Everybody dies–and most people, if they’re lucky, get to retire.
That means you can sell an awful lot of life insurance and annuities. The only problem, according to Colby Arceneaux, is the highly regulated and expensive industry is difficult to get into. Among other complexities, companies have to become individually licensed in every state in which they operate.
So, rather than starting up in the insurance industry, Arceneaux bought his way in. In 2018, he and longtime friend and second-generation life insurance agent Derek Hebert shelled out $7 million to acquire the then 106-year-old insurance company that would become Upstream Life Insurance Company. Today, the company mainly sells annuities–investments designed to provide steady income streams in retirement–to independent marketing organizations (IMOs) that connect insurance companies with brokers.
That’s not cheap, of course. But the two southern Louisiana natives managed to turn what they called a “forgotten” business into the No. 3 fastest-growing private company in America this year. In 2020, the insurance powerhouse booked $194 million in revenue, which had grown 36,955 percent since 2017.
How’d they do it? Good old-fashioned relationship building. “We’re not doing this like, ‘Hey, sell our stuff because you’re a commodity to us.’ Because you’re not,” Arceneaux says.
How It Works
Companies like Upstream don’t need to hire thousands of salespeople to get their annuities into consumers’ hands; they just need to know the people who run the IMOs, Arceneaux says. In Hebert’s father, they had a number of connections. He has been running his own life insurance sales and financial planning agency for 40-plus years, known as the Hebert Advisory Group.
So the duo had an in, but they still had to do the work, Arceneaux says. “We used everything we learned from being from the South,” he says. “And it didn’t take long.” They worked the phones and, pre-pandemic, met with folks in person, bringing clients and their families down to New Orleans to catch a Saints or Pelicans game. The face time eventually panned out. Upstream started selling policies in the second quarter of 2019, and by the end of the year it had generated $36 million in revenue.
Hebert had long known that a little finesse can go far. He’d been an insurance agent with his father’s firm before he and Arceneaux started Upstream. He even sold Arceneaux his first life insurance policy. So, in 2015, when Hebert mentioned the idea of starting up, Arceneaux listened. Hebert boiled down: Consumers pay money into a life insurance policy to ensure dependents or other expenses will be taken care of when they die, or they can buy annuities. Hebert and Arceneaux would then invest consumers’ premiums in bonds and stocks to generate returns. At the time, Arceneaux was working as CFO of his father’s oil and gas company, so he had the financial acumen to handle the money, while Hebert would take care of sales.
After realizing the full thrust of the regulatory hurdles involved with starting up from scratch, the duo hired a broker to comb the acquisition options. They landed on Financial Assurance Life Insurance Company, a subsidiary of Kansas City, Missouri-based insurer Americo. At the time, it held licenses in 24 states.
Since then, Upstream has been on a tear–which, in part, has been spurred on by the pandemic. During the past year, Americans panic-bought toilet paper, hand sanitizer, and, as it turns out, annuities. The company says it saw interest reach breakneck speeds by mid-May, as people’s heightened anxieties about the economy and their health drove them to seek shelter in so-called safer assets–like annuities, Arceneaux says. In some weeks, he adds, Upstream was taking in $33 million in revenue.
By August 2020, the business had to work to counteract the surge. It sounds counterintuitive, but in the insurance business, too much growth can work against you, Arceneaux says. Life insurers are legally obligated to get a return on all the money they take in. So, if they sell policies faster than Arceneaux can buy stocks and bonds to invest the money in, the company could break its “fiduciary duty” to get returns on consumers’ cash. The businessmen shifted their offering, pricing their return rates on the annuities so low that they weren’t competitive.
While the pandemic doesn’t appear to be abating, Upstream’s owners plan to grow beyond annuities. By 2022, Arceneaux says, his company should have a foothold in life insurance, which he expects will deliver future gains: “Once you’re in the business, the scale of it is really astonishing.”
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