2008: Busy Year for Mergers, Big and Small

By | December 21, 2008

A lot happened in the world of insurance agency/brokerage mergers and acquisitions in 2008.

Willis made the biggest slash with its $2.1 billion acquisition of Hilb Rogal & Hobbs Co. (HRH), one of the world’s largest insurance brokers and risk management intermediaries. Next in size was Aon’s grab of reinsurance broker Benfield for $1.75 billion.

The Two Big Ones

The Willis-HRH move that closed on Oct. 1 doubles Willis’ revenues and geographic presence in North America and strengthens key practice areas. It expands Willis’ local presence from 70 to 210 locations in North America. Willis is now among the top three brokers in 15 of the 20 largest U.S. markets, up from five previously.

The acquisition also expands Willis’ middle-market and large-account presence, more than doubles its North American revenues in employee benefits, and triples its personal lines business. Real estate, health care, environmental, construction, complex property and executive risk are among the other key practice areas bolstered by the acquisition.

Outside of North America, the combination strengthens Willis’ position in the London market through the addition of HRH’s Glencairn business.

The retail operation of Willis North America is now known as Willis HRH.

With the addition of HRH, Willis’ annual revenues expand from $2.6 billion in 2007 to $3.4 billion. North American revenues go from 30 percent in 2007 to 45 percent of the company’s total. Along business lines, the combination boosts employee benefits from 10 percent of overall 2007 revenues to 13 percent, while reinsurance goes from 15 percent of revenues in 2007 to 12 percent, pro forma, in the combined company.

On Dec. 1, Chicago-based Aon Corp. completed its $1.43 billion acquisition of reinsurance intermediary Benfield Group Ltd. on Dec. 1. The Benfield business is being combined with Aon’s existing reinsurance operations, creating Aon Benfield.

Company officials said the merger will mean enhanced scale and scope, including complementary books of business with minimal overlap in core U.S. and U.K. markets, and in developing markets targeted for growth, such as Asia, Central and Eastern Europe, Africa and Latin America.

Aon announced a global restructuring plan expected to save as much as $41 million in 2010 and $122 million in 2011.

Busiest Buyers

What they lacked in size vis-Ã -vis the Willis-HRH deal, three agencies — Brown & Brown, Arthur J. Gallagher and Hub International — made up in quantity of transactions (see listings), with Brown averaging more than two a month. Brown & Brown also launched a London wholesale brokerage operation named Decus, and Gallagher sold its U.K. reinsurance business to Aon.

Several other transactions stood out. California’s Barney & Barney LLC, one of Southern California’s oldest and largest privately held brokerages, combined with Oakland’s Saylor & Hill Co. Wholesaler Mercator Risk Services joined forces with Tennant Risk Services of Hartford. Confie Seguros made several acquisitions of agencies serving the Hispanic community.

Banks were busy,too. In October, Wells Fargo won a tug-of-war with Citigroup for Wachovia Bank — a deal that includes Wachovia Insurance Services and its $400 million in revenues. Raleigh, N.C.-based BB&T Insurance Services reached an agreement to buy UnionBanc Insurance Services Inc. in San Diego. Cherry Hill, N.J.-based Commerce Bancorp Inc. sold its insurance unit as it was being bought by TD Bank Financial Group.

A number of wholesalers were swallowed up in 2008. In addition to AVRECO by Gallagher (technically closed Dec. 31, 2007) and Tennant by Mercator, others picked up included E.L.M., Southern Risk, ESL, Symons, Network E&S, Big Sky Underwriters, Katie Freeman, Risk Reducers and Zaloom.

Carrier Deals

Of course, insurance companies were busy also, with the Liberty Mutual purchase of Safeco Insurance in a $6.2 billion deal topping the charts. Completed in September, the transaction strengthens Liberty’s standing to the fifth largest property/casualty insurer in America, with more than $32 billion in direct written premium. Safeco joins Liberty Mutual’s Agency Markets business unit, which now ranks third in personal lines and fifth in commercial lines in the independent agent distribution channel. The combined surety operation becomes the second largest nationwide.

Next in line: Tokio Marine’s acquisition of Philadelphia Insurance for $4.7 billion.

Other noteworthy carrier transactions:

Allied World Completes Darwin Deal; Meadowbrook Acquires Specialty Insurer ProCentury for $273 Million; Hanover Insurance to Acquire Chemical Industry Insurer Verlan; Markel Insurance Acquires Specialized Insurance; Unitrin to Acquire Auto Insurer Direct Response Corp. for $220 Million; Western National Completes Merger with Farmers Home Mutual; Spain’s Mapfre Completes Acquisition of Commerce Group; Main Street America Acquires Great Lakes Casualty; Rockhill Insurance Purchases National Environmental Coverage Corp.; Markel Acquires Nebraska’s Specialized Insurance, Inc.; State Auto to Purchase Rockhill Insurance Group; Allianz Agrees to $2.5 Billion Investment in The Hartford; Farmers Insurance Unit to Assume Zurich Small Business Renewals; Max Specialty Acquires Guaranty Casualty; The Hanover to Acquire AIX Holdings; N.J.’s Palisades Acquires Proformance Insurance; AmCOMP Gets Approval to Merge with Employers Holdings, and Donegal Group Acquires Sheboygan Falls Insurance.

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