Business Insurance Lifetime Achievement Award: Alan Jay Kaufman

Taking on a business that bore his family name was far from predestined or straightforward for Alan Jay Kaufman.

As the head of his own law practice, which he started in the 1970s, he had carved out a successful career outside of his father’s wholesale insurance group and while close to his father he was under no pressure to join the business.

But in the early 1990s when, after a long career, Herbert W. Kaufman started thinking about pulling back from the day-to-day running of the company, his son’s entrepreneurial instincts took over and he saw the opportunity to build on what his father had created and develop it into what is now a significantly larger and more complex network of insurance businesses.

There were hurdles along the way, including the initial challenge of taking the publicly traded company private in a deal in which he had to “bet the ranch” to come up with the funds. But over the past nearly 30 years Mr. Kaufman has turned Farmington Hills, Michigan-based H.W. Kaufman Group, where he is chairman, president and CEO, into a leading international specialty brokerage, managing general agent, wholesaler and insurance enterprise.

In 1996, the year he took the company private, its flagship unit Burns & Wilcox reported $271.7 million in premium volume and $38 million in gross revenue. Last year, the company reported $2.41 billion in premium volume and $600 million in gross revenue.

For his achievements in building H.W. Kaufman, his leadership position in the industry and his contributions to developing the next generation of insurance industry leaders, Mr. Kaufman received the Business Insurance Lifetime Achievement Award during the U.S. Insurance Awards presentation in New York in July.

Pursuing his passions

Encouraged to pursue his passions while growing up, Mr. Kaufman’s interests originally lay far from insurance. Attending Detroit public schools, he was an Eagle Scout interested in science and a keen sportsman who hoped to play sports in college. A serious knee injury curbed his sporting ambitions but his scientific bent and love of animals led him to enter Michigan State University intending to become a veterinarian.

But he had previously run his own small enterprises, including a landscaping service, and had been exposed to his father’s insurance business, which the elder Mr. Kaufman founded in 1969. He was also interested in civics and the law, so eventually he switched to the university’s business school and after graduating attended law school at the University of Notre Dame.

Interested in international law, while at Notre Dame he spent a year abroad studying at the London School of Economics. While he was there in 1972 he spent the summer working at C.E. Heath, a Lloyd’s of London broker and underwriting agency.

“I worked at the brokerage at C.E. Heath, and I also worked on the floor of Lloyd’s at a box, so that summer was an exceptional experience,” Mr. Kaufman said.

Back in Detroit, he started practicing law, specializing in litigation, including some insurance work, before starting his own firm in 1977. The firm represented insurance companies, including work with Lloyd’s, and did other commercial work, including real estate.

“The firm grew, and I was happy, but I also saw as an entrepreneur that I was limited as to what I could do financially,” Mr. Kaufman said.

His father had taken H.W. Kaufman public in the 1980s to fund acquisitions and with each acquisition he discussed the deals with his son, who grew excited about the growth of the business.

So, in the early 1990s, when his father was getting to the point where he wanted to retire and sell his interest in the company, Mr. Kaufman started talking to him about the possibility of taking over the company.

“I had a very small interest in it, but I decided this is an opportunity of a lifetime,” he said. 

Complicating the plan, though, was his desire to take H.W. Kaufman private. The company had only funded one of its acquisitions with shares, largely because at the time insurance brokerages were not seen as companies whose stock would grow significantly and sellers wanted cash. Yet, it still had to shoulder the regulatory and legal costs and burdens associated with a public company. 

“I thought that the best way to take over the company — for the future, for me — would be to take the company private and become the sole shareholder,” Mr. Kaufman said.

Going private

It was a long and complicated leveraged buyout process, which had to be an arm’s length transaction not involving funding from his father. Mr. Kaufman had to raise funding personally, including mortgaging his home. “It was the biggest gamble of my life.”

The deal closed in January 1996. His father stayed on as president of Burns & Wilcox and remained associated with the company until his death in 2001. The rest of the staff were retained, many of whom are still with the company.

One of the first major actions Mr. Kaufman took was to buy an insurance company to provide the brokerage with some flexibility in placing risks when other insurers backed away from markets.

