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2017 brokerage revenue: $1.87 billion
Percent increase (decrease): 20.3%
Jardine Lloyd Thompson Group P.L.C. continued its push into the U.S. specialty market in 2017 and its focus on collaborating across three key business areas: specialty risk, reinsurance and employee benefits.
JLT saw brokerage revenue increase to £1.38 billion ($1.87 billion) in 2017, a 20.3% increase over the prior year in dollar terms, reflecting in part a strengthening of the British pound. JLT moved up to No. 7 in Business Insurance’s 2018 ranking of the world’s largest brokerages from No. 8. Its risk and insurance division’s revenue grew 11% to £1.07 billion.
Last year saw the continuation of JLT’s strategy, which began in 2014, of building out its specialty brokerage business in the United States, said Mr. Burke. The losses associated with setting up that business “passed the high-water mark in 2016,” he said, and the business is slated to move into profitability next year. Mike Rice, as chairman, will help to negotiate strategic bolt-on acquisitions, Mr. Burke said, and the operation’s head count has surpassed 350.
The U.S. operation recorded revenue of almost £100 million for 2017.
JLT also took steps to strengthen its position in continental Europe, in part to plan for the eventual departure of the U.K. from the European Union.
The uncertainty over the shape of the U.K.’s deal with Europe once it leaves the EU next year is a challenge, Mr. Burke said. But JLT’s purchase in the summer of 2017 of Belgian specialty brokerage Belgibo B.V. had helped to strengthen the company’s on-the-ground footing in continental Europe and would serve as a hub for its EU operations, he said.
This acquisition, and others made during the course of the year in Europe, including the purchase of small marine brokers in Hamburg, Germany, will help JLT to manage the consequences of several different Brexit scenarios, the company said.
JLT’s employee benefits division saw a 7% increase in revenue in 2017 to £320.2 million. The U.K. and Ireland employee benefits business saw revenue increase by 7% to £172.0 million.
There are three major drivers behind JLT’s performance in 2017 and momentum for 2018, said Alan Devlin, who leads European insurance equity research at Barclays P.L.C. in London.
First, Mr. Devlin said, there is evidence of organic growth in JLT’s business in the United Kingdom and a recovery of the U.K. employee benefits business. In addition, the U.S. specialty business is now over the “hump” of the original investment and is now set to grow, he said.
And these two areas of the business — the United Kingdom and the United States — are the “cherry on the cake” of JLT’s underlying business, which has performed solidly, he said.
The insurance rating environment continues to be a challenge for insurance brokerages, Mr. Burke said, and a rise in protectionism in certain countries also may create some hurdles.
In 2017, the Financial Conduct Authority, which regulates insurance brokerages in the United Kingdom, discontinued an investigation into the five largest aviation brokerages over alleged sharing of competitive information. The European Commission began an investigation which JLT said it was participating in.
While the brokerage is unable to comment further on the probe, it said it had a constructive relationship with the regulators.
During 2017, JLT carried out an examination of its strategy, which Mr. Burke said reaffirmed the benefits of collaboration across the areas in which JLT operates.
As a result, in February, JLT announced a restructuring, effective April 1, that more formally aligns the business along three tracks: specialty, reinsurance and employee benefits.
As part of this restructuring, fresh leadership was brought in, Mr. Burke said.
Lucy Clarke, previously deputy CEO of JLT Specialty, was appointed to the newly created role of global CEO of JLT Specialty in April.
Mike Reynolds continues as CEO of JLT’s reinsurance business on a global basis, with added responsibility for the group’s Latin American reinsurance operations.
And in February 2017, Bala Viswanathan, CEO of JLT’s U.K. and Ireland employee benefits business, was also named international chairman of employee benefits across the group.
JLT also examined the operational processes across each of its divisions and has initiated a global transformation program that from 2020 envisages all three divisions using a consistent set of processes and core operating platforms.
The program is expected to deliver annualized cost savings of £40 million by 2020 after a one-off cost of £45 million.
The commercial insurance market saw some rate increases over the past year, which provided a slight tail wind for brokerages, but the brokers that saw the largest revenue increases mostly relied on acquisitions to drive their growth.