THE HALES REPORT 1270 Avenue of the Americas, Suite 930, New York, NY, 10020 | [email protected] Issue #11, Vol: 4 May 26, 2020 Inside This Issue Hales Top 100 U.S. Agents & Brokers 2019 Update. Revenues $47B (+13% YOY) pg 1 A Closer Look At Top 100 Trends Incl. Size Thresholds & The $1B Broker Club pg 5 Retro, The “Tip Of The Spear,” And Reinsurance Driving Top Down Hard Market pg 9 Lloyd’s Sees COVID-19 Industry Loss Of ~$50B; Total Q1 Loss Tally ~$6-7.5B pg 13 CIAB Survey Shows Pricing +9.3% In Q1, Tracks COVID Impact Across Lines pg 14 Market Pressures + COVID Drive Acceleration In D&O Pricing In Q1 pg 16 BRP Keeping An Eye On M&A & Producer Opportunities Amidst COVID Volatility pg 18 NJ Joins CA In Mandating Premium Refunds; CA Extends Mandate Incl. No Cancels pg 19 Insurtech Q1 Stat Review: Strong Premium Growth, U/Wing Profits Still Elusive pg 21 Auto CPI Observes Sharp Decline (-6.2%) Reflecting Premium Giveback Programs pg 24 Hales Hits, Q2 Deal Diary & Broker Valuations pg 25 Hales Top 100: Largest Commercial Focused Agents & Brokers In The U.S. Based On 2019 Revenue ($47B Total, +13% YOY). This week we release the full “Hales Top 100” U.S. agents & brokers based on 2019 revenue. The list ranges from #1 Marsh & McLennan with $7.2B of U.S. revenue to the #100 agency with $30M (High Street Insurance Partners). A few points of interest: 1) The entire Top 100 represents $47B of aggregate revenue, an increase of 13% year-on-year, which includes not only organic growth but significant revenue from acquisitions. Notably, only 5 agencies reported lower 2019 revenue. 2) The top 6 brokers by revenue are all publicly traded and represent $25.9B of revenue, an increase of 10% in 2019, or 55% of the Hales Top 100 (56% in 2018). 3) Within the top 25 there are 13 private equity backed “aggregators” which represent $13.2B of revenue (~28% of total), with growth of ~21% in 2019. Across the entire Top 100, and including companies that have a hybrid PE/ Management ownership, Private Equity firms are invested in 21 of the Top 100 agents representing 29% of total revenue (vs. 27% in 2018). Revenues for this group grew 22% in 2019. 4) Three of the Top 100 have been acquired so far in 2020 and are highlighted in red: #35 Assurance Agency (Marsh Agency), #40 Associated Benefits (USI) and #58 LMC Ins & Risk Mgmt (AssuredPartners). Additionally, #2 Aon is expected to acquire #3 Willis Towers Watson in H1 2021. 5) The threshold to be a “Top 10” broker continued to increase, now >$1.5B vs. $1.35B last year. See additional considerations in the subsequent article. The Hales Report Contact: [email protected] Page 1 Exhibit 1 Hales Top 50 U.S. Agents & Brokers Rank U.S. Revenue ($,M) 2018 2019 Company 2018 2019 % Change Type 1 1 Marsh & McLennan $7,219 $7,840 8.6% Public 2 2 Aon PLC $4,677 $5,016 7.2% Public 3 3 Willis Towers Watson $3,970 $4,370 10.1% Public 4 4 Arthur J. Gallagher $3,631 $4,063 11.9% Public 5 5 Brown & Brown $1,999 $2,385 19.3% Public 6 6 Truist $1,958 $2,215 13.1% Public 7 7 USI Insurance Svcs $1,795 $1,894 5.5% Private Equity 8 8 Hub International $1,685 $1,855 10.1% Private Equity 10 9 Acrisure LLC $1,336 $1,782 33.4% PE/ Management 9 10 Alliant Insurance Svcs $1,351 $1,585 17.3% Private Equity 11 11 Lockton $1,300 $1,437 10.5% Private 12 12 AssuredPartners $1,223 $1,429 16.9% Private Equity 13 13 NFP Corp. $1,175 $1,335 13.6% Private Equity 14 14 BroadStreet Partners $607 $747 23.1% Private Equity 15 15 Edgewood Partners / EPIC $437 $744 70.2% Private Equity 16 16 Risk Strategies $321 $530 64.9% Private Equity 19 17 Alera Group $283 $404 42.7% Private Equity 17 18 OneDigital $313 $403 28.6% Private Equity 18 19 CBIZ Benefits & Insurance Svcs $290 $298 2.7% Public 20 20 Leavitt Group $255 $286 12.4% Private 23 21 Higginbotham $200 $236 17.8% PE/ Management 21 22 Paychex Insurance Agency $226 $232 2.4% Public 24 23 Holmes Murphy & Associates $195 $229 17.6% Private 22 24 Insurance Office of America $209 $225 7.6% Private 28 25 Foundation Risk Partners $155 $220 41.9% Private Equity 25 26 Cottingham & Butler $189 $217 15.0% Private 29 27 The Hilb Group $141 $194 37.1% Private Equity 27 28 Cross Insurance $167 $186 11.3% Private 26 29 The IMA Financial Group $168 $183 9.4% Private 31 30 Woodruff-Sawyer $139 $159 14.4% Private 30 31 Hylant Group $141 $145 2.5% Private 44 32 Baldwin Risk Partners $80 $138 72.8% Public 32 33 PayneWest Insurance $130 $138 5.8% Private 33 34 Heffernan Group $128 $137 6.9% Private 35 35 Assurance Agency $116 $130 12.1% Private 34 36 BXS Insurance formerly BancorpSouth Insurance Svcs $118 $125 5.8% Public 37 37 INSURICA $104 $119 14.7% Private 38 38 Relation Insurance Services $99 $110 11.0% Private Equity 36 39 Meadowbrook / AmeriTrust $116 $110 -5.2% Private 39 40 Associated Benefits & Risk Consulting $96 $96 0.4% Public 42 41 Oswald Cos. $89 $95 7.5% Private 45 42 ABD Insurance & Financial Svcs $80 $93 17.4% Private 43 43 Propel Insurance $85 $93 10.0% Private Equity 40 44 Eastern Insurance $94 $93 -1.6% Private 49 45 TrueNorth Cos. $75 $86 15.0% Private 46 46 Lawley Service $76 $84 9.9% Private 47 47 Horton Group $76 $77 2.5% Private 51 48 Towne Insurance Agency $66 $76 15.9% Public 48 49 Marshall & Sterling Enterprises $75 $76 1.6% Private 52 50 Huntington Insurance $66 $71 7.8% Public The Hales Report Contact: [email protected] Page 2 Exhibit 2 Hales Top 51-100 U.S. Agents & Brokers Rank U.S. Revenue ($,M) 2018 2019 Company 2018 2019 % Change Type 50 51 M3 Insurance Solutions Inc.