Rusty Reid joined Higginbotham in 1986 and became CEO in 1989 after he led the employee purchase of the Fort Worth, Texas-based brokerage. In 2009, private-equity firm Stone Point Capital LLC invested in Higginbotham, but it remains majority owned by employees. Since the investment 15 years ago, Higginbotham has grown rapidly through acquisitions and organic expansion. With its base in Texas and the Southeast and 36 specialty practices, the brokerage has about 3,100 employees and is the 21st-largest brokerage of U.S. business. Mr. Reid recently spoke with Business Insurance Editor Gavin Souter about Higginbotham’s growth and market trends. Edited excerpts follow.

Q: Over the past 15 years, you’ve grown the company tenfold; how much of that has been through acquisitions and how much has been organic?

A: It’s literally almost 50/50 and that’s by design. Every firm that has joined us also grows significantly post transaction. You’ll see that if we acquired $30 million in revenue in a year, our organic grew $30 million; if we acquired $50 million, we grew organic $50 million; if we acquired $100 million, we grew organically $100 million.

Q: How have you managed to maintain that organic growth?

A: Every one of our producers are employee owners, so they are completely aligned with the strategy of growth. And we built out some “day two” services, where we’ve taken the national account service model of providing both risk management and benefit administrative services and we make that available to our clients at no charge, and, more importantly, they are also available to our production staff for no charge. 

So, we’ve kind of removed the friction if we need to deploy loss prevention services to a client to get them rehabbed so the market will applaud them again; that’s automatically included.

The other thing that we’ve done, and this goes back to me being hired as a newbie, is we try to invest a couple of percentage points on an annual basis bringing in youth into our organization, and they are huge drivers of our organic growth. 

Q: Some acquisitive brokers have pulled back since interest rates started rising, but you have continued to make acquisitions. Why are you still going ahead with acquisitions? 

A: Even when money was free, and it’s certainly not anymore, we’ve not ever been over-leveraged compared with our peer group. There’s only one class of stock and there’s only one layer of debt, and I’m kind of agnostic as to what market conditions are. You need to run a business and have a vision and an execution plan to operate regardless of external conditions. 

We look at it more from a macro view and maybe the cost today is a little more, but as long as we’ve got the free cash flow and we’ve got the organic growth it’s not going to change who we want to be.

Q: Even though the number of acquisitions generally in the industry is down, prices still seem to be high. Is that what you’ve seen?

A: There seems to be a common theme where you kind of have the haves and the have-nots, so there are people that have come to the realization that this is a great industry to invest behind. They say, “Hey, this opportunity’s become available, I want to get in this game, and I know that to get in this game I’m going to have to pay up.” So, even though the number of buyers may have shrunk, it doesn’t mean that the appetite around insurance as an asset allocation has gone down at all. 

The other thing is that the sellers are very picky, and rightfully so because they are monetizing their lifelong work. They care a lot about what does day two look like in their world. When you find a quality buyer and a quality seller, they’re going to spend the time really figuring out what’s important to one another, not only on the front end at the transactional level but also prospectively. When you lose sight of what your greatest asset is, which is the people that go up and down in the elevator every day, you’re not going to be able to play long in this game. 

Q: You have a lot of business in the Southeast, and many people are moving to areas where you’re active, but also there seems to be a change in the weather. Are you seeing significant increases in property losses?

A: 2022 had a lot of claims, and the same thing happened unfortunately in 2023, and there’s a shift in weather patterns. Fort Worth used to be the heart of the hail belt, and that’s not the case anymore; it seems to be shifting east. That’s going to drive market conditions, and all of us in our industry have to be more creative, leveraging captives, leveraging self-insured retentions, all those things. But not every client is going to be able to utilize those tools, which is even more of a reason to have things like loss prevention services available, have things like claims adjusters on staff. It takes all those things — the creativity in and around the placement and what you’re going to provide from a risk management supportive perspective. 

Q: How do you see the market at the moment? 

A: I still think there are some property-related issues. In certain markets, such as executive lines, you’re seeing some improvements. 

In workers compensation, you’re going to see improvement in states like Texas where there’s been reform.

But where you might get one state under control, another state gets out of control. Transportation is a great example. Nuclear verdicts are happening everywhere and until you have some level of tort reform, you’re going to continue to see that as a hot spot. But if you’re working with clients that implement best practices around loss prevention and indemnification, it’s a great industry and we’re big in that industry. You have to figure how to get your clients all the tools and make sure they are leveraging all the tools, so they don’t find themselves the victim of that nuclear verdict.