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Lockton Companies' acquisition of the international business of Alexander Forbes has catapulted the private insurance broker into a top global player.
Jack Lockton couldn't have envisioned in 1966 his basement operation in Kansas City, Mo., doing business as far away as St. Louis-just 250 miles away-let alone in Kuala Lumpur, Malaysia, which is among the many places around the world where Lockton Cos. currently operates.
David Lockton, now chairman of the insurance brokerage firm, said his brother Jack started the business with just an answering machine and couldn't have realistically imagined he was creating a global enterprise, although he designed the company logo with a globe on it. "He must have had the dream at the back of his mind," the younger Lockton said.
When Jack Lockton died in 2004 after a long battle with pancreatic cancer, Lockton Cos. was ranked among the top 15 insurance brokers in the United States and had more than 1,600 employees. Today, it has about 3,700 employees in more than 13 countries, and is the world's largest privately-owned insurance broker.
Lockton's growth has been most unconventional by industry standards. Over the past 40 years, the company has grown almost entirely through business written or renewed by its producers, and not through acquisitions, which is the industry norm. Of the $470 million of U.S. revenue projected in 2007, for example, less than 5% represents revenue acquired over the years, said President and Chief Executive Officer John Lumelleau.
The company's growth rate, averaging between 15% and 20% annually in the past decade, is driven by new business and a 95% client retention rate, among the highest in the industry, according to the company. Based on the trajectory of its revenue growth, one senior executive predicted that the company will soon be among the top six largest insurance brokers in the world.
David Lockton said the company's growth will depend a lot on its clients, as opposed to acquiring other entities just to fatten its market share. Also, "most insurance brokers that are for sale are for sale for a certain reason. They don't really meet our quality standards or fit into our culture," he said.
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But despite David Lockton's suspicion of insurance brokers that are for sale,...