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Top insurance brokers, No. 9: USI Insurance Services LLC

Posted On: Jul. 1, 2019 12:00 AM CST

Mike Sicard

2018 brokerage revenue: $1.67B

Percent increase (decrease): 1.9%

Fallout from the integration of former rival Wells Fargo Insurance Services USA Inc. crimped USI Insurance Services LLC’s revenue growth last year, but the brokerage remains well-positioned for future expansion, analysts say.

In particular, USI’s investment in technology helps facilitate communication and collaboration throughout the firm, they say.

The Wells Fargo Insurance deal in 2017 more than doubled USI’s revenue. USI maintained its ninth spot in Business Insurance’s 2019 rankings with $1.67 billion in 2018 brokerage revenue, but that represented less than a 2% over 2017’s pro forma revenue.

The limited increase in revenue is a result of an expected decline in Wells Fargo Insurance revenues resulting from the departure of producers prior to the announced sale of the business to USI, which USI has largely stemmed, according to Ed Bowler, USI’s chief financial officer. The lack of investment in the Wells Fargo business prior to the announced sale was also a drag on growth, he added.

Over the past two years, however, the brokerage has added more than $600 million in revenue and 3,000 staff through mergers and acquisitions, according to Mike Sicard, chairman and CEO of USI. Other significant acquisitions include the May 2018 closing of the previously announced purchase of Key Insurance & Benefits Services Inc., formerly part of KeyBank, headquartered in Buffalo, New York.

Mr. Sicard said “the past 18 to 24 months have been one of the most exciting growth periods” since he joined the broker as chairman and CEO in 2007.

USI’s proprietary Omni technology system helps the broker, analysts said.

“They’ve created a platform that stitched together a question and answer system for thousands of employees,” so each individual employee can draw upon the collective expertise of the whole, said John Wepler, chairman and CEO of Marsh, Berry & Co. Inc., a Woodmere, Ohio-based merger and acquisition advisory and consulting firm.

USI’s Omni system is “unique to the market” and represents significant investment over multiple years, he said.

“We’re looking to lead the technological revolution in our industry,” Mr. Sicard said. “We’re still in the early stages of where this is going to go. The transactional parts of our business will increasingly become automated.”

“One of the things that helps USI integrate is the fact they do have a pretty impressive technology platform with Omni,” said Julie Herman, director in New York with S&P Global Ratings Inc.

Integration is a strength of the broker, analysts said.

“USI is very big on that full integration and bringing everybody into that platform to drive growth and efficiencies,” said Stephen Guijarro, director in New York with S&P Global Ratings, adding that USI does not appear to be focused on “pure aggregation.”

The integration of Wells Fargo’s insurance business is going well, he said.

“Losing less revenue than anticipated is one of the signals the transaction is integrating pretty successfully,” Mr. Guijarro said. “Their track record has shown that they’ve done a pretty successful job with integration.” Recent increases in property/ casualty insurance rates help USI, the analysts said.

“Rates overall are up a little bit more so than last year, so that’s a positive for USI and the brokers,” Ms. Herman said.

“The market environment is helping brokers now more than hurting them because you have positive rate and you still have positive exposure,” Ms. Herman said, but she cautioned that S&P Global has a base case risk of recession at 20% to 25% over the next 12 months.

USI has some attributes that distinguish it among brokers.

USI, Mr. Wepler noted, previously had been a publicly traded company before being taken private in 2007, differentiating them from other privately backed brokers. “They have the systems, procedures, corporate governance that goes with a publicly traded company. That gives them a little more stability than others.”

USI also has “uniquely patient capital” in owners Kohlberg Kravis Roberts & Co. LP and Montreal-based pension fund Caisse de dépôt et placement du Québec, which bought the brokerage in March 2017, Mr. Wepler said.

This gives the brokerage a “long view,” he said. “They’re focused on the types of investments they need to make today that will propel the company five, 10, 15 years from now,” such as the Omni system.