* $67 $71 5.0% Private 53 52 Houchens Insurance Group $64 $70 8.6% Private 55 53 Parker, Smith & Feek $61 $68 12.5% Private New 54 Patriot Growth Insurance Services LLC $0 $67 NA Private Equity 54 55 Scott Insurance $62 $66 8.0% Private 56 56 The Graham Co. $59 $61 3.9% Private 57 57 Starkweather & Shepley Insurance Brokerage* $57 $60 5.0% Private 58 58 LMC Insurance & Risk Mgmt $57 $54 -5.2% Private 96 59 World Insurance Associates LLC $30 $54 82.1% PE/ Management 59 60 Bowen, Miclette & Britt $52 $54 3.3% Private 60 61 Frost Insurance Agency $50 $53 7.1% Public 64 62 Moreton $47 $52 11.9% Private 63 63 Bolton & Company $48 $52 8.5% Private 107 64 PCF Insurance Services $18 $51 181.1% Private Equity 62 65 Rose & Kiernan Inc. $48 $51 5.1% Private 70 66 Sunstar Insurance $44 $50 13.6% Private 61 67 Poms & Associates Insurance Brokers $49 $49 0.2% Private 71 68 The Loomis Co. $43 $49 13.4% Private 69 69 Armfield, Harrison & Thomas $45 $48 7.1% Private 67 70 The Mahoney Group $46 $48 3.7% Private 68 71 Riggs, Counselman, Michaels & Downes $45 $46 3.0% Private 78 72 Robertson Ryan & Associates $39 $46 19.0% Private 76 73 Sterling Seacrest Partners $40 $46 15.1% Private 87 74 Cobbs Allen $33 $45 35.8% Private 73 75 HMS Insurance Associates Inc. $41 $43 5.5% Private 79 76 The Partners Group $38 $43 12.9% Private 75 77 Fisher Brown Bottrell Insurance $40 $43 5.4% Public 72 78 Ansay & Associates $42 $42 -0.1% Private 77 79 First Insurance Group LLC $39 $42 6.8% Public 74 80 Charles L. Crane $41 $41 1.1% Private 91 81 Bukaty & Company $33 $38 15.2% Private 85 82 Rich & Cartmill $34 $38 12.6% Private 80 83 James G. Parker $37 $38 2.0% Private 81 84 M&T Insurance Agency $36 $37 3.0% Public 83 85 People’s United Insurance Agency $35 $37 6.9% Public 84 86 Christensen Group $34 $37 8.2% Private 88 87 MJ Insurance $33 $37 10.2% Private 99 88 InsGroup $28 $35 24.6% Private 88 89 R&R Insurance Svcs $33 $35 5.4% Private 92 90 Haylor, Freyer & Coon Inc.* $33 $34 5.0% Private 95 91 Kapnick Insurance Group $31 $34 10.6% Private 82 92 Sullivan, Curtis, Monroe $35 $34 -2.6% Private 90 93 Wood Gutmann & Bogart $33 $34 2.7% Private 94 94 Murray Securus $31 $33 4.8% Private 93 95 PSA Financial Services $32 $33 1.8% Private 97 96 Tompkins Insurance Agencies $29 $31 5.8% Public 106 97 The Liberty Company Insurance Brokers $21 $30 42.9% Private 103 98 HM Risk $28 $30 8.0% Private 100 99 The Buckner Co. $28 $30 6.3% Private Equity 108 100 High Street Insurance Partners $10 $30 200.0% Private Equity Source: The Hales Report survey *Preliminary 2019 estimate (Hales assumed +5% growth YOY) The Hales Report Contact: [email protected] Page 3 ÿ ÿ ÿ ÿÿ ÿ ÿÿ !"ÿ# ÿ$% &' !"(ÿÿ)ÿ'"01 2(3ÿÿÿ ÿÿ )ÿ4ÿ$ ÿ5 6ÿ$% &' )ÿ4(3 789@ABC8DEFÿCHÿIPQRÿ@HFÿBEFÿASÿATU9DET8ÿVCBBC@Wÿ@HFÿXDUW@8ÿYUBE`ÿa@9E8bYUBEÿC8ÿ@ÿc@WCBSbUdHEF CHFEeEHFEH9ÿTE9@CBÿCH8fT@HgEÿ@hEHgSÿA@8EFÿCHÿiEdÿp@T9cUTF`ÿiEdÿqUTrsÿVC9DÿUtETÿuvÿEWeBUSEE8` a@9E8bYUBEÿD@8ÿ89TUHhÿgUWWfHC9SÿTEB@9CUH8DCe8ÿ@HFÿ@ÿDChDBSÿTE8eEg9EFÿTEhCUH@BÿAT@HFsÿXDE YUWe@HSÿeB@gE8ÿ@ÿt@TCE9SÿUcÿgUWWETgC@BÿwxYÿ@HFÿeET8UH@BÿBCHE8ÿCH8fT@HgEÿ9UÿW@CHÿ89TEE9 Af8CHE88E8ÿ@HFÿCHFCtCFf@B8ÿ9DTUfhDUf9ÿYEH9T@BÿiEdÿqUTrs y ÿÿÿÿÿ ÿÿdefÿghijklhm ÿ ÿ ÿ dddsFUdBCHhD@BE8sgUW IoQvÿptEHfEÿUcÿ9DEÿpWETCg@8`ÿqfC9EÿPRv`ÿiEdÿqUTr`ÿiqÿIvvov rvIÿisÿsCgDCh@HÿptEHfE`ÿqfC9EÿItru`ÿYDCg@hU`ÿuvÿtvtII A Closer Look At The Hales Top 100.