Reliance Global Group, Inc. (NASDAQ:RELI) is an InsurTech pioneer, leveraging artificial intelligence (AI) and cloud-based technologies to revolutionize the insurance agency/brokerage industry. The company's business-to-business InsurTech platform, RELI Exchange, provides independent insurance agencies with a comprehensive suite of business development tools, enabling them to effectively compete with large-scale national insurance agencies while reducing back-office costs and burdens. Additionally, the company's business-to-consumer platform, 5minuteinsure.com, utilizes AI and data mining to provide competitive online insurance quotes within minutes to everyday consumers seeking to purchase auto, home, and life insurance.

Business Overview

Reliance Global Group's Growth Strategy and Acquisitions

Reliance Global Group has adopted a strategic "One-Firm" approach, uniting its nine owned and operated insurance agencies nationwide to function as a cohesive business unit. This strategy has granted the company access to higher commission tiers and created extensive cross-selling opportunities, driving significant revenue growth. In the first six months of 2024, the company reported revenue of $7.3 million, a 3% increase from the same period in the prior year.

The company's growth strategy also includes an aggressive acquisition plan, primarily focused on acquiring undervalued wholesale and retail insurance agencies with operations in growing or underserved segments. As of June 30, 2024, Reliance Global Group has acquired nine insurance agencies, including Fortman Insurance Agency, Southwestern Montana Insurance Center, and Barra & Associates.

Pending Acquisition of Spetner Associates

One of Reliance Global Group's most significant pending acquisitions is the acquisition of Spetner Associates, a well-established benefits enrollment company that, through its BenManage benefits enrollment company, is a leading provider of voluntary benefits to over 85,000 employees throughout the United States. Since the initial announcement of the acquisition, Spetner's BenManage segment has experienced impressive growth, more than doubling its covered employees.

The Spetner acquisition is expected to be transformational for Reliance Global Group, with projections suggesting it will double the company's annual revenue to approximately $28 million and significantly boost its EBITDA. The company believes that Spetner's unique voluntary benefits programs and extensive market reach will provide considerable synergistic opportunities, particularly in expanding Reliance's personal insurance lines through the RELI Exchange platform.

Diversification into Real Estate

In addition to its insurance-focused operations, Reliance Global Group has recently announced the formation of a new Real Estate division. The company has appointed Abe Miller, a successful real estate investor and M&A executive, to head this new division and provide strategic guidance on future real estate transactions.

The new Real Estate division is intended to supplement, not replace, Reliance's focus on acquiring accretive and cash flow-positive insurance agencies. The company believes that this expansion into real estate will broaden its portfolio by diversifying into multiple business lines and asset categories, while also allowing the company to leverage non-dilutive financing sources supported by the intrinsic value of the assets and its operational cash flows.

Financials

For the fiscal year ended December 31, 2023, Reliance Global Group reported annual revenue of $13,731,826 and a net loss of $12,009,982. The company's annual operating cash flow was -$847,970, and its annual free cash flow was -$1,037,781.

In the second quarter of 2024, the company reported revenue of $3.2 million, a 1% increase from the same period in the prior year. The company's net loss from continuing operations for the second quarter improved by 62% to $1.5 million, compared to $3.9 million in the same period of 2023. Reliance's key non-GAAP metric, EBITDA, showed a nominal loss of $178,000, or just under 6% of revenues, in the second quarter of 2024.

Liquidity

As of June 30, 2024, Reliance Global Group had a cash balance of approximately $2.8 million and working capital of approximately $600,000. The company has also simplified its capital structure by removing the Series B derivative instrument from its balance sheet and eliminating the potentially perceived significant warrant overhang through the exercise of all outstanding Series B and Series G warrants.

During the first quarter of 2024, the company entered into an At Market Issuance Sales Agreement, which allows it to offer and sell shares of its common stock from time to time. As of the date of this report, the company has approximately $1.7 million remaining in its ATM Capacity.

Outlook

Reliance Global Group remains focused on executing its strategic initiatives, including the pending acquisition of Spetner Associates and the launch of its new Real Estate division. The company believes the Spetner acquisition will be transformational, doubling its annual revenue and significantly boosting its EBITDA.

Additionally, the company is committed to further enhancing its RELI Exchange platform and rolling out new services to its agency partners. Reliance Global Group's mission is to build a multi-billion-dollar, highly profitable business enterprise that delivers substantial and sustainable returns to its shareholders.

Risks and Challenges

Reliance Global Group operates in a highly competitive insurance intermediary market, facing competition from numerous firms for customers and insurance companies. The company also faces risks related to the entrance of technology companies into the insurance intermediary business and the ability of some customers to self-insure.

The company's growth strategy, which includes aggressive acquisitions, also carries integration and execution risks. Additionally, the company's reliance on a limited number of large customers for a significant portion of its revenue could have a material adverse effect if any of these customers were lost.

Conclusion

Reliance Global Group is an InsurTech pioneer, leveraging innovative technologies to transform the insurance agency/brokerage industry. The company's strategic initiatives, including the pending Spetner Associates acquisition and the launch of its new Real Estate division, position it for significant growth and diversification. While the company faces competitive and operational risks, its focus on technological innovation and its proven track record of successful acquisitions suggest a promising future for Reliance Global Group and its shareholders.