Family Pride

Celebrating 50 years in the business, Lockton remains focused on being privately held and expanding a unique culture.
By: | December 14, 2016 • 9 min read

From its start using a single answering machine in 1966, Lockton celebrates its 50th anniversary this year as a global brokerage. From that humble beginning it now boasts $1.34 billion in annual revenue and 6,000 associates worldwide.

The founder, Jack Lockton, who died in 2004, was an intense, energetic man in a hurry. One former colleague recalled he must have gotten thousands of parking tickets as he rushed to appointments.


Lockton was the type of man who would happily answer the phone at 4 a.m. to advise a client. And he grew his business one client at a time.

“If he was awake, he was working,” said former COO Mike Frost, in a videotaped retrospective.

That same dedication to customer service remains a cornerstone of the Lockton culture today, said David Lockton, chairman of the Kansas City, Mo.-based company. He was the ninth associate at the firm, having been hired by his brother Jack in 1976 over a barbecue chicken dinner.

“It’s a culture that spreads like wildfire because it feels right to people,” said Lockton.

“But where it started was with our founder, my brother Jack who struck out on his own with no resources and no ability to hire anyone,” Lockton said.

With just that one answering machine, Jack Lockton was up against it in trying to pull business in the construction industry away from larger, more established brokerages. Having worked so hard to gain a client, he hated to lose one.

“When he was successful at finding a combination that would allow him to acquire these clients, the last thing he ever wanted to do was ever lose them. When I came in the business a few years later, there was this huge focus on making sure that we never lose a client,” Lockton said.

“It was a really, really big crisis if we lost a client. It still is today.”

That focus is demonstrated by Lockton’s client retention rate, which is 96 percent, compared to an industry average of 85 percent, according to the company.

But when Jack died in 2004 — about five years after he was diagnosed with pancreatic cancer and given 90 days to live — it was a scary time.

A Key Transition

David took the reins of the family-owned company and not only kept the brokerage together, he positioned it for far greater growth.

“Dave was ready to go and hit the ground running as our chairman,” said Steve Lockton, Jack’s son and a Lockton producer, in a video retrospective.

David Lockton, chairman, Lockton

David Lockton, chairman, Lockton

“He was never, ever going to let any of us down, let Jack down, and he really rose to the occasion.”

High-energy, client-focused and detail-oriented, David Lockton added a workers’ compensation claims cost control solution to the company’s services in 1989 before he took control of the company.

Once in charge, he made a major strategic move for the future by taking the company global with the acquisition of London-based Alexander Forbes International Risk Services in 2006.

While the brokerage had grown by bringing in specialized lines of business before — recruiting cousin Bill Frick in 1980 with his clients in manufacturing and real estate; Sam Reda with employee benefits in 1987; and Bob Croy in 2000 with retirement — this was a major acquisition.

It made Lockton the largest independent, privately owned global insurance broker. It was not smooth sailing at the beginning.

“The biggest challenge with that acquisition, and most acquisitions, is culture,” said Lockton.

“It took several years for us to instill the culture that drives our success and then it took off once that was accomplished.”

“When you win … that is infectious. It puts smiles on faces. It puts people after work together for dinners and socializing with their friends in the company.” — John Lumelleau, president and CEO, Lockton

“It was a company,” President and CEO John Lumelleau said, “that needed an awful lot of attention and leadership talent to take advantage of the assets within that company that we acquired to maximize them and to build out new competencies.”

Glenn Spencer, COO and president of U.S. operations, will take over as president and CEO on May 1 upon Lumelleau’s retirement. Spencer said the company’s culture is “all about being the best place for our clients and the best place for associates to build their careers and focusing on our communities.”

“If you heard our people talk all around the world, they’ll mention those three things,” he said, noting that in the last fiscal year, Lockton’s international company “grew more than our company in the United States for the first time ever. That was a really momentous point in time for us and their client retention and associate retention are every bit as good as they are in the U.S.”

John Lumelleau, president and CEO, Lockton

John Lumelleau, president and CEO, Lockton

One of the reasons Lockton retains 95 percent of its client-facing associates, Lumelleau said, is because it’s fun to be on a successful team, whether it’s bringing in new accounts, winning tough renewals or building new relationships.

