Dan Glaser, President and Chief Executive Officer (CEO) of Marsh & McLennan Companies, Inc., has said that the firm’s acquisition of JLT Group is about growth, noting that the two global insurance and reinsurance brokers are “stronger together”.
Marsh announced its $5.6 billion takeover of JLT Group on Tuesday, a deal which combines two of the world’s largest insurance and reinsurance brokerages, and which is expected to close in the spring of next year.
Following the announcement, management at Marsh held a call on the acquisition, and President and CEO Glaser noted several times that the deal is driven by growth.
Regarding organic growth, Glaser said that the deal absolutely accelerates its organic growth aspirations, but cautioned that it is only announcement day so was reluctant to offer a solid growth range.
The fact Marsh is larger than JLT and that the two companies share similar cultures, means it is a good acquisition from a growth basis, explained Glaser. Continuing to state that he feels comfortable this acquisition is more about growth than any other factor.
In light of the takeover and subsequent management call, analysts at Morgan Stanley have commented that the acquisition strengthens Marsh’s top market position and that it could also accelerate long-term growth.
Analysts note that the $5.6 billion M&A deal is the largest in Marsh’s history, adding that JLT’s specialty focus and strong geographical footprint complement Marsh’s global platform.
Currently, Marsh has an organic growth rate of +3% – 5%, and Morgan Stanley analysts feel that the acquisition of JLT could accelerate this.
Overall, the combined companies will have a revenue somewhere in the region of $16 billion, based on 2017 reported figures. The combined figure is larger than that of insurance and reinsurance broker Aon, which reported total revenue of $10 billion at the end of 2017. So, as noted by analysts, the deal is expected to cement Marsh’s top market position.
Regarding just reinsurance, Guy Carpenter (owned by Marsh) was the second largest and JLT Re the fourth, with Aon sitting in the top spot. However, based on 2017 revenues, the combination of Guy Carpenter and JLT Re results in slightly higher revenues than Aon’s Reinsurance Solutions unit.
Insurance and reinsurance industry participants across the value chain are under increasing pressure to remain relevant, while at the same time improving efficiency and achieving greater scale to offset the challenges of a highly competitive and pressured operating landscape.
In a marketplace that has been stressed for some time, and which failed to recover in an adequate or sustainable manner following the impacts of 2017 catastrophe events, merger and acquisition (M&A) activity isn’t too surprising. It could also be that this deal drives further M&A activity across the re/insurance broking community as players search for scale and relevance.