Government & Politics

Burns & McDonnell’s silent partner in the KCI deal keeps a low profile

Burns & McDonnell has claimed the spotlight in its unsolicited $1 billion plan for a new terminal at Kansas City International Airport.

Its partner has stayed off stage.

Americo Life Inc., a longtime Kansas City-based insurance group, has offered only a single public quote — in the news release announcing the proposal more than two weeks ago. Since then, it has declined to answer questions.

The company holds the critical role of lining up private financing for Burns & McDonnell’s proposal for the exclusive right to design, build and privately finance the new terminal, one of the largest public projects in the city’s history.

Questions about Americo Life and its ability to pull off the financing are pressing, especially with the Kansas City Council’s fast-approaching June 15 deadline to vote on the offer.

Has the company arranged financing for any airport projects or terminals? Has it ever arranged financing for a $1 billion project?

Burns & McDonnell spokeswoman Kristi Widmar acknowledged Friday afternoon that executives with the engineering firm do not know.

Burns & McDonnell issued a statement Saturday saying it is “completely confident with Americo’s ability and experience with financing projects like this.” The company also called Americo “a respected and trusted hometown company. We are proud to have them as our partner.”

“We build and design airports, and they invest in municipal projects,” said David Frantze, a Kansas City real estate attorney working with Burns & McDonnell on the KCI proposal. “We thought it was the right fit for a Kansas City team.”

Frantze also said Americo Life has talked with its market contacts about the deal and gotten a generally affirmative response.

As for Americo Life, the company’s website says its assets total $6.3 billion and its payroll holds more than 350 names. Americo Life also calls itself one of the nation’s largest privately held life insurance companies.

By themselves, these few facts shed little light on the company’s ability to bring other people’s money to the KCI deal. And so far, Americo Life and Burns & McDonnell have offered little to establish its financing expertise.

“We don’t know who we are doing business with, exactly,” Quinton Lucas, a Kansas City Councilman, said of the partnership, named Terminal Developer LLC.

Like other privately held companies, Americo Life guards its financial information closely and is under no obligation to share details publicly. Burns & McDonnell, front-and-center in this deal, is also a private company and volunteers only select financial information and details about its experience in various projects.

An examination by The Star showed that Americo Life has a long history in Kansas City as a profitable and growing life insurance business.

It also revealed the company’s position inside the sprawling collection of corporate entities controlled by the family of Kansas City businessman Michael Merriman. He is the third generation to lead the Merriman family enterprise in Kansas City that began in 1919.

And it confirmed that Merriman’s preference to stay out of the spotlight has been standard practice for decades.

Big reach

The center of the Merriman family’s corporate empire is an umbrella business with a plain vanilla name: Financial Holding Corp.

The name is emblazoned in gilded letters across the south-facing entrance of the classical architecture headquarters building near Quality Hill. The company has had a hand in much of the development around its corporate home.

Americo Life is only one of 66 corporations and partnerships that make up Financial Holding Corp. The holdings spread across nine states, with most of them registered in Missouri or Texas.

All of it, according to Missouri insurance records, is controlled by Michael Merriman, who owns 18.95 percent of Financial Holding Corp., and his sister Marybeth Sotos, who owns 12.18 percent.

Business and civic leaders interviewed by The Star point out that the Merrimans were instrumental in saving downtown Kansas City through their real estate investments. They worked in large part through their association with Kansas City-based DST Systems, whose own headquarters stands nearby.

“They’ve been involved with DST and the whole rejuvenation of Quality Hill from the very beginning,” said Buzz Willard, president and chief executive of Tower Properties.

The Merrimans’ local reach extends to other noted real estate developments, including the IRS building near Pershing Road and Broadway, the downtown headquarters for Kansas City Southern and the Kirkwood Condos south of the Country Club Plaza.

Other Merriman family holdings have included Lenexa-based Clinical Reference Laboratory Inc., which has 600 employees. Tim Sotos, who is Michael Merriman’s brother-in-law, has led Clinical Reference Labs as CEO and remains its chairman.

For many years, Americo Life owned half of Kansas City-based Argus Health Systems. Its partner in the pharmacy claims processing company was DST Systems, which bought Americo Life’s half in 2009 for $57 million.

Strong connections

While Merriman is hardly a household name in Kansas City, the family’s profile among corporate titans and politicians is prominent.

On the morning of Jan. 25, 2007, President George W. Bush stepped off Air Force One at the Charles B. Wheeler Downtown Airport and shook hands with a delegation there to meet him.

The group included then-Kansas City Chiefs General Manager Carl Peterson, prominent labor and employment attorney Terry Kilroy and Michael Merriman.

Merriman has contributed for years to various Republican causes.

Federal Election Commission records show he has given to the Republican Party in both Kansas and Missouri. He’s also made 11 contributions to U.S. Rep. Sam Graves, whose Northland district includes KCI.

Graves had been a critic of city-led plans to reshape KCI, but softened his stance last week with the announcement that Burns & McDonnell and Americo were involved.

The pair now faces competition from AECOM, the nation’s largest airport design firm, which has asked the Kansas City Council to be considered for the project.

  

In tapping Americo Life, Burns & McDonnell draws on the Merriman family’s business ties in Kansas City that run deep and wide.

They began with Merriman Mortgage Co., founded in 1919 by Jack Dawson Merriman. It serviced mortgage loans for the companies that held them as investments.

Jack Merriman sold the company to Kansas City-based Commerce in 1966, but not before his son, Joe Jack Merriman, joined the family business.

