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Top insurance brokers: Lockton Cos. L.L.C.


Top insurance brokers: Lockton Cos. L.L.C.

Lockton Cos. L.L.C. had a solid performance in 2015 and expects more of the same this year, as it stays the course as a private firm.

“They're pretty impressive,” John Wicher, principal of John Wicher & Associates Inc. in San Francisco, said of the Kansas City, Missouri-based insurance brokerage.

Being able to stay private is “very, very difficult,” and “Lockton has done something pretty special in that they've grown to $1.3 billion in revenue” while maintaining that status, Mr. Wicher said.

This allows Lockton to offer employees higher compensation than publicly held brokers, which has helped the firm recruit “higher performance-type producers,” he said.

“I don't know another firm that's been able to grow and achieve the sort of revenue level that they have achieved without being ultimately put in the position of needing to do a public offering to grow or look to private equity for capital,” Mr. Wicher said.

Lockton reported $1.33 billion in 2015 brokerage revenue, up 8.0% from a year earlier, moving it up one notch to No. 9 in Business Insurance's 2016 ranking of the world's largest commercial insurance brokers. Gross revenue increased 7.8% to $1.34 billion.

The 50-year-old company plans to remain private, said Executive Chairman David Lockton

“We have laid careful plans to remain private well into the next generation of Lockton,” he said.

Being private “allows us to concentrate on the two most important factors in the business” — client-facing professionals and clients, said John L. Lumelleau, Lockton's president and CEO. “Our industry is populated with very successful firms, but we like the advantages of our private ownership because it really does give us greater opportunity to focus on what clients need and what professionals want to achieve in their careers.”

This means “Lockton can allocate financial resources to its employees,” and has the ability “to spend the necessary time developing solutions for our clients. It all adds up to one big advantage to our privately held status,” Mr. Lumelleau said.

Lockton continues to focus primarily on organic growth, helped by its 95% client retention rate, said Mr. Lockton. “We have been able to best that the last couple of years.” Having to replace only 3% to 5% of your clients demands only a “modest sales effort,” he said.

Meanwhile, “We continue to see expansion opportunities for us around the world, not only in various industry segments, but in the geographic sense when we look at our three core businesses: international, U.S. retail and benefits,” Mr. Lumelleau said.

“More specifically, a big part of our expansion has been building out our presence in marine insurance,” with the formation of a joint venture, LCH Lockton Pte. Ltd. in Singapore, and the acquisition of P.L. Ferrari & Co. in Genoa, Italy, which was announced in June, Mr. Lockton said. Both companies have management and leadership that “are a great cultural match for our company in that they are very entrepreneurial,” he said.

Lockton has entered five new countries through acquisitions or organically: Italy, Monaco, Greece, Jordan and Morocco.

Energy is a significant business.

“Despite the fact that the global energy and commodity markets are in recession, from the standpoint of those industries, we have been continuing to add talent in our Lockton global energy business, and we have been building that practice out with expansion into London, Dubai and Bermuda as well as continuing in the U.S.,” said Mr. Lumelleau.

Retirement is another growth area for Lockton, said Mr. Lumelleau. Started just 10 years ago, “we see dramatic opportunities in front of us as the working population and the baby boomers continue to exit the market” and as “the next generation continues to think proactively about their financial futures,” he said.

Then there's the growth potential of the benefits business, particularly outside the U.S., which Mr. Lumelleau called “a driving force in our growth in the last decade or more.”

Lockton announced last month that Glenn A. Spencer, Lockton's global chief operating officer and president of its U.S. operations, will become president and CEO when Mr. Lumelleau retires, effective May 1, 2017.

“Glenn is an industry veteran who has over the last 11 years taken on increasing responsibilities at Lockton. At each opportunity, he's clearly demonstrated his leadership skills,” Mr. Lumelleau said.

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