Brokers

Joining Together

Top brokers are using mergers and acquisitions to expand reach, add expertise and deliver localized services.
By: | August 3, 2015

Acquisitive Arthur J. Gallagher & Co. surpassed Willis Group Holdings plc for the No. 3 spot in AM Best’s list of top global insurance brokers based on 2014 total revenue – although Willis’ deal for Towers Watson announced in June will likely impact next year’s rankings, according to the rating agency.

Marsh & McLennan Cos., with $13 billion in 2014 revenue, and Aon plc, with $12.05 billion, kept their first and second spots respectively.

AJG, with $4.63 billion, moved into third place from fourth, switching positions with Willis, $3.8 billion, which dropped to fourth place.

BB&T Insurance Holdings, with $1.71 billion, had the No. 5 spot this year, replacing Wells Fargo Insurance, with $1.5 billion, which dropped to eighth place.

The key to becoming one of the top global brokers is to offer a range of services — as Willis’ deal for Towers Watson shows — and to expand one’s global reach — as AJG’s acquisition spree shows, according to AM Best.

Patrick Gallagher, chairman, Arthur J. Gallagher & Co.

Patrick Gallagher, chairman, Arthur J. Gallagher & Co.

Indeed, AJG made 60 acquisitions alone in 2014, said AJG’s chairman, president and chief executive Patrick Gallagher said during a video interview with the rating agency.

The key to a successful acquisition is making sure the target has the same cultural fit, and that the right people stay on with the company. It’s also crucial for the organization to have the right expertise to run a successful financial enterprise, Gallagher said.

The future for AJG is “incredibly bright,” he added. “I always like to tell our folks that even as we cross $4 billion this year, soon to be $5 billion in revenue, this company is just getting started.”

Marsh’s Global Footprint

Marsh’s principal competitive advantages are its global scale, and its breadth and depth of capability, Peter Zaffino, CEO of Marsh and chairman of Marsh & McLennan Cos. Risk & Insurance Services, said in an emailed statement.

“Our geographic footprint is extensive, and we reinforce it with deep product and industry knowledge,” Zaffino said. “The combination is formidable. It would be extremely challenging to duplicate.”

Peter Zaffino, CEO, Marsh

Peter Zaffino, CEO, Marsh

Marsh has used acquisitions to firmly establish itself in the U.S. middle market, acquiring nearly 50 insurance agencies under the Marsh & McLennan Agency name, he said.

Marsh has also used acquisitions to increase its geographical representation in developing markets. In the last five years, Marsh has significantly expanded its presence in Africa, Latin America and Asia by ending alliances and replacing them with Marsh-owned businesses.

“The common thread that unites all of Marsh’s acquisitions is the focus on quality,” Zaffino said. “Regardless of geography, segment, product or size, Marsh only buys business that can meet its rigorous standards for performance and client value.”

Marsh is also investing in data and analytics “to empower clients with as much insight as they need to make informed decisions when confronted with sophisticated choices about how to manage and mitigate risk.”

Aon Focuses on Clients

Aon is a top global broker, said Mike O’Connor, CEO of Aon Risk Solutions in Chicago, because the firm was built on “an intense focus” on clients and understanding their needs.

No matter where the clients are located around the globe, this emphasis has led to prolonged investment in global capabilities that can be delivered locally, he said.

Mike O’Connor, global CEO, Aon Risk Solutions

Mike O’Connor, CEO, Aon Risk Solutions

“We’re very focused on making sure we continue to listen to clients so we can understand their needs in order to offer the appropriate content and capabilities to make them successful,” O’Connor said.

“We can help improve their income statements and balance sheets, and help them reduce volatility, whether through property and casualty insurance, or employee benefits, or both or additional risk solutions.”

Aon uses both organic growth and acquisitions to add “distinctive solutions” and “specialty expertise” across industries and products, he said. The firm is also distinguished by its ability to use data and analytics.

“We bring insights to clients that lead to action,” O’Connor said. “This is unique to Aon in that we do this across both our insurance and reinsurance businesses.”

Willis/Towers Watson Merge

Willis executives were not available for comment on the $18 billion merger to create Willis Towers Watson.

A June 30 joint announcement by the companies said the deal “brings together two highly complementary businesses to create an integrated global advisory, broking, and solutions provider to serve a broad range of clients in existing and new business lines.”

The combined company would have roughly 39,000 employees in more than 120 countries, and pro forma revenue of about $8.2 billion and adjusted earnings of more than $1.7 billion for the twelve months ended Dec. 31, 2014.

“The rationale for the merger is powerful – at one stroke, the combination fast-tracks each company’s growth strategy and offers a truly compelling value proposition to our clients,” Willis CEO Dominic Casserley said in the announcement.

“Together we will help our clients achieve superior performance through effective risk, people and financial management. We will advise over 80 percent of the world’s top-1,000 companies, as well as having a significant presence with mid-market and smaller employers around the world,” he said.

Katie Kuehner-Hebert is a freelance writer based in California. She has more than two decades of journalism experience and expertise in financial writing. She can be reached at [email protected].

More from Risk & Insurance