CAC revenues up 40% in 2023, with further growth and possible M&A forecast

CAC Group’s revenues increased almost 40 percent to $263mn in 2023 as the fast-growing broking business recorded significant expansion across its operating platforms, with further growth forecast and potential M&A on the cards, management has told The Insurer.

In 2023, Cobbs Allen, the firm’s legacy agency business, merged with upmarket brokerage CAC Specialty to form CAC Group.

CAC Specialty generated $200mn in revenue last year, a significant increase on the circa $135mn it recorded in 2022.

The revenue growth of just over 40 percent at CAC Specialty in 2023 followed income growth of around 30 percent in 2022 and 100 percent in 2021.

While pleased with the repeated significant growth levels recorded by the business since its formation, CAC Group CEO Mike Rice noted that as the business increases, those levels of organic expansion become even more difficult to achieve due to scale.

“I assure you, the rate of organic growth is not going to continue next year,” he said.

“There's just no way to continue to do those numbers once you get to a quarter billion dollar scale,” he explained.

Rice also said that Cobbs Allen had “a fantastic year” in 2023, as the executive detailed how the broker’s revenues increased from the $50mn it generated in 2022 to well over $60mn in 2023.

“That’s a lot of growth, and it was a record year for new business at Cobbs,” Rice noted.

M&A in the offing?

CAC Group’s growth to date has been through organic means, with the company largely able to fuel its expansion efforts through the cash flow generated by its profits.

As this publication revealed last June, CAC Group strengthened its financial capabilities after expanding its syndicated loan facility with the addition of JPMorgan Chase.

At the time, CAC Group said the deal strengthened its drive to meet its strategic goals, including adding further talent and entering new markets.

While CAC Group’s strategy has not changed significantly, Rice said it has “slightly evolved”.

“Our eyes have always been open to M&A, and we’ve always been more interested in possible mergers than acquisitions. That still holds true – and there are opportunities in a high–debt environment.

“There are so many folks looking for a really strong partner and platform – a company that's been around for a while, or one that is looking to get to the next level, or might want the geographic, product or industry need that we have.

“So, while I wouldn't say our eyes weren't open before, maybe they're slightly [more widely] open now,” Rice said.

In the view of Bruce Denson, CAC Group president, there is an increased interest in firms combining their operations and remaining in control of their outcomes, rather than selling out to a major market player.

“I call it a coalition of the willing,” Denson said.

“We think that is a huge opportunity in the next two to five years,” he added.

Cross company growth

Looking at the drivers of CAC Specialty’s growth in 2023, Rice highlighted the firm’s transactional liability unit as a major contributor, with the operation having generated circa $60mn of revenue in 2023.

“That growth has come at a time when a lot of TL books are shrinking because there [haven’t] been a lot of M&A events,” Rice said.

“I've heard anecdotally in the market that some companies are shrinking by half, while we’ve doubled in that space, and so we’re on solid ground.

“We’re fortunate because we’ve just got this phenomenal team of reps, contingent and tax folks. We’ve got some great leaders who are really good problem solvers.

“They're creative, and the word is out about us. People hear about good deals we’ve worked on, and want to test us out,” Rice said.

The group’s natural resources platform also recorded another year of significant growth, with the unit expected to generate “well north” of $30mn in revenue last year, Denson said.

A lot of the growth has emanated from the renewable energy industry, Rice said, with CAC Specialty in particular having built up a large book of business in the fast-growing segment.

But Rice said the natural resources team has also benefited from recurring business, with the broker retaining accounts when it comes to renewal.

CAC Group’s investment banking practice also expanded by a large extent in 2023, Rice said, with the Jack Levanthal-led platform increasing its revenue by some 50 percent last year.

Headcount on the up

CAC Specialty’s ranks swelled to over 500 staff in 2023, up from around 400 at the end of 2022, with approximately half of the new recruits having reached out to the business looking to join the expansive broker.

“Unlike four years ago, when not many people had heard of the name, that's not the case anymore,” said Rice.

“If we wanted to hire the number of people that wanted to come work with us, we'd be probably north of 1,000 employees,” he stated.

“We're still in a position where we're picking our spots and making sure that people are the right match,” Rice noted.

Healthcare a 2023 highlight

CAC Specialty continues to invest in its healthcare practice, with that unit another that is on the cusp of growing significantly as additional resources are assigned to building out the platform.

The unit’s beginnings were established in June 2022 when CAC Specialty hired Carl Swan and Alex Whipple from AssuredPartners. Those hires were shortly followed by David Thurber, Shannon Holt, Mark Holt and Yvonne Wiltse, all of whom joined from Alliance Insurance Group.

Then in April last year, CAC Specialty added market veteran Kevin Carnell from RCM&D to further build out its healthcare platform.

Carnell, who serves as executive chairman of the new healthcare offering, has been joined by Melissa Menard, who moved from Beecher Carlson to serve as co-lead of the division.

Former WTW staffer Karmanee Governor then joined as senior account executive from RCM&D. She was followed by Erin McDevitt who joined CAC Specialty’s healthcare practice from WTW as a senior vice president, with former Lockton staffer Liz Stelly another addition to the unit.

Both the senior living and healthcare practice “are doing great”, Rice said.

“There's more revenue in the healthcare solution than we expected, which has been a pleasant surprise. We've been able to attract a couple of very good healthcare producers to that group, so it's been a very good investment, and something that we'll continue to invest in,” he added.

Geographic expansion

While CAC Specialty has been adding product expertise to its ranks, Denson detailed that geographic expansion has been a growing focus of the broader business too.

In October Cobbs Allen announced it had opened its inaugural Philadelphia office with the hire of Jeff Banasz as executive vice president, while earlier in the year, CAC Specialty recruited Joseph Surette from Aon to spearhead its growth in the New England region.

Sandwiched between those arrivals was CAC Group’s recruitment of Doug Turk from Coalition in August, a move which reunited the ex-Aon and NFP executive with former JLT Specialty USA colleagues including Mike Rice.

Denson said Turk’s hire “is part of a bigger investment in California”.

“We’re going to add offices or practices that are a little more geographically focused in 2024,” Denson detailed.

“We’re looking to bring on producers in a particular geography, even if they're not necessarily focused on specific businesses in that region. There'll be a lot more of that in this coming year,” he noted.

Looking ahead, Rice highlighted Florida, Chicago, Minneapolis, and the Northwest US as cities and regions that CAC Group is looking to strengthen its operations in this year.