By James Thaler

May 22 - (The Insurer) – CAC Group’s management has said that “everything is on the table” when it comes to exploring outside equity investment in the fast-growing intermediary, citing the success of a 100% employee-owned model and becoming cash flow positive shortly after launch.

Newly installed CAC Group CEO Erin Lynch and vice chair Mike Rice made those comments in an interview with The Insurer TV at this month’s RIMS Riskworld event in Chicago, where they also detailed the thinking behind its recent transition to a new generation of leaders.

CAC Specialty was launched in 2019 as a specialty arm to longstanding Birmingham, Alabama-based agency Cobbs Allen, capitalizing on dislocation from the Marsh-JLT merger as well as an aggressive organic growth strategy by hiring waves of staff from around the industry.

Cobbs Allen and CAC Specialty merged at the beginning of 2023 to form CAC Group, where the specialty division has been a major growth driver, having rapidly emerged as a top 30 US brokerage with around $300 million in revenue and nearly 600 staff.

“From the beginning, our stated purpose was that we wanted to be a company that was owned by its employees,” Rice said in the Riskworld interview.

“So, I start with that 100% of our equity today is owned by our own employees, which we love. Over half of our employee base are actually active shareholders, significant shareholders in our company,” he continued.

Rice said that employee ownership has been critical for the company, “because people tend to row together when they all benefit from the overall success of the firm.”

“But along the way we were fortunate enough to be cash flow positive within six months of starting our business, and that's despite the fact that we sent everybody home six months after starting our business for COVID,” he noted.

“And so, we were lucky enough to be cash flow positive, where we didn't need to go out and raise outside funds,” Rice continued.

“And so, to this day, we have not raised any outside money. We financed our business with minor amounts of debt, probably (with) one turn-ish of debt to Ebitda and cash flow. That's how we built the business today,” he explained.

Rice said that CAC’s management has consistently had annual conversations about taking outside money and explored “the most efficient use of capital,” but has up until now determined that funding the business through cash flow has been the most prudent.

“We don't pay dividends. We reinvest our cash into the business.We have debt, we have facilities, and we have untapped facilities that we can attach, but we have conversations around whether we will take an outside investor,” he explained.

“Will we take a minority investor? Will we ever consider a majority investor? And so that's in our discussion every single year. To date, we haven't done anything with it. We may do something this year,” he continued.

“We may not. We may do something next year. We may not, but everything needs to be on the table for us in order to evaluate what our opportunities are,” he added.

On the topic of accepting outside money, CEO Lynch said CAC’s management is “always going to act in the best interest of the people on this team and the culture that we've built.”

“We take great pride in that, and we continue to think more and more about where we really are a unicorn in the space.

Being employee-owned at its size and winning the majority of its business from the largest brokers in the world makes CAC “very unique,” she added.

“And I think we have so much more that we want to do in this business. We're very bold about the growth that still exists. So we're going to be very thoughtful in the way that we go into any type of process,” Lynch commented.

M&A A GROWING CONSIDERATION

With such a strong organic growth trajectory to-date, the pair was also asked whether the next phase of the company’s growth could involve more inorganic growth through M&A, to which Rice responded that the company is “absolutely open-minded to looking at deals.”

“I think that we're getting to the point in our existence where those things have to be things that we consider,” Rice explained.

Rice highlighted the fact that CAC is “not an acquisitive firm” and has “proven” it is “really good at organic growth,” as he pointed to the intermediary’s 14% organic growth rate in 2024.

“We know how to grow our business from within. And so right now we're taking our cash flow and we're just reinvesting it into people, and we've proven that we can continue to grow if we want to, organically,” he commented.

“But everything's always on the table for us. We'll take a look at everything. If we think we can make it better, we think it's going to be great for clients or prospects, and we think we can make a go of it, we'll take a look at things,” he concluded.

Watch the full interview with CAC Group CEO Erin Lynch and vice chair Mike Rice to hear more on:

• The company’s recent wave of promotions and transition to a generation of leaders

• CAC Group’s plans to double down investments on product lines and industry verticals

• How the brokerage thinks about organic versus inorganic opportunities for next growth phase

• The importance of maintaining its employee-first culture fueling its organic strategy

• The rationale behind the company's consideration of taking outside equity investment

• And more…