The chief executive of the world's largest brokerage firm said it plans to have a new unit begin buying up small agencies.
During a financial analysts' conference call Thursday to discuss Marsh & McLennan's third-quarter results, Daniel S. Glaser, chairman and chief executive officer of Marsh, said plans for the company's new unit, Marsh & McLennan Agency, LLC, could include the acquisitions of agencies of $5 million or less in revenue.
The new unit, he added, is expected to become one of the largest agencies in the United States "in a very short time" and will act as an agency representing companies to lower corporate segment, small commercial and personal lines accounts.
Yesterday in an interview, John Butcher, president and chief executive officer of MMC Agency, said plans call for both organic and non-organic growth, including the acquisition of agencies.
"This is an exciting growth market for us," he said.
On the issue of contingent commissions, which the company agreed to forego after a New York State investigation linked them to bid-rigging activity, Mr. Butcher said the company still does not accept them and that would be the policy with the agency business. He was adamant in declaring that position with MMC Agency underwriting partners.
As far as how MMC Agency would deal with the contingent commission issue if an acquired agency had a policy of accepting them, a spokesman said it is too early to speculate how that situation will be dealt with.
MMC Agency will be staffed with a combination of new hires and current employees, said Mr. Butcher.
He said while MMC Agency has definite plans on staffing levels and locations it will be opening in, the details are not being released at this time. Plans do call for the opening of offices during the first quarter of next year and announcements will be made prior to that.
Among mega-brokers dealing in the small commercial space, Willis Group Holdings already has a leg up on MMC Agency with its acquisition last year of InsuranceNoodle.
InsuranceNoodle permits independent agents to access the market for their commercial accounts through the Internet. The acquisition has allowed Willis to enter that market space in partnership with agents, without having to build a new brick and mortar system of agency distribution.
Tom Ealy, national partner in charge of the Willis HRH commercial segment, explained that the acquisition of InsuranceNoodle was part of a two-pronged strategy for this segment of the business.
Its second action was the recent acquisition of Hilb, Rogal and Hobbs, he said. Willis with that purchase, he explained, now has 140 new agencies throughout the United States, 75 percent of whose clientele fits the small to medium-size commercial account profile.
"We don't need to make additional acquisitions because we completed our acquisition of HRH," giving the firm a robust access to that segment of the business, he explained.
David Prosperi, a spokesman for insurance broker Aon Corp. in Chicago, said the firm is on track to making $200-to-$300 million in revenue acquisitions this year. Whether that includes a small size agency or a large entity, such as London-based reinsurance broker Benfield Group, all depends on the best return on capital the acquisition can garner. The overriding concern, he said, is shareholder value.
He said Aon has pursued small and midsize commercial accounts through its Private Risk Management group since 2005.
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