Payne Financial Group Inc., a Missoula, Mont.-based insurance brokerage that operates a growing office here, says Spokanes strong economy has been helping drive its robust, companywide growth.


At the same time, the company, which has its top executives office here, is facing challenges posed by the tightening labor market here as well as increasing numbers of consolidations industrywide.


Payne posted $30 million in commission revenues last year, giving it a place among the top 50 privately held insurance brokerages in the U.S., says Bill Wrigglesworth, its Spokane-based president and CEO. Between the end of its first year in 2001 and the end of 2006, the companys revenues grew 64 percent, he says.


Payne has 230 employees, including 26 at its operation here, which it opened in 2002. Currently, its remodeling its office downtown, at 827 W. First, in a project that will double its space and allow it to accommodate up to 40 employees, Wrigglesworth says. He says he wouldnt be surprised if the company added up to seven employees here this year, although at this point it doesnt have a fixed number it plans to hire.


We knew we needed the space here, because Spokane is growing and weve grown, Wrigglesworth says. Were very excited about where Spokane is now and where its going.


Payne formed when three different agencies, each of which the Montana-based risk-management firm Terry Payne & Co. owned in part, combined. It is a Subchapter S corporation with 46 shareholders, Wrigglesworth says. Stock ownership is available only to employees, who must be invited to participate based on their sustained efforts at the agency, he says.


The company offers commercial insurance, personal insurance, employee benefit products and consulting, and contract surety bonds. A contract surety bond is an agreement under which one party, the surety, guarantees to another, the obligee or owner, that a third party, the contractor or principal, will fulfill the underlying obligation in a contract.


Commercial insurance makes up about 70 percent of the companys revenues. The company acts as a broker for such insurers as Safeco Insurance and St. Paul Travelers. Employee benefit products and consulting, contract surety bonds, and personal insurance each comprise about 10 percent of the companys overall revenue, he says.


Employee benefit consulting and sales of products is one of Paynes fastest-growing divisions, and Wrigglesworth expects it soon will make up 20 percent of the companys revenues. He attributes the divisions growth to the swelling costs of health benefits, which employers are seeking help to manage.


Benefits is growing because of the crisis that industry is facing, Wrigglesworth says. Its becoming increasingly necessary to be creative in finding solutions to the cost of employee benefits.


In Spokane, the companys contract surety bonds and financial institutions specialty practice, which is a program within its commercial division, make up a large part of its business. Growing family-owned businesses also are heavy contributors. The company is what Wrigglesworth calls a generalist agency, but also has specialty programs for the financial institutions, construction, hospitality, and technology industries.


Payne expects its revenues will grow by about 8 percent this year, keeping pace with the high-single-digit growth of its similarly sized competitors, he says. The company, which has sold or closed five offices in the last two years, now operates nine offices in Washington, Idaho, and Montana, including one it opened in Boise in 2005. It sold offices in small rural communities, because it wanted to focus more on the middle markets, such as Spokane and Boise, in which it thrives, he says. Typically, it opens its own offices, but currently is discussing plans for some possible acquisitions, he says.


The companys main challenge to continued growth in the Spokane area involves the tightening labor market here, Wrigglesworth says. In the past, insurance brokerages stole employees from insurance agencies that had already trained them, but now, however, to cut costs, insurance agencies arent paying for employees training, thus leaving fewer trained people in the labor force, he says. He adds, though, that agencies are considering training their employees again because theyve found that if youre going to find somebody, you have to find a way to keep them, and training is an incentive for employees to join or to stay with a company.


Its a war for talent, and were very selective about who we hire, Wrigglesworth says. The good news is that its a little easier to get candidates to move here now than it used to be.


Payne offers a referral reward program to employees who recruit new hires, and it also attends college fairs to recruit candidates, but the primary way its dealing with a shortage of trained salespeople is by training them itself, he says. The company established a program called Payne University that trains new hires and helps its current employees develop additional skills. It also operates an internship program for college students and people who have worked in other industries and are interested in joining Payne.


Payne University is our recognition that we need to be involved in recruiting, Wrigglesworth says. Its also our way of perpetuating ourselves.


Consolidation


A tight labor market, however, isnt the only challenge Payne is facing. Nationally, the insurance industry has consolidated greatly as insurance carriers require higher volumes of product sales from their brokers, and big international and national brokerages pursue aggressive expansion plans. Because of these factors, increasing numbers of small agencies are choosing to sell out, he says.


The number of agencies is shrinking and will continue to shrink, and to survive you need to be a bit bigger, yet you also want to be small enough to be nimble, Wrigglesworth says. Controlling our destiny by being owned by ourselves is a big deal to us.


Wrigglesworth points to his former employer as an example of how often agencies, especially those owned by large companies, can change hands in the industry. In the 1970s, he joined the Spokane office of Fred S. James & Co., which, after a series of ownership changes, was sold to New York-based global insurance giant Marsh in 1998. Since then, that office has undergone several transitions, including being sold last April to Accordia Inc., a Chicago-based Wells Fargo subsidiary.


Meanwhile, several Marsh employees jumped ship early last year to work for another insurance heavyweight, New York City-based Willis Group Holdings Ltd., which left the Spokane market suddenly last July after only operating here for about six months. Spokane-based Inland Insurance Inc. bought the assets of the operation last summer.


You see that kind of thing happen a lot in this industry, and it is what it is, he says. Were fiercely independent, and that drives all of our decisions.


The company is counting on its ability to provide specialized, personal customer service to help it grow in such a competitive marketplace, he says. While its not looking to grow at the rapid double-digit rate of its largest competitors, it also wants to avoid low-single-digit growth, which would be a death dance, he says.


Our business isnt rocket science; its all about delivery, and if you take care of your clients, youll be successful, he says.


The company decided early on that to stay lean, it would adopt a style called silo management, Wrigglesworth says. The agency is divided into seven silos, rather than being divided by office location or region.


The silos, which are overseen by separate managers, include commercial, financial services, personal lines/small commercial, surety, administration, accounting, and information technology.


Such a style requires its managers to travel a great deal, and also means that employees must be self-starters, since their manager might not be based in their office. It also, however, has made the company more efficient by eliminating a layer of management, he says.


Contact Emily Brandler at (509) 344-1265 or via e-mail at emilyb@spokanejournal.com.