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Blackstone, Goldman Sachs Back New Insurance Agency Serving Life, Retirement, Health Products

Posted on 07 Jul 2009

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Blackstone Group LP, Goldman Sachs Group Inc. and Credit Suisse Group AG are backing a new U.S. firm marketing insurance to small businesses and middle-income individuals.

Insphere Insurance Solutions will sell life, retirement and health products through 3,500 agents when the Dallas-based firm launches in January, the company said in a statement. Funding comes from a $1 billion private equity investment made in 2005 in HealthMarkets Inc., a predecessor firm whose agents will be retrained as the Insphere sales force, said Phillip Hildebrand, chief executive officer of both companies, in an interview.

“What attracted Blackstone and Goldman Sachs was HealthMarkets' agents,” Hildebrand, 56, said yesterday. “We had an asset many companies are without -- a delivery platform to take it to the customer. We said, ‘We have all these agents, why don’t we put them to work?’”

Firms including Goldman Sachs and Morgan Stanley have been investing in middlemen to generate fee income from insurance without taking on the risk of losses on investment portfolios backing policies. Insurers including Hartford Financial Services Group Inc., Liberty Mutual Group Inc. and Unum Group have been seeking to add smaller customers as larger clients pressured by the recession use their scale to demand lower rates.

Management Stake

Hildebrand spent more than three decades at New York Life Insurance Co., the biggest policyholder-owned U.S. life insurer, and was named vice chairman by the company in 2006. He said he was recruited by Blackstone to take over at HealthMarkets a year ago and installed his own senior management team to overhaul the firm. HealthMarkets was named UICI before the buyout, for about $1.7 billion, was completed in 2006.

Blackstone, Goldman Sachs and Credit Suisse will own about 80 percent of Insphere, Hildebrand said. Sales agents will own 12 percent to 15 percent of the company, and management the rest, he said.

Insphere will sell policies created by HealthMarkets, as well as those of ING Groep NV, the Dutch bank and insurer, and is in talks to add products from more insurers, Hildebrand said. The company defines middle-income customers as those earning $50,000 to $250,000 a year.