“When you win … that is infectious,” he said. “It puts smiles on faces. It puts people after work together for dinners and socializing with their friends in the company.”

“Our voluntary turnover,” said Lockton, “is near zero. We work hard and we play hard.”

The company’s employees in 80-plus offices around the world have a great deal of autonomy in the “rather flat” organization, Spencer said.

Knowledge Transfer

As in the insurance industry as a whole, retaining productive associates while recruiting new talent are key imperatives.

Lockton accommodates its older professionals as they change roles or responsibilities on the way to retirement to retain them as vital parts of the organization and allow them to pass on the knowledge they have accumulated, Spencer said.


Recruiting new talent is also crucial. The company hired 1,000 new associates last year globally.

“Whether we are recruiting on campuses or recruiting top talent from our competitors,” Spencer said, “there is a real sense of focus from our most senior people. … We invest a ton in professional development. We are looking at how we can restructure our benefits to be more appealing for young people.

“There is a lot that we are doing organizationally to attract and develop and, at the end of the day, be the best place for them to develop careers, but it begins with our senior leadership caring about it.”

“It was a really, really big crisis if we lost a client. It still is today.” — David Lockton, chairman, Lockton

“Our objective,” Lockton said, “is to continue to attract an unfair share of the best talent out there. We do that by being a company that’s more fun to work for.”

Technology is another strategic imperative.

“It has a lot of impact on how we service clients, how transactions get negotiated, how data analytics are used, how distribution occurs,” Spencer said. “Technology is going to affect nearly every aspect of our business and how we deal with that is a fairly significant challenge.”

“We feel like we are either swimming in [data] or drowning in it,” Lumelleau said, noting the challenge is how Lockton can use data on behalf of its clients.

Efforts to enhance distribution and add to client satisfaction include apps, tools and analytics for the benefits, risk and retirement divisions of the business.

It is also incubating a startup, Mylo, to digitally distribute commercial insurance products and services to small businesses as well as homeowners and auto coverage to consumers. At the moment, only about 2 percent of Lockton’s business is personal lines.

Lockton also continues to increase its book of business, launching Lockton Global Energy in 2014 by adding experts in London and other key trading centers.

It also is building out its marine book, and while it remains committed to organic growth, the brokerage is “opportunistic” about acquisitions. Last year, it made a significant investment in a marine specialty firm in Singapore and acquired a marine specialty company with several offices in Europe for $50 million, Lumelleau said.

It also has broadened its aviation expertise, including a focus on drones as they become more commonplace in commercial enterprises.

There’s no lack of challenges facing the company as it passes the half-century mark. Economic, political and social issues all present difficulties for clients that “we do our best to solve through the insurance marketplace and advice and consulting capacity,” Lumelleau said.

Glenn Spencer, COO and president of U.S. operations, Lockton

Glenn Spencer, COO and president of U.S. operations, Lockton

“We work with insurance underwriters and executives continuously to try to determine how to address the new exposures using insurance and transfer of risk,” he said, noting that cyber risk has been a problem for “well over a decade. … Is it a coverage or is it a peril? That’s a perfect example of where the industry and we are taking steps to address the needs of clients.”

The soft market is another stumbling block, and it’s a double-edged sword. Lockton strives to provide the most competitive insurance programs to meet client needs, but it still needs to find ways to grow.

“We understand those two things are competing in some ways,” Spencer said, “but we’ve always found a way to do that.”

Lockton noted that in the company’s 50 years, it has grown by double-digits “in each and every one of those years, with the exception of the 2008 recession when we still had positive growth. And we did most of that without the benefit of acquisitions.”

The company has also been able to beat the troubles faced by many family businesses. Lockton noted that only 30 percent of family-owned businesses are able to make it to the second generation and only 10 percent make it to the third generation.

“A big focus of mine over the last five years is to position the company so that we can successfully make that transition,” Lockton said.

“We have been able to adopt a structure that will allow for the family to maintain its stake in the business through future generations while making sure that we have people in business making business decisions.”

