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While other brokers focus on acquisitions, Lockton Cos. L.L.C. keeps its eye on organic growth and the talent that makes organic growth happen.
Lockton's successful organic growth has been achieved “to a significant degree by attracting top-notch talent,” said Timothy J. Cunningham, managing director of Chicago-based investment banking and consulting firm Optis Partners L.L.C.
“Organic growth creates opportunities for our associates. Acquisitions generally create opportunity for redundancy,” said David Lockton, chairman of Kansas City, Missouri-based Lockton.
“We believe we are the most desirable place to build a career in the brokerage industry, and it all begins with the underlying premise that we are in the business to serve others,” said John L. Lumelleau, Lockton's president and CEO.
“One of the things we're doing is really ramping up our college recruitment and international programs and our associate development programs,” seeking to “continue to be the best place that a person could choose to go to work,” Mr. Lockton said.
Lockton's efforts resulted in a 10.2% increase in its 2014 brokerage revenue, which rose to $1.23 billion in 2014, making it No. 10 in Business Insurance's 2015 ranking of the world's largest commercial insurance brokers.
Lockton's commercial retail brokerage business from U.S. offices grew 9.2%, to $588.1 million while its non-U.S. office revenue grew 11.5% to $206.7 million.
Employee benefits revenue increased 14.8% to $347.4 million. The company includes retirement services revenue in its employment benefits data.
“We're pleased that our international and our U.S. operations grew at about the same pace,” Mr. Lockton said.
“We had a great year in employee benefits, and we had a great year in retirement services, which is an area that we believe we have a lot of upside potential, and we added over 300 great new associates to bring our total number to 5,600-plus,” Mr. Lockton added.
“Every year, throughout our history, we've brought on more new business than we did the year before,” Mr. Lockton said.
“We don't think there's any lack of opportunity. There's plenty of market share left. The biggest challenge is to maintain and improve the quality of our associates and to provide the same level of services our customers have become accustomed to,” he said
Being private helps, said Mr. Lockton.
“We believe that private ownership is the most sustainable form of ownership for a professional services business,” Mr. Lockton said.
“Customers would not allow their accounting firm or their lawyers to file a public offering because they believe that the shareholders would be their first loyalty, and we want to make sure our customers are our first priority,” said Mr. Lockton, who added that the firm has no plans to go public.
Expanding the insurance brokerage's international capabilities is on the agenda for this year, Mr. Lumelleau said.
“Last year, we added one office in Glasgow, but our geographic footprint will continue to grow this year,” Mr. Lumelleau said. “Where we find great people, we will add great operations.”
“I would also say, though, that the changes we see to the business are not only geographical, but are also critical areas of professional expansion,” Mr. Lumelleau said.
Lockton's retirement business, for instance, grew 20% last year over 2013, “and we expect to triple that in the next few years,” Mr. Lumelleau said.
“As more and more people take responsibility for their own financial futures, it's a need and an opportunity for Lockton to assist them, so we see a tremendous opportunity” for growth in that business,” he said.
Mr. Lumelleau said he also sees an opportunity to expand Lockton's global energy practice, including in the United States, United Kingdom, the Middle East and Asia.
Lockton also has taken steps to plan for the future. During the summer, it announced that Ron Lockton, 48, who is the son of late company founder Jack Lockton and the nephew of David Lockton, has been named vice chairman and that he will take on broader global leadership responsibilities.
“He and I have been working together to assure a smooth succession plan, and he will be taking on additional responsibilities going forward around the globe,” said David Lockton, who has not yet set a specific retirement date.
Ron Lockton previously headed the broker's Kansas City property/casualty operation, according to a company statement.
Private equity-backed buyers again dominated mergers and acquisitions of insurance agents and brokers during the record-setting first half of 2015.