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The Six Deals that Changed the Insurance Brokerage Industry
Overview
Over the last two decades, private equity (PE) investment has transformed the insurance brokerage industry. PE-sponsored brokerages, virtually nonexistent 20 years ago, have grown to dominate the top tier of largest insurance brokers and now represent 13 of the top 20 brokers listed in Business Insurance. In 2007, PE-sponsored insurance brokers represented less than 10% of total deal volume. In 2024, PE-sponsored brokers accounted for approximately 87% of all insurance broker M&A deals.
In 2007, the buyside was dominated by a handful of public insurance brokers and banks, including Bank of America, Wells Fargo, BB&T Corp., Northeast Bancorp, and Wachovia. Now there are over 50 insurance broker acquirers, the vast majority of which are sponsored by private equity capital.
This article describes the six key transactions that transformed the insurance brokerage industry over the last 18 years.
The First Two Deals - USI and HUB
A primary investment strategy of private equity is the use of levered buyouts (LBO’s). A leveraged buyout is a type of acquisition in which a private equity firm uses a significant amount of borrowed funds (leverage) to finance the purchase of a company. In an LBO, the buyer contributes a portion of the purchase price with their own equity and borrows the rest from lenders such as banks or other financial institutions. This borrowed capital is secured by the assets of the company being acquired.
The historic problem with doing an LBO for an insurance broker is that brokerages have no real assets that can be used as collateral to lend against. All the assets are intangible. The breakthrough to this problem came in
2007 when two large PE funds, Goldman Sachs Capital and Apax Partners, were separately able to convince lenders that insurance brokers’ cash flows are a solid collateral to lend against. In the first transaction, Goldman Sachs Capital took publicly traded USI (NYSE:USH) private in an LBO worth $1.4 billion. A few months later, Apax Partners took publicly traded HUB (NYSE:HBG) private in a $1.8 billion LBO.
From a timing perspective, things could not have been worse. To take a company private requires the buyer to pay a significant premium over the current market price of the stock. So not only did Goldman and Apax have to pay a premium, but they paid a premium at the top of the 2007 stock market, just before the market fell by 53% in the largest financial crisis to take place since the Great Depression.
So how did those deals turn out for investors? Despite these headwinds, the returns proved impressive. USI reportedly generated 2.5x returns over five years and HUB generated 3.5x returns over five years. For lenders, the test case of lending to insurance brokers with no real assets in a challenging environment proved lucrative. These two deals would set the stage for what was to come next.
Confie Seguros
In January 2008, Genstar Capital teamed up with John Addeo to invest roughly $60 million into a new firm called Confie Seguros. Led by entrepreneur Mordy Rothberg, Confie’s strategy was to roll up non-standard auto agencies that focused on the Hispanic community. Talk about investing courage – not only was this in the thick of the financial crisis but at that time non-standard auto agencies weren’t even an asset class in which buyers were interested. The deal was led by Ryan Clark at Genstar who would become, arguably, one of the most
successful insurance broker investors in industry. Ryan made the brilliant move of partnering with John Addeo who might be considered the godfather of insurance broker M&A. John founded Alliant and went on to start USI. His track record brought a lot of credibility to the deal.
So how did this highly speculative investment turn out? Spectacular would be an understatement. In 2012, Genstar sold Confie to ABRY Partners (another PE firm that would play a major ongoing role in the insurance broker market) for around $600 million. After paying lenders, it was reported Genstar ended up with roughly $360 million from their $60 million investment.
Parenthetically, this deal would impact the insurance broker M&A world in a different way since it led to the formation of Sica Fletcher. Mike Fletcher, a partner at insurance broker M&A advisor Hales & Company, was so impressed with the deal that he made calls to find who put the deal together. Both Genstar and Abry indicated that Al Sica of Sica Consultants made the deal happen. A deal of that size was typically reserved for bulge bracket firms, and Fletcher was so impressed Sica pulled it off he called Sica to congratulate him. Twelve years later, Sica says that Mike was the only one of his “competitors” to call and congratulate him. This led to several conversations between them where they both shared the theory that PE would have a major role in the industry going forward, which was not the consensus view at the time. They were so convinced of their thesis that they launched Sica Fletcher in 2014.
Sica Fletcher would go on to be ranked by S&P Global as the most successful insurance broker advisor of the decade, completing $19 billion in transaction value via 350 sell-side deals and leading the S&P league tables each year from 2017 to date.
Acrisure
In 2010, GCP Capital Partners made a $20 million investment in a small insurance broker out of East Lansing, Michigan with the odd name of Acrisure. Acrisure was led by Greg Williams and Ricky Norris. Williams, who came from outside of the insurance industry, thought the acquisition strategies in vogue at the time (buying an insurance broker, stripping out costs and changing everything that made the agency successful) were counterproductive and destructive of value.
