Top insurance brokers, No. 8: Jardine Lloyd Thompson Group P.L.C.Reprints
2016 brokerage revenue: $1.55 billion
Percent increase (decrease): (8.7%)
London-based Jardine Lloyd Thompson Group P.L.C. saw brokerage revenue in its home currency rise, but reported in U.S. dollars the broker experienced a dip.
But against that challenging market backdrop, JLT continued to expand its specialty operations in the United States.
JLT’s brokerage revenue was $1.55 billion for 2016, down from $1.70 billion in 2015. This caused JLT to slide into the No. 8 position in Business Insurance’s 2017 ranking of the top insurance brokers worldwide, down from No. 5 last year.
Even so, last year “was an important year, and I am pleased with the outcome of the business,” said Dominic Burke, CEO of JLT.
“As we entered into 2016, we faced the two major challenges of continuing to build our U.S. specialty business and the corrective action in our U.K. employee benefits business,” he said. “These were the two big dynamics for 2016. And we are pleased that the market had confidence in us.”
“Less than four years ago, we were not on the ground in the United States. Now across our operations, we have 650 colleagues on the ground and 20-plus offices,” he said.
“We are very excited about the quality of people we are able to attract and the traction we are getting” in the United States, Mr. Burke said.
JLT continued to build out its U.S. specialty business, which posted revenue of $56 million in 2016, and that business is on track to deliver a profit in 2019, said Mr. Burke.
In late January, it bought a majority stake in U.S. construction and surety brokerage Construction Risk Partners L.L.C. This is an “outstanding” business, and the acquisition is progressing well, he said.
Last year JLT shed 300 jobs in its U.K. employee benefits arm as part of a planned restructuring aimed at saving £14 million ($17.9 million) by 2017. That restructuring was prompted by the U.K. government’s Retail Distribution Review, which reduced the commissions that could be earned on pensions.
During 2016, JLT sold the majority stake in its niche Thistle U.K. business, which catered largely to small to medium-size enterprises, to PIB Group Ltd.
“We need to be in areas where we can add value, so in 2016 we disposed of our U.K. Thistle operations,” Mr. Burke said. “Part of the rationale for this is that where transactions are commoditized, it is difficult to add value.”
There were some headwinds for insurance brokerages in 2016, he noted. For example, “commodity prices and reinsurance and insurance rates were challenges” during 2016, “and it is no secret that remains challenging for 2017.”
“In March, we said that we thought there might be a leveling off in rate declines, but that was a false dawn, and there continue to be rate reductions for July renewals,” Mr. Burke said.
Mr. Burke said he is not overly concerned about continued insurer consolidation. While it is disruptive, “there is no shortage of capacity,” and as insurers consolidate, more capital fills the void, he said.
The concern about consolidation, and other trends such as insuretech and disintermediation in some areas, is the risk of losing expertise from the insurance industry, said Mr. Burke.
“Innovation can only come through expertise,” he said.
JLT is one of the brokerages that is cooperating with the U.K. regulator, the Financial Conduct Authority, as it looks into competition in the aviation insurance sector.
“I am unable to comment on the ongoing, industrywide investigation,” Mr. Burke said.
“My personal view is that the aviation market has always been, and continues to be, one of the most competitive marketplaces in which we trade — and that is healthy and helps our clients,” Mr. Burke said.
For the coming year, Mr. Burke said that emerging markets will continue to be a focus for growth.
“I do aspire for JLT to be the world’s leading global specialty broker,” he said.
Eamonn Flanagan, research analyst at Shore Capital Group in Liverpool, England, said that JLT continued to see momentum in 2016 and that its specialty operations withstood turmoil in the global energy and marine markets to deliver a profit.