While the company has many Locktons playing major roles in the company — including Jack’s son Ron, who was named vice chairman in 2015 — the family agreed that the CEO does not have to bear the family name.

The Locktons are also “willing to pass on the temptation of public offerings or selling to a competitor at the high prices [that prospective purchasers] are willing to pay,” said Lockton.

“Fortunately, the Lockton family is on board with that.”


Being privately owned “is the quintessential differentiator for Lockton,” he said. “It allows us to be long-term focused. It allows us to focus on our constituencies, which we choose to be our associates, our clients and our communities.”

“It allows us to operate at much lower margin than the publicly held competitors do, which means that we can deliver a higher level of service because we are investing more in the client relationship and resources.”

As the next CEO, Spencer does not plan any significant changes.

“If it feels like the company is going in a drastically different direction then I think I’ve done something wrong,” he said.

“I feel like we are in a really, really good place right now. … We need to stay on that path.” &

The late Anne Freedman is former managing editor of Risk & Insurance. Comments or questions about this article can be addressed to [email protected]

More from Risk & Insurance

More from Risk & Insurance

Exclusive | Hank Greenberg on China Trade, Starr’s Rapid Growth and 100th, Spitzer, Schneiderman and More

In a robust and frank conversation, the insurance legend provides unique insights into global trade, his past battles and what the future holds for the industry and his company.
By: | October 12, 2018 • 12 min read

In 1960, Maurice “Hank” Greenberg was hired as a vice president of C.V. Starr & Co. At age 35, he had already accomplished a great deal.

He served his country as part of the Allied Forces that stormed the beaches at Normandy and liberated the Nazi death camps. He fought again during the Korean War, earning a Bronze Star. He held a law degree from New York Law School.


Now he was ready to make his mark on the business world.

Even C.V. Starr himself — who hired Mr. Greenberg and later hand-picked him as the successor to the company he founded in Shanghai in 1919 — could not have imagined what a mark it would be.

Mr. Greenberg began to build AIG as a Starr subsidiary, then in 1969, he took it public. The company would, at its peak, achieve a market cap of some $180 billion and cement its place as the largest insurance and financial services company in history.

This month, Mr. Greenberg travels to China to celebrate the 100th anniversary of C.V. Starr & Co. That visit occurs at a prickly time in U.S.-Sino relations, as the Trump administration levies tariffs on hundreds of billions of dollars in Chinese goods and China retaliates.

In September, Risk & Insurance® sat down with Mr. Greenberg in his Park Avenue office to hear his thoughts on the centennial of C.V. Starr, the dynamics of U.S. trade relationships with China and the future of the U.S. insurance industry as it faces the challenges of technology development and talent recruitment and retention, among many others. What follows is an edited transcript of that discussion.

R&I: One hundred years is quite an impressive milestone for any company. Celebrating the anniversary in China signifies the importance and longevity of that relationship. Can you tell us more about C.V. Starr’s history with China?

Hank Greenberg: We have a long history in China. I first went there in 1975. There was little there, but I had business throughout Asia, and I stopped there all the time. I’d stop there a couple of times a year and build relationships.

When I first started visiting China, there was only one state-owned insurance company there, PICC (the People’s Insurance Company of China); it was tiny at the time. We helped them to grow.

I also received the first foreign life insurance license in China, for AIA (The American International Assurance Co.). To date, there has been no other foreign life insurance company in China. It took me 20 years of hard work to get that license.

We also introduced an agency system in China. They had none. Their life company employees would get a salary whether they sold something or not. With the agency system of course you get paid a commission if you sell something. Once that agency system was installed, it went on to create more than a million jobs.

R&I: So Starr’s success has meant success for the Chinese insurance industry as well.

Hank Greenberg: That’s partly why we’re going to be celebrating that anniversary there next month. That celebration will occur alongside that of IBLAC (International Business Leaders’ Advisory Council), an international business advisory group that was put together when Zhu Rongji was the mayor of Shanghai [Zhu is since retired from public life]. He asked me to start that to attract foreign companies to invest in Shanghai.

