Building a $1 billion revenue broking business

Building a $1 billion revenue broking business | Insurance Business America

Building a $1 billion revenue broking business

Risk Strategies recently celebrated its 25th anniversary, with staff getting an extra day of leave over the summer, as well as receiving “branded swag”, and some colleagues having gathered to celebrate.

“I’m not sure that champagne was involved in many of them, but it might have been,” was how Risk Strategies CEO John Mina (pictured) put it to Insurance Business.

For Mina, the event of the day was a fireside chat between himself and Mike Christian, Risk Strategies’ founder and chair who passed the CEO reins to Mina in 2019.

Read more: Risk Strategies appoints a new chief executive

Risk Strategies was launched in 1997, as a “small alternative to the sort of upper middle market in large account brokers”.

It was not until 2010 that it started taking on equity funding – its first injection came from a minority investment by WR Berkley Capital – and began making smaller acquisitions and opening up into its specialist areas, according to Mina.

Kohlberg & Company bought a significant stake in the business in 2013, with Kelso & Company going on to buy it two years later, accelerating the company’s growth.

“We’re very fortunate to have had a number of financial sponsors over the last 12 years that have helped drive our growth and have really bought into and committed to our philosophy of growing the business through a specialty focus,” Mina said.

These days, the business comprises more than 60 offices – and in addition to its retail branches, it also has several specialty brands and is home to wholesale and alternative distribution business One80.

A quarter of a century in age is not the only milestone that Risk Strategies is celebrating this year. The North American brokerage has sailed past the $1 billion revenue mark – a “highlight” for Mina.

“We don’t have any plans to stop at any time, but it was a nice, big number – and now we’ll put our sights on the next big number,” Mina said.

Growth has come from an “80/20 mix” (or 80% acquisitions, 20% organic), according to Mina.

“I don’t think we’ll ever be a top 10 acquirer, but we are certainly acquiring businesses that fit within our strategic profile and our long-term growth model,” Mina said. “We do like businesses that specialise in a particular niche, and that have carved out a particular value proposition that we think we can expand by giving them a national distribution platform.

“So [it’s] the combination of acquisition in, let’s be honest, a rapidly consolidating market, [crossed with] organic growth, which has gone quite well.”

It’s a mix that Mina predicated will continue into the next couple of years, though he did acknowledge that there is “debate” around how long brokerage M&A can go on.

“Every time we look at the number of acquisitions that are made, we reach a new high watermark, we think that that’s the highest it’s ever going to go and then the next year again,” Mina said. “I don’t know that it’s going to slow down much.”

Rising interest rates may “temper enthusiasm a little bit”, according to the CEO, but “baby boomers” have continued to look to secure their business’s future.

Despite global economic pressures, Mina was confident that the M&A pipeline for this year remains “strong”.

Read more: "Now’s when I’d sell" – Pat Gallagher on brokerage M&A

“I think this year will be a similar performance to the one that we had last year. In round numbers, similar in terms of volume and total revenue,” Mina said. “It’s hard to look at – we don’t look at really small deals as acquisitions, some of our competitors do so.”

As for organic growth into 2022 and beyond, Mina said that “we cannot discount the impact of rate”.

The business is poised for growth in cyber, where rate increases have been “well documented”. Demand for workers’ comp, however, “seems to be flattening out”, Mina said.

Travel and entertainment – a “big venue” for Risk Strategies – are two areas that have bounced back post pandemic restrictions.

“We’re seeing a nice return in [the entertainment] space,” Mina said. “Travel is another one where we’ve had a really nice return to ‘prior year and then some’ performance.”

On the wholesale side, Mina described the business’s programs as a “real boon”.

Looking to the biggest challenges facing insurance agents today, Mina said that technology, risk evolution, and talent were all key issues.

“As an industry, we have some challenges [in terms of uniformity and compared to industries like banking], and it’s going to require some investment in technology to get to a better place,” Mina said.

The broking boss called for a collaborative approach on tackling evolving risks.

“If you think about some of the risks that are out there, whether we want to point to wildfire in the West Coast, or hurricanes and flooding in Florida, all of those risks are going to require new solutions if we’re to continue building and investing and growing our businesses and our personal wealth in those spaces,” Mina said.

“There’s definitely a need for some new solutions that we as an industry need to lean in and push forward and need to get a little bit more innovative and creative around.”

As for talent and succession planning, Mina said the industry must make sure it is “investing in the next generation of insurance professionals.”

“That would need to be a diverse portfolio of insurance professionals,” Mina said.