Joe Jack Merriman cast a higher public profile in his day. Even while working at the family’s mortgage company, he served as president of United Investors Life Insurance Co., which worked with Waddell & Reed to manage and sell mutual funds.

He also became Waddell & Reed’s president and helped arrange for its sale in 1969.

Joe Jack Merriman remained involved in Financial Holding Corp. as its chairman and treasurer, even after he moved in 1994 to Palm Beach, Fla., according to records the company submitted to Missouri’s secretary of state.

By mid-1994, his son Michael A. Merriman had become Financial Holding Corp.’s president.

About that time, the company issued $100 million in bonds that turned the closely held family insurance business into an open book — as open as companies such as Sprint or Cerner, whose shares trade on Wall Street.

The bond buyers required detailed financial information on Americo Life, and the company regularly filed quarterly and annual reports with the Securities and Exchange Commission. Americo Life said it filed the public reports “on a voluntary basis” as part of its “contractual obligations” with the bondholders.

Those records showed Americo Life was profitable and growing at least until its last disclosure in March 2003 and as far back as 1992, when it listed assets of nearly $1.55 billion.

Michael Merriman collected a $360,000 salary from Americo Life as its chairman, a paycheck that did not change from 1994 through 2002, according to the records.

In 2003, Americo Life paid off the bonds and pulled the curtain over the public’s best window into its operations.

Saving downtown

Michael Merriman has been an active player in the company’s activities, including its sizable real estate portfolio, many of which involved DST System’s real estate arm called DST Realty.

“In his younger days, he was really a force to reckon with, and I think he probably is still today,” said Michael Fitt, a former director of DST Systems.

Efforts to arrange an interview with Merriman were unsuccessful.

People contacted by The Star credit Merriman’s partnership with DST for investing in downtown Kansas City at a time when few others would.

“They together have redeveloped this part of downtown from Baltimore (Avenue) on west,” said R. Crosby Kemper III, chief executive of the Kansas City Public Library.

Before Kemper ran the library, Merriman and other DST executives, including the late Phil Kirk, helped assemble financing for the parking garage that serves the central branch of the Kansas City Public Library. Kemper said those involved didn’t make any money off of it.

“It was purely a charitable thing,” Kemper said.

Merriman’s real estate holdings aren’t solely confined to Kansas City. Broadway Square Partners, the joint venture between DST and a corporate entity controlled by Merriman, joined with JE Dunn to own slightly less than half of the Hilton Garden Inn in Kansas City, Kan. The Unified Government of Wyandotte County and Kansas City, Kan., owned the majority of the enterprise.

As evidence of Americo’s capacity to bring financing to large projects, Burns & McDonnell cited the IRS building, a $400 million venture.

“The idea of investing in infrastructure in a private fashion is not new to Americo,” said Frantze, the attorney working with Burns & McDonnell.

Frantze said Americo’s investment holdings include more than $600 million in “privately placed infrastructure-related investments” of a wide variety. He did not know whether any included airport or terminal projects.

Money at risk

To help attract financing and to keep the cost of that financing low, both companies also are putting some of their own money at risk in the deal.

But contemporary information about Americo Life’s own ability to invest is hard to come by.

Moody’s Investors Service began to rate Americo Life’s insurance business through a series of reports in 2002. It called the operation “relatively small,” labeled its earnings “modest” and noted that the company relied on independent agents to sell policies in niche markets.

Through subsequent reports, Moody’s also praised Americo Life’s attention to controlling costs, its embrace of technology and its strong investment holdings.

Financial information included in Moody’s profiles showed Americo Life’s assets, revenues and profits continued to grow.

But the Great Recession took its toll on Americo Life as it did on the rest of the insurance industry.

Employment at Americo Life fell “materially,” according to Moody’s, from 511 in early 2008 to 360 in early 2010, which is near the total Americo Life currently claims on its website. Mostly, the job cutbacks reflected cost-cutting efforts that brought operations from other regions into the Kansas City offices, the credit rating agency said.

In mid-2009, as the economic downturn officially ended, Financial Holding Corp. added $40 million in capital to its main insurance company, Americo Financial Life and Annuity Insurance Co.

The most recent financial information available shows Americo Life’s growth and profits continued into 2012, when it earned a $95 million profit on $605 million in revenues. Both totals were the largest the company had reported.

Still, in an early 2014 report, Moody’s continued to label the company’s insurances operations as “relatively small,” limited to sales through independent agents and dedicated to a “niche market focus.”

And Moody’s noted this about the parent company Financial Holding Corp.: “Moody’s believes that the private-ownership and the company’s very modest franchise and scale prevent it from having ready access to equity and debt capital markets, consequently limiting Americo (Financial)’s financial flexibility.”

The only information that Americo has provided to The Star through a Burns & McDonnell official is a spreadsheet that shows Moody’s sounds a similar refrain about other insurance companies, including industry giants TIAA, Nationwide Mutual, New York Life and Liberty Mutual.

For example, a Moody’s report in 2016 noted New York Life’s “lack of ready access to the public equity markets somewhat limits its financial flexibility” despite holding $302 billion in assets.

In any case, it was Moody’s last word. It stopped rating Americo Life’s credit in mid-2014.

State records show that Americo Life is led by its president, Philip Polkinghorn. He joined the company in 2013 and holds the same title with at least seven other businesses in the Americo corporate family tree.

Polkinghorn, along with other Americo Life officials, did not respond to calls from The Star, or referred questions to Burns & McDonnell.

Mark Davis: 816-234-4372, @mdkcstar

Steve Vockrodt: 816-234-4277, @st_vockrodt

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