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National Underwriter, Property & Casualty Edition
By Mark E. Ruquet
January 19, 2004
Some of the major insurance brokers are struggling to increase their organic earnings and could face an increasing struggle as insurance market pricing begins to stabilize and generates less commission growth, one leading independent agency advisory firm warns.
Steven Wevodau, a principal of WFG Capital Advisors in Harrisburg, Pa., made his observations while commenting on the firm's first "Broker Insights Quarterly" report. The report looks at the performance of both independent and bank-owned insurance brokerage firms.
He said the intent of the quarterly report is not trend analysis or to make any forward-looking comments, but to supply information to anyone interested in the performance of the country's eight leading brokers.
The firms included, in alphabetical order:
- Aon Corp.
- Arthur J. Gallagher & Co.
- Brown & Brown Inc.
- Hilb, Rogal and Hobbs Co.
- Hub International Ltd.
- Marsh & McLennan Co. Ltd.
- U.S.I. Holdings Corp.
- Willis Group Holdings Ltd.
"These eight firms represent the preponderance of broker distribution throughout the country, and [the report gives] highlighted information on their overall performance relative to one another, the market and banks to offer some critical insights into things that probably are not key or apparent to a lot of people who follow them, know about them, or compete against them," explained Mr. Wevodau.
Among the observations he made, brokers who have been very acquisitive have failed to see proportionate growth on their organic (in-house) side. On the other hand, brokerages that have not been acquisitive have generated a "consistent, strong growth rate" on their organic side, primarily because they have emphasized a "very, very strong sales infrastructure."
The only exception to this rule, he pointed out, was Gallagher, which he described as an enigma, because the firm "consistently keeps a good balance of a good, solid, organic growth rate measured against the acquired growth rate."
Few banks that acquired brokerage firms, he contends, have built substantial insurance programs because insurance is not viewed as a key part of their strategy. Instead, insurance is seen as an extension of services to their clients and does not get the same attention as other financial services, Mr. Wevodau said.
Additional information on the report is available at
www.wfgca.com.
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