Top insurance brokers: Lockton Cos. L.L.C.Posted On: Jul. 20, 2014 12:00 AM CST
Lockton Cos. L.L.C.'s entrepreneurial environment, which fosters producer creativity centered on clients' needs, continues to drive the Kansas City, Missouri-based commercial insurance broker's growth.
After surpassing the $1 billion milestone in 2012, Lockton tallied nearly $1.12 billion in brokerage revenue in 2013. Despite this 10.9% surge, Lockton dropped a notch in Business Insurance's 2014 ranking of the world's largest commercial insurance brokers to No. 10 due to bigger gains by Hub International Ltd.
It posted 11% organic growth in 2013, unchanged from 2012.
Unlike brokers that have grown by acquiring other businesses, Lockton generally sees its growth driven by acquiring the best people.
Lockton's focus is giving clients specifically what they need, whether it be tailored programs, enhanced analytics or consultative services, said John L. Lumelleau, president and CEO.
“Because Lockton is privately held, they are not obsessed with profit margin metrics, so they stay focused on their clients,” said John W. Wicher, principal at John Wicher & Associates Inc. in San Francisco.
“Lockton also does very few acquisitions, meaning that they don't need to be in the capital markets,” Mr. Wicher said. “Generally, they can fund the business from operating cash flow. This was of great importance through the Great Recession when they were able to attract real talent at a time when some public brokers were cutting not just fat, but bone. You don't hear about talent leaving Lockton, rather you hear about Lockton attracting it.”
“The strength of our company is the ability to bring to bear for large clients and middle-market clients a very effective relationship-driven application of program development and broker placement,” Mr. Lumelleau said. “Whether it's in London or Singapore or here in the United States, that's where our focus is. We're engaged with our clients at every juncture around where we can help them make their businesses better.”
This emphasis on serving clients' needs is reinforced by the way Lockton compensates its producers, said Timothy J. Cunningham, managing director of Chicago-based investment banking and consulting firm Optis Partners L.L.C.
“Because producers are compensated based on their sales results, producers are very client-focused,” he said. Lockton also is known for its entre-preneurial spirit, which attracts talented producers who have the freedom to design and implement creative solutions for their clients, he said.
As such, Lockton's biggest growth challenge going forward may be its ability to continue to attract the best talent, said David Lockton, executive chairman.
“I think it's vital that we continue to attract the best talent, because you're only as good as your people are,” Mr. Lockton said. “We estimated that we may need to recruit as many as 10,000 new people over the next 10 years at all levels within the organization and worldwide.”
Indeed, much of Lockton's future growth opportunities are likely to be outside the United States, Mr. Cunningham said.
“If history is any indicator, their future growth will likely be foreign, not domestic,” he said. “They can acquire a team ... and they can help support that from other offices. It's easy to do that today with technology. There's an old adage in this business: You either buy or build. Lockton has demonstrated they buy outside of the country and they build inside of the country.”
Lockton also places a premium on hiring indigenous broker and consulting talent, Mr. Lockton said. “We're recruiting throughout Asia in countries in which we do business. It's a significant focus for us,” he said.
Lockton also is using technology to provide clients access to analytical tools to measure claims exposures, deductibles or limits of liability. It also provides health insurance exchange technology to its employee benefits clients and plans to launch a digital commerce site for direct-to-consumer insurance sales next year.
“Technology's changing our world, and we're flexible enough to change with it. We're not abandoning our existing approach, but we're adding a new stream of revenue to our already strong model,” Mr. Lockton said.
Lockton also is expanding its portfolio of financial and retirement advisory services after recruiting industry veteran Pam Popp to be president of its retirement services businesses, Lockton Financial Advisors L.L.C. and Lockton Investment Advisors, effective Sept. 2.
Lockton's retirement services business has grown from $12 billion in assets under advisement in 2011 to $32 billion now, serving 940 U.S. employer-sponsored retirement plans.