By David Bull

May 23 - (The Insurer) - Hub International’s revenue is expected to “modestly” exceed $5.5 billion in 2025 and reach $6.0 billion next year, with EBITDA margins forecast to remain steady at 34% to 35%, according to S&P Global Ratings.

S&P upgraded Hub’s long-term issuer credit rating to B-plus from B following its recent minority common equity investment, which the rating agency said is expected to fund growth through 2026 and drive deleveraging.

It also raised the issue ratings to B-plus from B for Hub’s senior secured debt and to B from B-minus for its senior unsecured debt.

As previously reported, the broker – which has retail and wholesale operations – confirmed on May 12 that it had secured a minority investment of around $1.6 billion in a deal that gave it an enterprise value of $29 billion.

The investment was led by funds and accounts advised by T Rowe Price Investment Management, Alpha Wave Global and Temasek, with participation from other new and existing investors.

Hub was valued at $4.4 billion when Hellman & Friedman initially invested in the company back in 2013. This climbed to $10 billion in 2018 when Altas Partners acquired a minority stake, and increased again to $23 billion in 2023 when Leonard Green & Partners announced its minority investment.

The broker's annual revenue has increased more than fourfold during this period, from $1.1 billion in 2013 to $4.8 billion in 2024.

In a note explaining its upgrade, S&P said it believes Hub’s financial risk profile will benefit from a deleveraging trend it considers to be enduring.

It said the minority investment supports this deleveraging trend “given its strategic intent and evolving financial policy mindset about the forward composition of its currently highly leveraged capital structure through 2026”.

The rating agency said it estimates Hub’s financial leverage will improve towards 5.5x to 6.0x and its EBITDA interest coverage towards 2.5x to 3.0x.

S&P added that the forecast revenue and EBITDA will drive cash flow from operations at the company to $535 million to $555 million in 2025 and $760 million to $780 million in 2026.

It noted that the intermediary has a well-established market presence as the fifth-largest insurance broker in the U.S., and in Canada where it is the largest.

“We believe Hub’s competitive position is supported by meaningful scale, scope, and diversity enhancements across its retail-commercial/personal, and wholesale/specialty segments via a combination of steady organic expansion and acquisition activity,” said S&P.

It added that this enables profitable growth while positioning Hub as a leader in its category, while its continued efforts to strengthen its focus on industry verticals includes expanding its specialty capabilities through the greater use of MGA resource to establish a presence in the retirement and wealth segment.

“We believe these developments at scale have positioned Hub above most of its direct middle-market competitors,” said S&P.