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Five new additions over the past 12 months fueled Aon Re's 183.2% boost in revenues and positioned it as the world's largest reinsurance broker.
Aon Re's $543.7 million in 1996 pro forma revenues was more than enough to bump Guy Carpenter from its long-standing position as the No. 1 intermediary.
Aon Re's acquisition-fueled growth came from Bain Hogg International Ltd., Alexander Howden Group and Alexander Reinsurance Intermediaries Inc., Minet Re Worldwide and BEP International Holding Inc. These reinsurance units were part of larger brokerage companies acquired by Aon Group Inc., the retail brokerage arm of parent Aon Corp. In June, Aon Re separately acquired Bloemers & Co. Herzerzerkering, which was integrated into Aon Re Netherlands. Aon Group's pending acquisition of German broker Jauch & Huebener KGaA, which is not included in the pro forma figures, will further add to Aon Re's global presence and size.
Aon Re's employee count bolted to 2,693 people from 824 in 1995 as a result of the deals.
The coming together of all these firms in a 12-month period is "an event unparalleled in the history
of reinsurance broking," said Mr. Channell, president of Aon Re Worldwide in Chicago.
The mergers have enhanced Aon Re's global penetration, product line expertise and efficiencies of scale, he said. "We can deliver to our clients and markets high-quality, cost-effective products and services better than ever before."
Globally, the new firms further strengthen Aon Re's position in
the United States and London and give it "significant reinsurance penetration" in Australia, Canada, Europe and Japan, Mr. Channell said.
In addition, while "we had some presence and good business in Latin America, with the addition of Alexander Howden, Bain Hogg and Minet, we are in great shape in that part of the world," he said.
Mr. Channell said the physical integration process is "essentially completed" in the United States and United Kingdom and that all other locations will be completed by the end of the year. "We're now in a position to evaluate how to best move forward in each part of the world," he said.
Aside from the acquisitions and integration, Aon Re continues to focus on developing alternative solutions for clients. To further help clients manage risks on a comprehensive basis, Aon Re also established Aon Capital Markets in May.
New business and a heavy dose of acquisitions propelled Guy Carpenter's revenues up 16.2% to $373 million, but it was not enough to sustain its spot at the top of the world's largest reinsurance intermediaries.
The integration of Willcox Inc. Reinsurance Intermediaries into Guy Carpenter and the integration of the books purchased from Tretis Group Inc. and G.J. Sullivan Co. Inc. is "going smoothly," said Mr. Megna, president and CEO of the U.S. division of Guy Carpenter in New York.
"All the people and accounts have been fully integrated," he said. Some integration issues, while not complete, are well under way.
The acquisitions bring in new, talented people, Mr. Megna said. Willcox complements Guy Carpenter's mid-market specialty business, enhances its current position in London and offers new opportunities in Singapore and Buenos Aires, Argentina, he said. G.J. Sullivan brings specialty expertise in such areas as surety, and Tretis brings strong, "nice sized" regional accounts, he noted.
"Last year I had five branch offices reporting to me; now I have 11 reporting to me," Mr. Megna said of the intermediary's regional growth.
In addition to acquisitions, which Mr. Megna said the company is "always interested in looking at," Guy Carpenter continues to emphasize new business production.
Over the past four to five years, Guy Carpenter has emphasized new business production in such areas as health care, excess and surplus lines, alternative risks and specialty lines, Mr. Megna said. The intermediary, which traditionally has focused on large-account business, also continues to focus on middle-market business.
Mr. Megna attributes the intermediary's catastrophe and financial modeling services as one of the catalysts behind its middle-market expansion. The modeling services also bring Guy Carpenter growth opportunities in the coastal areas, he noted.
For example, Guy Carpenter is providing modeling services and working with insurers in Florida to take on more catastrophe exposures as the state continues to "depopulate" the Joint Underwriting Assn., he said.
Over the past year, Guy Carpenter created three major divisions: a U.S. division, led by Mr. Megna; an international division, led by Geoffrey I.K. Bromley; and a global services division, led by Richard C. Kane.
Having distinct entities allows Guy Carpenter to focus on more clearly and serve more efficiently the needs of its customers, Mr. Megna said.
Willis Faber Global Reinsurance credits new clients and continued specialty lines development for its 14.9% revenue growth last year to $239 million, making it the world's third-largest reinsurance intermediary.
