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Top insurance brokers, No. 1: Marsh & McLennan Cos. Inc.

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2016 brokerage revenue: $13.23 billion

Percentage increase (decrease): 2.5%

Marsh & McLennan Cos. Inc. grew through a combination of organic growth and acquisitions in 2016 amid a tough pricing environment that is not expected to end anytime soon.

New York-based Marsh & McLennan’s 2016 brokerage revenue increased 2.5% to $13.23 billion, keeping it atop the Business Insurance broker rankings.

Last year marked the company’s sixth consecutive year of underlying organic growth greater than 3%, which Peter Zaffino, CEO of Marsh L.L.C. and chairman of the risk and insurance services segment of Marsh & McLennan, attributed to the broker’s ability to acquire new clients, geographic distribution, middle-market expansion strategy and investments made in previous years paying off in 2016.

The company has reported strong organic revenue growth in its brokerage division, and its reinsurance unit has also fared well despite pricing headwinds, said Elyse Greenspan, equity research analyst and director with Wells Fargo Securities in New York.

“Externally, things could be better, but there’s not a whole lot to complain about internally,” said Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore.

“The two issues that are most important are insurance pricing and general economic growth. In that context, we’re still seeing steady progress,” Mr. Shields said.

Rate decreases have become more orderly, meaning reductions have moderated in the low- to mid-single-digit range, Mr. Zaffino said.

“Do we expect to continue to see rate decreases? We do,” he said. “We think that’s the environment we’re going to be in for the next couple of years.”

Marsh & McLennan units made 15 acquisitions in 2016, spending about $901 million on the deals, according to stock market filings.

Seven of the deals added to its middle-market unit Marsh & McLennan Agency L.L.C., two involved Marsh and six related to its consulting units.

Marsh & McLennan Agency also announced in January that it had acquired J. Smith Lanier & Co., a West Point, Georgia-based brokerage that reported $132.9 million in U.S. brokerage revenue in 2015.

Including J. Smith Lanier, Marsh & McLennan Agency made four acquisitions in the first quarter of 2017, for about $509 million, according to stock market filings.

The firm “has been pretty disciplined in how it uses its capital, really balancing acquisitions against share repurchase,” Ms. Greenspan said.

The expansion of the middlemarket business has been a consistent theme at the company for almost 10 years, with more than 50 acquisitions in the sector since 2009.

“They’ve made investments in the middle market that are starting to pan out,” said Julie Herman, director at S&P Global Ratings in New York.

Ms. Herman said there is plentiful opportunity for additional acquisitions with more than 30,000 brokers in the United States.

However, Paul Newsome, managing director at Sandler O’Neill & Partners L.P. in Chicago, said this expansion is “a little of a negative in the sense that there’s a lot of private equity demand for midand small-size brokerage operations, and companies like Marsh are competing with them. I think it’s harder and harder to make really good acquisitions in that world.”

Several top insurance brokers, including Marsh Ltd., are being investigated by the U.K.’s Financial Conduct Authority for allegedly sharing competitively sensitive information within the aviation insurance and reinsurance sectors.

Marsh & McLennan President and CEO Daniel Glaser declined further comment beyond statements made during the company’s quarterly earnings call in April, when he said the agency indicated it had reasonable grounds for its investigation and pledged the company’s full and complete cooperation.

Analysts view the investigation as a concern, but also say the aviation insurance market is unique and a certain amount of regulatory scrutiny is generally expected.