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Jardine Lloyd Thompson Group P.L.C. is looking to continue its U.S. brokerage expansion in specialty insurance and reinsurance, but it does face some headwinds in its efforts to hire talent to further that business.
London-based JLT saw its commercial retail brokerage revenue increase 7.7% to $664.6 million in 2015, including more than doubling its U.S. revenue, which rose to $30.8 million. It also posted higher reinsurance and employee benefits revenue.
The broker's U.S. push — furthered by its 2014 merger of JLT Specialty Ltd. and its wholesale arm, Lloyd & Partners Ltd., following its 2013 acquisition of the reinsurance business of what then was Towers Watson & Co. — “appears to have worked,” said Eamonn Flanagan, head of the Liverpool, England office of Shore Capital Group Ltd.
“We now have offices in 13 cities, in all the major economic areas where we want to be focused,” said Dominic Burke, group CEO of JLT, with specialist offerings in directors and officers liability, entertainment, and oil and gas coverage. “We remain very much in build mode (in the U.S.) and see ourselves building for some time.”
The brokerage's revenue for 2015 came in at $1.70 billion, a 4.7% increase over the previous year, placing it fifth in Business Insurance's 2016 ranking of the world's largest brokers. Gross revenue for 2015 was $1.71 billion, a 4.6% increase.
But JLT also has faced some litigation risk, which Mr. Flanagan said includes a current suit involving Aon P.L.C. alleging that JLT poached staff and that some of those staff were in breach of contract.
In April, JLT announced that it had settled a suit with Willis Towers Watson P.L.C. over a fine arts, jewelry and specie team that JLT hired in 2015. JLT said it had set aside about £22 million ($28.5 million) for the case.
Despite the poaching allegations, JLT remains focused on building its U.S. business, which Mr. Burke said is creating a “runway for growth for other areas of the world.”
He said the brokerage has won business by dint of having a global platform from clients in Asia, South Africa, Australasia and Latin America, for example, even when those clients do not currently require JLT's services in the U.S.
Reinsurance and employee benefits business remain bright spots for the broker. JLT Re, the brokerage's reinsurance arm, increased its revenue to $338.9 million in 2015, up 3% from 2014, which Mr. Burke described as a “strong” year despite soft pricing.
Employee benefits also is an important area for JLT despite challenges in the United Kingdom, its largest marketplace, over the past year, Mr. Burke said. In 2015, JLT's employee benefits division posted revenue of $425.3 million, up 1.7% compared with a year earlier.
Employee benefits business makes up about 25% of JLT's revenue, Mr. Burke said. But despite increasing its overall employee benefits revenue, he said revenue in its U.K. and Ireland division fell about 9% to £167.4 million ($216.8 million).
The division, which accounted for about half of total employee benefits revenue, reflected changes in tax relief on U.K. occupational pensions, and life insurers ceasing to collect commissions ahead of the 2016 deadline on ending that practice.
The pension changes resulted in some employers entering “a state of paralysis around long-term support of pension” plans, Mr. Burke said.
“It has been a difficult period, but in no way dilutes my commitment to this business and its relevance and importance to JLT,” he said.
Bala Viswanathan was appointed CEO of JLT's employee benefits unit last October, succeeding Duncan Howarth, who retired.
The unit is restructuring to create a flatter structure, smaller headcount and generate annual cost savings of about £14 million ($18.1 million) after a one-time cost of £12 million ($15.5 million), JLT said in its annual report.
“I am confident about the long-term outlook, and it is a strong business but has necessitated a whole new look at the way we deploy resources,” Mr. Burke said of efforts that will simplify processes and establish a more responsive platform.
As for the U.K.'s decision in a June referendum to leave the European Union, Mr. Burke said JLT “benefits from change.”
Although JLT as an organization was neutral in the “Brexit” vote, Mr. Burke was one of only two insurance industry leaders — the other being Hiscox Ltd.'s life President Robert Hiscox — to sign an open letter in favor of leaving the E.U.
“I don't think there is anything to fear,” Mr. Burke said. “I respect the views of those who are concerned about London's standing as a financial center, but London will survive,” Mr. Burke said. “I fear nothing for JLT in this respect.” Mr. Burke said. “We celebrate risk at JLT. We like risk. We like challenge.”
Private equity-backed buyers again dominated the insurance brokerage merger and acquisition landscape during the first half of 2016, but their share declined slightly amid increased activity by privately held and bank-owned brokers.