“It turns out that it is harder [for China] to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

Shanghai and China in general were just coming out of the doldrums then; there was a lack of foreign investment. Zhu asked me to chair IBLAC and to help get it started, which I did. I served as chairman of that group for a couple of terms. I am still a part of that board, and it will be celebrating its 30th anniversary along with our 100th anniversary.


We have a good relationship with China, and we’re candid as you can tell from the op-ed I published in the Wall Street Journal. I’m told that my op-ed was received quite well in China, by both Chinese companies and foreign companies doing business there.

On August 29, Mr. Greenberg published an opinion piece in the WSJ reminding Chinese leaders of the productive history of U.S.-Sino relations and suggesting that Chinese leaders take pragmatic steps to ease trade tensions with the U.S.

R&I: What’s your outlook on current trade relations between the U.S. and China?

Hank Greenberg: As to the current environment, when you are in negotiations, every leader negotiates differently.

President Trump is negotiating based on his well-known approach. What’s different now is that President Xi (Jinping, General Secretary of the Communist Party of China) made himself the emperor. All the past presidents in China before the revolution had two terms. He’s there for life, which makes things much more difficult.

R&I: Sure does. You’ve got a one- or two-term president talking to somebody who can wait it out. It’s definitely unique.

Hank Greenberg: So, clearly a lot of change is going on in China. Some of it is good. But as I said in the op-ed, China needs to be treated like the second largest economy in the world, which it is. And it will be the number one economy in the world in not too many years. That means that you can’t use the same terms of trade that you did 25 or 30 years ago.

They want to have access to our market and other markets. Fine, but you have to have reciprocity, and they have not been very good at that.

R&I: What stands in the way of that happening?

Hank Greenberg: I think there are several substantial challenges. One, their structure makes it very difficult. They have a senior official, a regulator, who runs a division within the government for insurance. He keeps that job as long as he does what leadership wants him to do. He may not be sure what they want him to do.

For example, the president made a speech many months ago saying they are going to open up banking, insurance and a couple of additional sectors to foreign investment; nothing happened.

The reason was that the head of that division got changed. A new administrator came in who was not sure what the president wanted so he did nothing. Time went on and the international community said, “Wait a minute, you promised that you were going to do that and you didn’t do that.”

So the structure is such that it is very difficult. China can’t react as fast as it should. That will change, but it is going to take time.

R&I: That’s interesting, because during the financial crisis in 2008 there was talk that China, given their more centralized authority, could react more quickly, not less quickly.

Hank Greenberg: It turns out that it is harder to change, because they have one leader. My guess is that we’ll work it out sooner or later. Trump and Xi have to meet. That will result in some agreement that will get to them and they will have to finish the rest of the negotiations. I believe that will happen.

R&I: Obviously, you have a very unique perspective and experience in China. For American companies coming to China, what are some of the current challenges?


Hank Greenberg: Well, they very much want to do business in China. That’s due to the sheer size of the country, at 1.4 billion people. It’s a very big market and not just for insurance companies. It’s a whole range of companies that would like to have access to China as easily as Chinese companies have access to the United States. As I said previously, that has to be resolved.

It’s not going to be easy, because China has a history of not being treated well by other countries. The U.S. has been pretty good in that way. We haven’t taken advantage of China.

R&I: Your op-ed was very enlightening on that topic.

Hank Greenberg: President Xi wants to rebuild the “middle kingdom,” to what China was, a great country. Part of that was his takeover of the South China Sea rock islands during the Obama Administration; we did nothing. It’s a little late now to try and do something. They promised they would never militarize those islands. Then they did. That’s a real problem in Southern Asia. The other countries in that region are not happy about that.

R&I: One thing that has differentiated your company is that it is not a public company, and it is not a mutual company. We think you’re the only large insurance company with that structure at that scale. What advantages does that give you?

Hank Greenberg: Two things. First of all, we’re more than an insurance company. We have the traditional investment unit with the insurance company. Then we have a separate investment unit that we started, which is very successful. So we have a source of income that is diverse. We don’t have to underwrite business that is going to lose a lot of money. Not knowingly anyway.

R&I: And that’s because you are a private company?

