Growth Partners: Equity Firm Kohlberg Invests in Wholesaler U.S. Risk

By | July 14, 2016

Dallas-based international specialty lines underwriting manager and wholesale broker U.S. Risk Insurance Group Inc. has agreed to partner with the private equity firm, Kohlberg & Co. With capital and two board members from Kohlberg, U.S. Risk plans to expand by acquiring other firms and individual brokers in the U.S. and abroad.

Subject to receipt of customary regulatory approvals, the transaction is expected to be completed during the third quarter of 2016. Terms of the agreement were not disclosed.

Through its $1.6 billion private equity fund, Kohlberg Investors VII, L.P., Mount Kisco, N.Y.-based Kohlberg will make a significant equity investment in U.S. Risk and reserve substantial additional equity capital to support the company’s growth initiatives.

Founded in 1986, U.S. Risk operates through 16 domestic and international branches, which handle insurance underwriting, insurance brokerage and reinsurance brokerage.

Since its inception, U.S. Risk has grown dramatically “and everything we have done we have done with our own internal resources and minor amounts of traditional bank debt,” said U.S. Risk founder, chairman and CEO Randall Goss. However, “in order to really take advantage of the opportunities that are in the marketplace today I knew that I was going to have to align myself with a financial partner.”

After meeting with the team from Kohlberg, “I was convinced that they were the group that I wanted to partner with to take U.S. Risk into the next level,” Goss added.

The brokerage division at U.S. Risk specializes in excess and surplus lines coverages, represents more than 100 companies nationwide, and offers all forms of property, casualty, automobile, umbrella, professional and risk management products and services for virtually any type of business.

Additionally, U.S. Risk’s underwriting management division provides underwriting services and manages niche specialty programs.

Internationally, U.S. Risk maintains a UK-based platform, led by its affiliates Oxford Insurance Brokers Ltd. and James Hampden International Insurance Brokers Ltd.

“U.S. Risk is unique in that we have a strong transactional wholesale side to our business, as well as separately having a very strong robust managing general agency and specialty program manager division,” Goss said.

He said with the partnership with Kohlberg will allow U.S. Risk to build an even more robust organization.

The company is no stranger to acquisitions; it has completed 25 in the past 30 years and plans to do more. “M&A activity is not foreign to us at all. We’re very experienced acquirers of businesses. However, the types and size of the accounts that we could acquire was limited,” he said.

With Kohlberg as a partner, U.S. Risk will be able to dramatically increase both the number and the size of acquisitions, he said. “We have a very strong pipeline of potential acquisitions and I think we will be successful.”

The expansion plans are not limited to acquiring other companies, either. “Our company with the various types of distribution capability is also a very attractive place for brokers and/or teams of people, so in addition to potentially acquiring other businesses we’re also going to be looking very strongly at acquiring individual brokers and teams to drive the organic growth within our company,” Goss said.

The company will be looking to expand internationally as well as in the United States, “so we’re going to be casting our net pretty widely in terms of looking at opportunities,” he said.

Goss will remain in his current position following the transaction and will continue to be the company’s largest individual stockholder.

At the closing of the transaction, Kohlberg & Co.’s financial services operating partner, Scott M. Birnbaum, and insurance industry veteran, Roger E. Egan, will join U.S. Risk’s board of directors.

Together Birnbaum and Egan bring six decades of industry experience to the organization, including board and executive management experience across global and middle-market insurance brokerage retailers and wholesalers. Both will play active roles with U.S. Risk, in partnership with Goss and the U.S. Risk management team.

“Being able to work with those two individuals going forward is a pleasure. They both bring immense capabilities, knowledge, contacts, experience, and so on to our business,” Goss said.

Kohlberg & Co. in Mount Kisco, New York, was formed in 1987 by Jerome Kohlberg Jr., the senior founding partner of Kohlberg Kravis Roberts & Co., and James A. Kohlberg to concentrate on private equity investments in the middle market, which they define as acquisitions valued at $100 million to $1 billion.

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