Acrisure’s strategy was to make the owners who sold their businesses feel like true partners by offering them equity in the company. Instead of focusing on cutting expenses or eliminating jobs, Acrisure encouraged these former owners to continue managing and growing their businesses under the Acrisure umbrella.
As it turned out, many business owners looking to sell loved this approach. By 2013, Acrisure had closed several acquisitions and had grown to $35 million of revenue leading Acrisure to recap in a deal valued around $90 million allowing GCP to exit with a solid 3.0x return in only 3 years, a very short investment window. The new investor was Genstar. The same duo of Ryan Clark and John Addeo who had just come off their blockbuster Confie Seguros deal rolled right into this new investment, Acrisure. Acrisure would go on to become the fastest growing insurance broker in history. In 2016, Genstar exited their position in a management buyout and generated a reported 8x return on their initial investment.
The Hilb Group
In 2010, Bob Hilb, Jr. founded the Hilb Group. Bob previously worked as an executive at Hilb Rogal & Hamilton, or HRH, which was a public insurance company at the time, which was founded and managed by Bob’s father, Bob Hilb. Sr. With no capital and no revenue, Bob Hilb and Jud Elliott set out to build an insurance broker that would grow through acquisition.
When you have no institutional capital, it is hard to get traction from the banker community. Bob Hilb and Jud Elliott were able to convince industry M&A advisor Mike Fletcher to let them bid on a deal he had in market with a company named Endorsed Administrators (EAI). EAI was a specialty agency with about $3 million of revenue, extremely profitable and led by industry pioneer Jerry Jerome. The idea of the Hilb Group appealed to Jerry Jerome, and he ultimately agreed to sell to Hilb. The Hilb team put together about $5 million of their own savings and had Jerome take back a note for the rest. Keep in mind, it’s easy to do deals when you are using other people’s money and much more difficult when you are using your own savings.
After the successful EAI transaction, the Hilb Group began searching for a PE firm willing to invest. Just about every PE firm contacted turned the opportunity down except for one - BHMS Investments (BHMS). BMHS was led by Kevin DeAngelis and Robert Salomon, who at the time were both in their 20’s and had what could be described as a “friends and family” fund. BHMS liked the Hilb story and in 2011 made an investment into the Hilb Group.
In 2015, Sica Fletcher was representing Gencorp Insurance Group and Cornerstone Group, two of the largest P&C and employee benefit brokers in Rhode Island. Because Hilb’s first deal was with Mike Fletcher, Hilb had built a solid relationship with Sica Fletcher. Al Sica had an idea to combine the two extremely impressive Rhode Island firms with the Hilb Group and recapitalize them into one new company.
That is exactly what happened. In January 2015, Abry Partners closed on the $100 million dollar transaction that combined the Hilb Group, Gencorp and Cornerstone under one umbrella and under the financial sponsorship of Abry. The newly combined firm would be loaded with management talent and a great book of business.
BHMS would make 4.0x its returns on Hilb and went on to become a leading investor in the space. In 2020, ABRY sold its position in Hilb to The Carlyle Group, generating 3.5x returns. Today, Hilb is ranked as the 23rd largest broker in the U.S.
Assured Partners
It would not be too much of an exaggeration to say that Hyatt Brown of Brown & Brown was one of the founding fathers of modern insurance broker M&A. Brown & Brown, through its acquisition program, became one of the best performing stocks in the early 2000’s, and not only for insurance brokerages. From 2010 to 2024, Brown & Brown’s stock increased 1,059% in value.
In 2011, Brown & Brown executives Jim Henderson, Tom Riley and Paul Vredenburg left the firm and formed Assured Partners with the backing of PE Firm Golder, Thoma, Cressey, Rauner (GTCR). Like the Hilb Group, Assured had no revenue to get started but unlike Hilb, they did start with a capital sponsor and were not forced to boot strap their first deals.
Assured grew dramatically through acquisitions and in 2019, the business was recapitalized. GTCR exited and APAX Partners (the firm that took Hub private in 2007) stepped in. Upon exit from the Assured investment, GTCR reported returns of capital in excess of 3.0x. As of 2024, Assured Partners grew to the 11th largest broker in the United States. Its acquisition by Arthur J. Gallagher for a reported $13.45 billion is expected to close in the second half of 2025.
Conclusion
The transactions described above set the stage for the radical transformation of the insurance brokerage industry. The success of these transactions attracted huge amounts of private equity capital to the insurance brokerage space, led to the formation of many new private equity-sponsored brokers, dramatically increased both transaction volume and multiples paid for insurance brokers and led to the steady consolidation of the industry. The insurance broker LBO model has proved to be both very profitable and very resilient and has led to enormous creation of wealth for investors, for senior management of these firms and for those selling their agencies.