but split apart.
In contrast, Troy said that, in the current market environment, he and management will also be scouting for possible acquisitions.
"We're looking for aggressive growth," Troy said, adding that GAB Robins has done well "retaining its TPA, loss-adjusting and managed care services customers."
The new GAB Robins will have about half the number of employees as the old operation.
On the loss-adjusting side, Michael G. Repoli, the president of North American Operations, said GAB Robins' cadre of executive general adjusters will continue to be in the forefront of adjusting the very largest losses.
"Our ELA (Executive Loss Adjusting) division focuses on major corporate losses," Repoli said, pointing out that GAB Robins has been the lead adjuster on major fires, mine collapses, construction crane accidents and the like. "During Katrina, for example, we handled casino and hotel losses and the Superdome," he said.
On the TPA side, GAB Robins is focused on the public sector. The largest client of the TPA is the state of Connecticut. Repoli added that GAB Robins also has retail, construction, manufacturing and service industry clients. And Troy said the firm intended to expand its penetration of middle market customers.
The claims management marketplace continues to be competitive.
"When jobs are down, claims are down," Troy said. "There are fewer accidents on the roads, workers' comp claim frequency is down, but costs, particularly medical costs, continue to increase."
Troy acknowledged that, during the past few years, the TPA market has become increasingly price-competitive, making new business a challenge and increasing the need to show that GAB Robins offers higher quality services. On the loss-adjustment side, Troy sees opportunity among insurers, which are under greater pressures to reduce costs.
"Insurers will probably do more and more outsourcing of claims and adjusting," he said.
In the past, GAB Robins has made a major investment in developing its loss-adjusting and TPA technology platforms--and it will continue to do so, according to Troy, who noted that he views the company's technological capabilities as a major factor in its relatively high customer retention rate.
MANAGED CARE UP
Troy said that, in the past year, MedInsights, GAB Robins' managed care subsidiary, began to sell its products independently.
"There is a big market among the larger players for managed care services, especially among the self-insureds. A lot of TPAs don't offer their own managed care services," he said.
GAB Robins recently began a new Medicare Set-Aside service as part of its managed care product offerings.
"MedInsights is a jewel in the crown of our operation--we had close to a 100 percent retention ratio among our managed care customers last year," Troy said.
Cunningham Lindsey Group also announced on Monday that Philippe Bes, the former president of international operations at GAB Robins, was named the chief executive of the Cunningham Lindsey Group. Cunningham is also owned by a private-equity firm, Stone Point Capital, along with Fairfax Financial Holdings. In addition to GAB Robins' international operations, Cunningham acquired its U.S. forensic engineering firm, EFI Global.
February 10, 2009
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