The universe of publicly held brokerage firms could expand within the next two years, with two firms that are now in the hands of private-equity interests re-entering the public sphere in the United States.
In an analyst's report from Stifel Nicolaus titled "Insurance Brokers & Risk Managers, A Comprehensive Overview," the firm suggests that at least four firms are potential candidates for initial public offerings over the next 24 months.
Two are retail brokers based in the United States: Hub International, based in Chicago, and USI Holdings, based in Briarcliff Manor, N.Y.
Hub was traded on the New York Stock Exchange and Toronto Stock Exchange until 2007 when it was acquired by the private-equity firms Apax Partners and Morgan Stanley Principal Investments. The firm operates 250 offices across North America.
USI has 40 offices in 23 states and is owned by Goldman Sachs Capital Partners, a private-equity division of Goldman, Sachs & Co. It also went private in 2007.
Both firms are considered to be among the top 15 brokers in the world.
The firm suggests Cooper Gay Swett & Crawford and Hyperion Insurance Group may also consider going public. Cooper Gay was formed in 2010 with the merger of Cooper Gay in London and San Francisco-based wholesaler Swett & Crawford. The firm employs 1,400 people operating in North America, South America, Europe and Asia.
Hyperion Insurance Group has 50 offices in 25 countries employing 850 people. It is an insurance-brokerage firm that also operates an underwriting unit.
The insurance-brokerage marketplace as a whole, Stifel Nicolaus says, will benefit from an insurance market that is continuing to show signs of rate increases. Rate increases will mean an increase in commission revenue and margin expansion as "expense will remain largely unchanged."
A projected 10 percent rise in insurance rates "could boost operating margins by 160 basis points," the report says.
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