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Top insurance brokers, No. 10: USI Insurance Services LLC

Michael J. Sicard

2020 brokerage revenue: $1.95B

Percent increase (decrease): 6.4%

Mergers and acquisitions supplemented by some organic growth comprised the formula for growth at USI Insurance Services LLC in 2020.

The broker saw only marginal organic growth last year but is expected to return to mid-single-digit organic growth in 2021 and remains committed to recruiting more staff. 

Valhalla, New York-based USI reported $1.95 billion in brokerage revenue in 2020, up 6.4%, but slipped one place to No. 10 in Business Insurance’s ranking of the world’s largest brokers.

“We expect mergers and acquisitions to support growth, mainly focused on tuck-in acquisitions,” said Francesca Mannarino, a New York-based associate director at S&P Global Ratings. USI also made some “more materially sized acquisitions in 2020,” she said. 

USI’s June 2020 purchase of Minnetonka, Minnesota-based broker Associated Benefits and Risk Consulting in a $266 million cash deal from seller Associated Banc-Corp added 400 staff to USI’s ranks. 

At the time, Associated Benefits & Risk Consulting was the 39th largest broker of U.S. business, according to Business Insurance’s ranking, reporting $92.6 million in 2019 brokerage revenue, mostly employee benefits and retail business. 

In October, USI bought Nashville, Tennessee-based employee benefits and human resources company Findley Inc., which added some $41 million in annualized revenue, according to Ms. Mannarino. 

Michael J. Sicard, USI’s chairman and CEO, said 2020 was an active M&A year for the brokerage. Privately held USI does not disclose the number of deals it closes or exact revenue figures. 

Phil Trem, president, financial advisory, for Woodmere, Ohio-based mergers and acquisitions advisory and consulting company Marsh, Berry & Co. Inc., said its research shows USI completed 10 acquisitions in 2019, 10 more last year and six so far in 2021, putting the broker slightly ahead of its historical pace for deals. 

Pricing for acquisition targets is rich. “Valuations have never been higher than they are today, and they continue to go up,” Mr. Trem said, adding that pricing levels may be as much as 10% higher than just six months ago. 

“Valuations today for the industry are at the highest level they’ve been on a historical basis,” Mr. Sicard said. 

The acquisitions also help provide a steady stream of new talent along with recruitment by USI.

“They are very heavy in terms of producer recruitment and continue to invest in that initiative, specifically citing that if it’s a little dilutive to margins at the outset, they have a long-term view and focus,” Ms. Mannarino said.

“We’re making hundreds of new hires a year,” Mr. Sicard said. “Think of it as a nine-figure investment for USI. It’s very material.” 

USI was able to achieve slightly less than 1% organic growth for 2020, in line with S&P’s forecast, Ms. Mannarino said. The forecast is for the broker to return to the “low-single-digit range” of organic growth for 2021, she said. 

Like many brokers, USI saw its business constrained in 2020 by the economic slowdown tied to the COVID-19 pandemic. The broker was, however, “able to adapt to selling strategies virtually with good digital marketing,” underpinned by its Omni technology platform, said Julie Herman, director in New York with S&P Global Ratings.

While increasing commercial primary insurance rates helped to offset some of the decline in exposures, Ms. Herman said brokers may not reap the full benefits of insurance price increases if their clients’ spending remains flat. 

“They might have a certain amount they can spend on an insurance program, and with rates going up, clients are going to have lower limits, change deductibles to more easily absorb rate,” Ms. Herman said.

Commercial insurance rates are expected to continue to rise, Mr. Sicard said. “In the near term, we expect to see rate pressure in single to double digits across most lines of business,” with loss affected accounts seeing rate pressure of 20% to 40% and even higher, he said. 

USI has for roughly the past year been analyzing locally available data on infection rates, hospitalizations and more to guide small amounts of employees back to offices, but the vast majority of the workforce through June was still working from home, Mr. Sicard said. 

Moving forward the broker will likely implement a hybrid model of home and office work, Mr. Sicard said.