Dec 11, 2019

Insurance company announces employee ownership plan

Illustration: Lazaro Gamio/Axios

Integrity Marketing Group, a private equity-backed distributor of life and health insurance products, on Tuesday told its 750 employees that they'll receive an aggregate payout of $50 million as a "recognition of their success" in growing the business. They'll also all become eligible for company stock, subject to 12-month vesting and continued employment.

The big picture: Corporate America has talked a big game in 2019 about how it must do a better job of serving all stakeholders, not just investors.

  • This is an example of a company putting its money where its mouth is, serving as a welcome rebuke to skeptics like me.

Details: Private equity firm HGGC first invested in IMG in 2016 and has used it as a consolidation platform.

  • Just this year alone, the Dallas-based company has acquired 18 smaller insurance product distributors, all around the country. Earnings over that time have grown by around 800%. HGGC did a dividend recap, and the company recently announced a minority equity investment from Harvest Partners.
  • Proceeds from that deal will be used to fund the $50 million payout — which averages out to $66,000 per employee, although actual distributions are lumpier (the smallest check size is $7,500).

What they're saying: "We got to the $50 million number by retroactively calculating what people would have gotten had we begun giving equity when we started with HGGC," says IMG CEO Bryan Adams (no, not that Bryan Adams).

  • "Equitizing employees is never a bad idea. ... I think of it as being more part of old-school private equity, which I think is coming back," says HGGC partner Steve Young (yes, that Steve Young).

The bottom line: I don't know if Young is right or if IMG and some recent KKR deals will remain exceptions to the prevailing rule. But I want him to be.

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A possible explanation for 2019's equity outflows

Data: Investment Company Institute; Note: Nov. 2019 and Dec. 2019 data are estimates; Chart: Axios Visuals

The historic outflow from equity funds this year likely has a lot to do with the aging demographics of the U.S., analysts at the Investment Company Institute say.

What it means: Shelly Antoniewicz, ICI's senior director of industry and financial analysis, says that the record flows out of U.S. and global equity funds and into bond and money market funds largely reflect older Americans' desire for safety.

Go deeperArrowDec 12, 2019

Private insurance's costs are skyrocketing

Reproduced from Kaiser Family Foundation; Chart: Axios Visuals

The cost of private health insurance is out of control, compared to Medicare and Medicaid. You see that clearly if you take a long-term view of recently released federal data on health spending.

Why it matters: This is why the health care industry — not just insurers, but also hospitals and drug companies — is so opposed to proposals that would expand the government's purchasing power. And it’s why some progressives are so determined to curb, or even eliminate, private coverage.

Go deeperArrowDec 16, 2019

Cigna's big divestiture on its life and disability insurance business

Photo: Julia Rendleman/Getty Images for Eventive Marketing

Cigna finally pulled the trigger on selling its life and disability insurance business, netting $5.3 billion after taxes from New York Life.

The big picture: Health insurers have been divesting products that have less to do with actual medical care and instead combining with companies that sell drug benefits

Go deeperArrowDec 19, 2019