Big deals
Marsh/JLT, Brown & Brown/Hays Topped 2018 P/C Agency Mergers
A handful of big deals dominated the very busy property/casualty insurance agency and broker merger news cycle for 2018.
Based on Insurance Journal reporting, the most active agency acquirers across the country included AssuredPartners, Alera Group and Seeman Holtz along with perennial active acquirers Hub International, Arthur J. Gallagher, Brown & Brown and Hilb.
In terms of number of deals, Texas (25), New York (24), Massachusetts (23), California (19) and Florida (11) had the most P/C agencies acquired in 2018.
A number of Insurance Journal’s Top 100 privately-held P/C independent agencies grew their books with acquisitions, including Hub (ranked #1), Alliant (3), AssuredPartners (5), USI (6), EPIC (9), Risk Strategies (11), Higginbotham (17), Insurica (23), Hilb (26), Alera (49) and TrueNorth (50) and Crest Group (90). Two of the top 100 – Hays Companies (22) and Integro (12) – were acquisition targets.
Marsh/ JLT
No insurance merger story in 2018 generated more buzz than Marsh & McLennan’s $5.7 billion acquisition of its U.K.-based competitor, Jardine Lloyd Thompson (JLT).
The deal, announced in September after only 11 days of negotiations, has received JLT shareholder approval and cleared U.S. antitrust hurdles but is still going through other regulatory approvals.
The deal ranks among the largest ever involving insurance brokers. KKR & Co. in 2017, with Canada’s Caisse de Depot et Placement du Quebec, bought USI Insurance Services for $4.3 billion.
MMC says the purchase will strengthen its specialty risk brokerage operations, expand its global reinsurance network and enhance its position in Asia and Latin America. The deal will boost MMC’s revenues by about $17 billion. The company expects some cost savings (about $250 million over three years) and faster revenue growth from the smaller JLT.
MMC CEO Dan Glaser said while the acquisition makes his firm bigger, it mainly “accelerates” MMC’s existing strategy and aspiration to be the preeminent global firm in the areas of risk, strategy and people. It is no great departure from what it now does. “It’s keeping within our knitting,” he said.
While JLT has some traditional wholesale business in its mix, Glaser said the deal does not mean Marsh is getting back into the wholesale business it exited when it sold its wholesale broker Crump in 2005. He said the term wholesale is an “archaic one” for what he says has become specialty placement business rather than traditional third-party wholesale brokerage business. He said every business has some, but JLT “does not have a dramatic amount “of third-party wholesale business. “It’s not like we are entering a market we exited when we sold Crump,” he commented.
Brown & Brown/Hays
In terms of agency M&A, after the Marsh-JLT blockbuster, the agency transaction that caught the most attention was Brown & Brown’s move to acquire Hays Companies.
The deal for the Minnesota-based insurance broker with $200 million in revenues marks the largest acquisition ever by Brown & Brown in its 75-year history. Hays is ranked 22nd on Insurance Journal’s Top 100 list of privately held independent P/C Agencies. The deal, announced in October, closed in mid-November.
Headquartered in Minneapolis, Hays Companies is comprised of more than 700 risk management and employee benefits professionals in 32 locations across 21 states. The Hays Companies focuses on risk management, commercial insurance, employee benefits, consulting services, specialty programs and private client services.
Hays Companies will operate as a region inside Brown & Brown Retail, one of four divisions. The Retail division brought in $940 million in revenues in 2017, which was 50 percent of the company’s total.
None other than Patrick Ryan, founder and CEO of Ryan Specialty Group and former CEO of Aon, called the acquisition of Hays a “very, very smart move” in an age of consolidation by large retail brokers that is reducing opportunities for MGAs and wholesalers.
BB&T/Regions
BB&T Insurance Holdings made some waves with its agreement to acquire another bank-owned insurance broker, Regions Insurance Group, from Regions Financial Corp. The deal closed in July.
Memphis-based Regions is a mostly retail insurance broker with offices in 10 states: Alabama, Arkansas, Georgia, Florida, Indiana, Louisiana, Mississippi, South Carolina, Tennessee and Texas. In 2017, it sold about $1.5 billion in premiums in property/casualty and employee benefits products to businesses. Regions Insurance also has a wholesale insurance division, Insurisk, based in Little Rock, Arkansas, which accounts for about eight percent of its business. Insurisk is also included in the sale.
This acquisition “adds incremental balance” to BB&T’s insurance business between its wholesale and retail insurance channels and further builds its footprint across core markets in the Southeast, according to Kelly S. King, BB&T CEO. Following this acquisition, BB&T Insurance’s retail network will contribute almost half of its insurance brokerage revenue. The company also announced it is rebranding its BB&T Insurance Services retail broker as McGriff Insurance Services, which includes Regions Insurance Group. BB&T Insurance Holdings operates 200 offices through subsidiaries BB&T Insurance Services, BB&T Insurance Services of California, McGriff, Seibels & Williams, CRC Insurance Services, Crump Life Insurance Services and AmRisc.
AIG/Glatfelter
Ryan and others are also watching American International Group’s purchase of insurance program manager Glatfelter Insurance Group, which AIG CEO Brian Duperreault said will help AIG reposition its existing U.S. program business, 50 percent of which the insurer is currently non-renewing. Glatfelter serves approximately 3,000 brokers and 30,000 insureds in the U.S. and Canada with multiple niche programs.
Glatfelter’s divisions include a Public Practice (public entities, including water entities, municipalities and educational institutions); a Healthcare Practice (hospices, assisted living and senior living facilities, and home healthcare providers) and a Religious Practice (churches, synagogues, temples, mosques and other religious organizations). Glatfelter also has programs for emergency responders, private ambulance companies and benefit plans for public entities, schools and nonprofits.
Glatfelter also operates two retail insurance agencies: The Glatfelter Agency in York, Pennsylvania, and The InsuranCenter in Joplin, Missouri.
The two firms are not strangers. Glatfelter has been doing program business with AIG for 40 years, according to Tony Campisi, CEO of Glatfelter.
According to Ryan, the industry is wondering if AIG’s move will “make a new strategic statement of carriers buying up MGUs” and whether carriers will feel they better “get into the game.”