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Happenstance led to Martin P. Hughes taking a job in the insurance industry more than 45 years ago, but hard work, exceptional leadership skills and an ability to get the best from a wide range of different teams were some of the drivers behind his success building Hub International Ltd.
After establishing himself as a top producer in his native Chicago growing his own, then his firm’s, books of business via his insurance expertise and sales skills, over the past two decades he’s led Hub through close to 500 acquisitions that have helped make it the world’s sixth-largest insurance brokerage.
And as one of the first private equity-owned brokerages to pursue a strategy of rapid growth through acquisitions, Mr. Hughes and Hub helped blaze the way for numerous others.
For this and many other accomplishments, Mr. Hughes, executive chairman of Hub, is the 2019 recipient of the Crain Lifetime Achievement Award, sponsored by Business Insurance. He received the award during a ceremony at the U.S. Insurance Awards in New York in March.
Born and raised on the south side of Chicago, Mr. Hughes attended Mount Carmel High School in the Woodlawn neighborhood of Chicago and graduated with an accounting degree from the University of Illinois at Chicago.
In 1973, after turning down an offer to join accounting firm Price Waterhouse because he did not want to move to Omaha, Nebraska, where the job was located, he interviewed with Chicago brokerage Mack & Parker Inc. During the interview, it became apparent that the accounting position that had been advertised was in fact an account executive position.
“So they said, ‘We are here for the wrong reasons but we have the hour set aside anyway, so would you like to just go through the interview?’ so I said sure,” Mr. Hughes said. After a second interview, he was offered a sales training position.
Mack & Parker’s business was about 95% employee benefits, but the firm wanted to diversify into property/casualty insurance. On his return from a two-month training program run by Aetna Casualty & Surety in Hartford, Connecticut, Mr. Hughes set about calling on prospects to develop the fledgling book.
By 1980, he was running Mack & Parker’s commercial lines business, which consisted of middle-market accounts in the Midwest.
“Because Mack & Parker was dominated by health care, I had to learn everything,” Mr. Hughes said.
That willingness to learn helped him grow the book and achieve personal financial success. “The great thing about the business, if you are willing to really commit yourself to it and work really hard, it’s almost like owning your own business without all the responsibilities of owning a business.”
In 1980 at age 32, Corroon & Black, which was later merged into what is now Willis Towers Watson PLC, offered to make him president of its Midwest operations.
“Mack & Parker was a family-run firm and I loved it, but I also knew that this was the opportunity of a lifetime and I just couldn’t pass it up,” Mr. Hughes said.
In response, the Mack family offered him a deal whereby he could exercise options to buy a third of the company. “That was a whole new revelation, so I stayed,” Mr. Hughes said. Four years later, he and Ed Mack, the grandson of the founder, bought the brokerage.
In 1999, when Mack & Parker reported nearly $12 million in brokerage revenue, Prem Watsa, CEO of Toronto-based Fairfax Financial Holdings Ltd., offered to buy the brokerage and fold it into Hub, which was then a Canadian brokerage, and make it the bridgehead for Hub’s expansion into the United States.
The strategy was to take the firm public and grow rapidly through acquisitions. Mr. Hughes was named CEO of Hub while Richard A. Gulliver, his Canadian counterpart, was named president, and they set about building the firm together.
In 2000, Hub bought C.J. McCarthy Insurance Agency Inc. in Boston, which had roughly $12 million in brokerage revenue, and went on to make several more acquisitions, including the Kaye Group Inc. in 2001, which had $47.2 million in brokerage revenue, and Albuquerque, New Mexico-based Talbot Financial Corp. in 2004, which had about $100 million in brokerage revenue.
Managing a stream of M&A deals was a new experience for Mr. Hughes. “I became CEO of a company whose mission was to do acquisitions and was a public company, and I had no experience with either. It was a total leap of faith.”
But as he worked with the agency managers who joined Hub through the various acquisitions, Mr. Hughes’ ability to motivate the new teams and include them in business decisions helped build a unified firm, Mr. Gulliver said.
“He focuses on you and the team. He allows you to speak up and say the things that you think are the right things to be highlighted in a business strategy, and you feel that you are part of the outcome. He allows you to take ownership, and then he has your back if it doesn’t work out,” he said.
As a result of that support, Hub staff “feel that they need to get the job done, do it right and do it with class. He brings that out in people, which is an amazing talent,” Mr. Gulliver said.
For about 18 months after the Talbot deal, Hub focused on integration, upgrading its operational resources and growing the business organically.
In 2007, the brokerage took another turn when private equity investment firm Apax Partners led a $1.9 billion buyout of Hub and took the firm private. Apax paid $41.50 a share for Hub, which was trading at $26 at the time.
The deal set off what became a trend of private equity-backers buying brokers and using them as vehicles to roll up smaller firms.
“We broke the mold and it caused a lot of private equity money to pour into the industry … people began to see our results and started to do more research on it and recognized that this is a business with repeatable income — and if you are able to keep what you have, grow it organically and do M&A, what a great business,” Mr. Hughes said.
In 2013, Hellman & Friedman LLC bought Hub for $4.4 billion. The San Francisco-based private equity firm remains Hub’s largest investor, but last year Toronto-based Atlas Partners LLP took a substantial minority stake.
There is little pressure on Hub to return to public ownership, Mr. Hughes said.
“There is so much capital in the world — pension funds, sovereign nation funds — looking for places to invest their money, and we are a fabulous spot for them to do it, so I don’t see us being forced to go back into the public arena anytime soon,” he said.
Also in 2018, Mr. Hughes became executive chairman of Hub, and Marc Cohen, who joined the company in 2001 with the Kaye acquisition, became CEO.
Looking ahead, Mr. Hughes said he sees lots of potential for insurance brokers and that he does not expect his firm to be disintermediated by technological developments.
“We have the affiliation with the client, the client has the relationship with us, and with the development of artificial intelligence and the abundance of capital that exists in the world today, there’s great opportunity for us to control our destiny in ways that just weren’t possible five to seven years ago,” he said.
ABOUT THE AWARD
The Crain Lifetime Achievement award, named after the family that founded Business Insurance, recognizes an individual whose outstanding contributions have had a lasting impact on the insurance and risk management sector. The 2018 honoree was Maurice R. Greenberg, chairman and CEO of C.V. Starr & Co. Inc. Mr. Greenberg and the 2017 honoree, Patrick G. Ryan, chairman and CEO of Ryan Specialty Group LLC, were also the first inductees into the Business Insurance Hall of Fame in 2018.
Seven years ago, when supposed retiree Patrick G. Ryan launched what is now the third-largest wholesaler in the United States, no one should have been surprised.