Initially, he formed a captive and fronting company before buying USF Insurance Co. in 2001. He later changed its name to Atain Insurance Co. 

“It has enabled us to write business in certain states where companies had pulled out or where we couldn’t get contracts with companies because some companies would have an exclusive with a competitor,” he said.

Atain also does business with other wholesalers, and it writes only about 5% of business generated by Burns & Wilcox, he said.

Mr. Kaufman continued to make acquisitions and expanded the company beyond its Midwest base, including key acquisitions in California, Louisiana and Texas. 

There was significant consolidation in the brokerage sector, and sometimes it took an innovative approach to secure a deal. For example, the owner of Southern Insurance Services Inc., a brokerage in New Orleans, was pursued by several buyers in 2000, but Mr. Kaufman approached him to find out what he wanted out of a deal.

“I said, ‘What do you really want to do?’ He said, ‘I want one check. I want to call it a day, including my building.’ I said, ‘Done.’”

Other buyers did not want the building, but Mr. Kaufman said he simply took it as part of the deal and later sold it.

“People sometimes get involved in the minutiae,” he said. “I did not want the building either, but I wanted the company.”

The arrival of private equity funding in the insurance sector has driven up the cost of acquisitions in recent years. He first saw the influence of private equity in the industry when he tried to buy Crump Group Inc. when Marsh & McLennan Cos. Inc. sought to divest the wholesaler in 2005. While he held in-depth discussions with Marsh McLennan, he was outbid by a substantial amount by private-equity firm J.C. Flowers & Co. LLC.

As a long-term participant in the business, though, he said he’s never been tempted to use private equity funding to make acquisitions because the investors usually sell the companies they buy after a few years.

“They’re going to run things in a different way than the way I want to see a business run, so we’ve never taken money from the outside all these years,” he said.

International push

He continued to make deals, particularly as he looked to expand the company internationally.

In 2012, H.W. Kaufman bought Chesterfield Insurance Group in London, which gave it an operation in a market it had long traded with, and the deal also allowed it to expand into Canada, where Chesterfield also had operations. Burns & Wilcox now has offices in several locations in Canada, which doesn’t have a separate surplus lines market but there is a high demand for specialty brokerage expertise, Mr. Kaufman said.

The Lloyd’s brokerage and U.K. operations have grown as the company has made more acquisitions. Burns & Wilcox also established operations in Amsterdam and Santiago, Chile. 

H.W. Kaufman continues to be privately owned and two of Mr. Kaufman’s three children chose to join the business, after also qualifying as lawyers. Among other corporate roles, Daniel Kaufman is president of Burns & Wilcox, and Jodie Kaufman Davis is president of Burns & Wilcox Canada, which she joined after working at an international law firm.

Outside of the company, Mr. Kaufman is involved in several nonprofit organizations, including the Detroit Zoological Society, and in 2016 he endowed a professorship in insurance at the Eli Broad College of Business at Michigan State.

“They have an excellent business school, but they did not have one class on insurance,” he said. Now, the school has an insurance and risk management minor.

Looking ahead, he sees insurance as a great business for anyone looking for a career. 

“You don’t have to sell insurance; you have to sell the company. People have a choice of where to go, but they need insurance. That’s not going to change,” he said.

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ABOUT THE AWARD

The Business Insurance Lifetime Achievement Award recognizes an individual whose outstanding contributions have had a lasting impact on the insurance and risk management sector. The honorees are also inducted into the Business Insurance Hall of Fame. The award was first presented in 2017 to Patrick G. Ryan, chairman and CEO of Ryan Specialty Holdings Inc. The 2018 honoree was Maurice R. Greenberg, chairman and CEO of C.V. Starr & Co. Inc.; the 2019 honoree was Martin P. Hughes, executive chairman of Hub International Ltd.; the 2020 honoree was Kevin Kelley, retired vice chairman of Liberty Mutual Insurance Co.’s Global Risk Solutions business; the 2021 honoree was Brian Duperreault, who retired as executive chairman of American International Group Inc. later that year; and the 2022 honoree was J. Patrick Gallagher Jr., chairman, president and CEO of Arthur J. Gallagher & Co.