Apax Partners and the private-equity investment arm of Morgan Stanley will buy Chicago insurance brokerage Hub International Ltd. for approximately $1.7 billion, it was announced today. The group will pay Hub $40 per share, a 16% premium over the shares' Friday close. Hub provides insurance and employee benefit services to medium-sized companies and derives one-quarter of its business in Canada. Insurance brokers, with their relatively small capital investment requirements and hefty profit margins, hold great appeal for private equity firms.

This deal sheds more evidence that private equity has taken notice of the insurance industry. With Apax and Morgan paying over 12x EBITDA, they must be looking to aggressively grow this company to realizes some good returns. This may very well be a platform to acquire more, large regional brokers as add-ons. We will wait and see.