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Top insurance brokers, No. 7: Hub International Ltd.

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2016 brokerage revenue: $1.65 billion

Percent increase (decrease): 12.1%

Hub International Ltd. reported another year of double-digit revenue growth in 2016 as the private equity-backed brokerage bought dozens of smaller rivals across North America.

That acquisition-fueled growth is expected to continue as it targets large and small acquisitions and seeks growth opportunities in several specialty areas.

The Chicago-based brokerage, which is the largest privately held brokerage, made 44 acquisitions in 2016 — one more than its 2015 tally. The purchases helped drive its brokerage revenue up 12.1% to $1.65 billion making it the world’s seventh-largest commercial insurance brokerage in Business Insurance’s 2017 ranking.

Hub tends to acquire “small to medium-size multiline insurance brokers and ancillary business. That has been their sweet spot,” said John Wicher, San Francisco-based principal at John Wicher & Associates Inc.

But the brokerage is also willing to consider large deals, said Martin P. Hughes, Hub’s chairman and CEO.

“We have always been an opportunistic company, and we had done both very large deals and small deals. We think about what makes most sense for the organization. It has to fit us strategically, culturally and financially. If it passes those three criteria, then we are willing to do a deal of any size,” he said.

The brokerage sector has seen a surge in merger-and-acquisition activity over the past several years, which has driven up prices for brokerage firms. However, the deals can still be profitable for the buyers, Mr. Hughes said.

“At the end of the day, people are going to measure the arbitrage between what’s being paid and what we or public brokers are able to recognize … As long as arbitrage exists, I would say they are definitely sustainable; if the arbitrage begins to shrink, they are not,” he said.

While M&A has driven much of Hub’s growth, organic growth is important, too, he said. Hub recorded 2.5% organic growth in 2016, which is light for the brokerage, Mr. Hughes said.

“Typically if you would look at the results over the last seven years or so, Hub has always been near or at the top of the organic growth field. We think it’s important to do both of those well, and we do both of those well. For the first quarter of 2017 our organic growth was 5.5%,” said Mr. Hughes.

“They probably perform anywhere from slightly above average to above average in relation to their peers ... They are a very acquisitive company. I know, for example they will talk about how their compound annual growth rate going back 10 or 15 years has been double-digit, like around 15% and that their profit has grown by the same metric,” said Tim Cunningham, Chicago-based managing director of Optis Partners L.L.C.

Moving forward, Hub is concentrating on several specialty areas, including entertainment, marine, construction and transportation.

“We have a listed a handful of specialty areas where we really want to do well, entertainment being one,” Mr. Hughes said. “We recently brought a brokerage firm, Global Marine Insurance Agency, that does marine, yachts, and we see that as a fabulous growth opportunity for us. We see construction as another specialty arena. Transportation ... we will be doing that via a combination of strategic mergers and acquisitions of program companies in those arenas, as well bundling our own business.”

“As big as they are, it’s fairly easy to expand specialties,” said Mr. Cunningham.

Mr. Hughes said Hub’s employee benefits business, which grew to $380.3 million in revenue in 2016 from $326.0 million in 2015, is where it is seeing more growth.

“We have seen more growth from a percentage standpoint in our employee benefits business than any of our other businesses,” he said.

In September, Hub named Marc Cohen president and Lawrence Lineker executive vice president of the broker. Both report directly to Mr. Hughes. “The key hire that we had to make when we rolled out that process is we had to replace Marc in Hub Northeast, where he was president. We hired a guy named Paul Collins who has replaced Marc. Everything else we have done has been internal,” he said.