Hank Greenberg: Yes. We attract a different type of person in a private company.

R&I: Do you think that enables you to react more quickly?

Hank Greenberg: Absolutely. When we left AIG there were three of us. Myself, Howie Smith and Ed Matthews. Howie used to run the internal financials and Ed Matthews was the investment guy coming out of Morgan Stanley when I was putting AIG together. We started with three people and now we have 3,500 and growing.

“I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.” — Maurice “Hank” Greenberg, chairman and CEO, C.V. Starr & Co. Inc.

R&I:  You being forced to leave AIG in 2005 really was an injustice, by the way. AIG wouldn’t have been in the position it was in 2008 if you had still been there.


Hank Greenberg: Absolutely not. We had all the right things in place. We met with the financial services division once a day every day to make sure they stuck to what they were supposed to do. Even Hank Paulson, the Secretary of Treasury, sat on the stand during my trial and said that if I’d been at the company, it would not have imploded the way it did.

R&I: And that fateful decision the AIG board made really affected the course of the country.

Hank Greenberg: So many people lost all of their net worth. The new management was taking on billions of dollars’ worth of risk with no collateral. They had decimated the internal risk management controls. And the government takeover of the company when the financial crisis blew up was grossly unfair.

From the time it went public, AIG’s value had increased from $300 million to $180 billion. Thanks to Eliot Spitzer, it’s now worth a fraction of that. His was a gross misuse of the Martin Act. It gives the Attorney General the power to investigate without probable cause and bring fraud charges without having to prove intent. Only in New York does the law grant the AG that much power.

R&I: It’s especially frustrating when you consider the quality of his own character, and the scandal he was involved in.

In early 2008, Spitzer was caught on a federal wiretap arranging a meeting with a prostitute at a Washington Hotel and resigned shortly thereafter.

Hank Greenberg: Yes. And it’s been successive. Look at Eric Schneiderman. He resigned earlier this year when it came out that he had abused several women. And this was after he came out so strongly against other men accused of the same thing. To me it demonstrates hypocrisy and abuse of power.

Schneiderman followed in Spitzer’s footsteps in leveraging the Martin Act against numerous corporations to generate multi-billion dollar settlements.

R&I: Starr, however, continues to thrive. You said you’re at 3,500 people and still growing. As you continue to expand, how do you deal with the challenge of attracting talent?

Hank Greenberg: We did something last week.

On September 16th, St. John’s University announced the largest gift in its 148-year history. The Starr Foundation donated $15 million to the school, establishing the Maurice R. Greenberg Leadership Initiative at St. John’s School of Risk Management, Insurance and Actuarial Science.

Hank Greenberg: We have recruited from St. John’s for many, many years. These are young people who want to be in the insurance industry. They don’t get into it by accident. They study to become proficient in this and we have recruited some very qualified individuals from that school. But we also recruit from many other universities. On the investment side, outside of the insurance industry, we also recruit from Wall Street.

R&I: We’re very interested in how you and other leaders in this industry view technology and how they’re going to use it.

Hank Greenberg: I think technology can play a role in reducing operating expenses. In the last 70 years, you have seen the expense ratio of the industry rise, and I’m not sure the industry can afford a 35 percent expense ratio. But while technology can help, some additional fundamental changes will also be required.

R&I: So as the pre-eminent leader of the insurance industry, what do you see in terms of where insurance is now and where it’s going?

Hank Greenberg: The country and the world will always need insurance. That doesn’t mean that what we have today is what we’re going to have 25 years from now.

How quickly the change comes and how far it will go will depend on individual companies and individual countries. Some will be more brave than others. But change will take place, there is no doubt about it.


More will go on in space, there is no question about that. We’re involved in it right now as an insurance company, and it will get broader.

One of the things you have to worry about is it’s now a nuclear world. It’s a more dangerous world. And again, we have to find some way to deal with that.

So, change is inevitable. You need people who can deal with change.

R&I:  Is there anything else, Mr. Greenberg, you want to comment on?

Hank Greenberg: I think I’ve covered it. &

The R&I Editorial Team can be reached at [email protected]