"We continue to extract revenue growth through the winning of new business and the continued development of specialty product lines where we have made a name for ourselves," said Mr. Pelly, chairman and CEO in London. "But primarily the reason for our growth is that in certain parts of the world, our market share has grown."
"There were no acquisitions. Our growth is real growth," added Mr. Pruitt, chairman and CEO of Willis Faber North America in New York. "Prices are globally down, so (the growth) is from new business."
The growth was in spite of a 17% and 21% shrinkage of Willis's existing book of business between 1995 and 1996, said Mr. Pelly. Though the company kept most clients, the shrinkage occurred because commissions decreased due to a softening market; or clients retained more risk, he said.
Consolidation of ceding company clients also played a factor, though more so in Europe, where Willis Faber represents some of the top world insurers, than in North America, where Willis Faber's clients have not traditionally been the top 25 to 30 cedents.
Willis Faber is a major U.S. reinsurance intermediary in aerospace, aviation, marine, and surety, and in life/health/accident coverages.
The group worldwide also specializes in aviation, aerospace and marine business, as well as placing facultative reinsurance internationally. Property also is a specialty in Japan.
Willis Faber has "massively changed" over the past three or four years in order to improve its market share, said Mr. Pelly. The firm has "retrained and reskilled" its 985 employees and placed huge emphasis on research and development of new products. R&D is now "the fastest-growing expense in our global reinsurance business," said Mr. Pelly.
Willis aims to provide analytical and consulting services "to provide a real competitive advantage to our client base. . .to get them into the driving seat against their competitors. We give them advice; we give them help in developing ideas to take them out of the ordinary," said Mr. Pelly. "That is our raison d'etre."
Willis Faber has developed new products but does not wish to crow about them because "intellectual property is of paramount importance," he added. But the development of these products involves the capital markets, actuarial development, rating and risk modeling, and financial analysis.
Also, new placements in the traditional reinsurance markets protect all sorts of risk, including currency and capital market fluctuations as well as property/casualty exposures.
The merger of Benfield Group Ltd. and Greig Fester Group Ltd., which should be completed this week, will produce the world's largest independent global reinsurance intermediary and the world's fourth-largest reinsurance broker overall.
The new group, to be called Benfield Greig Group P.L.C., generated 88.7 million pounds or $138.4 million in estimated pro forma 1996 gross revenues.
Benfield's reinsurance arm, Benfield Ellinger Ltd., and Greig Fester, a sole reinsurance intermediary, together are a perfect fit, both sides claim.
"There is remarkably little overlap," said Mr. Spiller, CEO of Greig Fester International and director of Greig Fester Group. He is managing director of the new group.
"The areas we've specialized in, Greig hasn't specialized in" and vice versa, added Graham Chilton, chairman of Benfield Ellinger, who will be CEO of the new group.
The merger negotiations in fact were called "Project Jigsaw" because there was very little repetition between the two companies.
Talks began earlier this year in part because "we saw more and more synergies, and we both wanted to remain private and independent, which we see as a major asset," said John Coldman, chairman of Benfield. He will be chairman of the combined group.
One good fit, for example, is Greig Fester's work on catastrophe modeling and dynamic financial analysis; and Benfield's expertise in alternative risk transfer products in the capital markets for catastrophe coverage.
Benfield believes it placed the first reinsurance product in the financial markets more than two years ago, said Mr. Chilton, though he would not give details.
"We've got 28 people in Greig doing nothing else but modeling work, and there's a natural synergy with what Benfield has done with developing new products in alternative risk transfer and with the capital markets," he said.
The new group also will benefit from Benfield's 24-hour access to client information by its clients via secure lines on the Internet, both company executives agree. This constant availability of clients' account information "stops the temptation to sit on clients' money," said Mr. Chilton.
Both intermediaries trace their roots to reinsurance.
Benfield originally specialized in marine reinsurance but developed other specialties after 1988 in non-marine and aviation, Mr. Chilton said. Customers came primarily from the United States and United Kingdom.
In particular, Benfield placed a higher proportion of retrocessional business than others in the London market, though Mr. Chilton wouldn't describe it as LMX business. More than 70% of clients are from overseas.
Greig Fester dates back to 1874 and is credited with pioneering excess-of- loss reinsurance in the 1950s and 1960s, Mr. Spiller said.
About one-third of Greig Fester's business emanates from the Pacific Rim in Japan, Australia and Southeast Asia. The company also is very dominant in placing reinsurance for U.K. insurance companies.
The sluggish reinsurance market outside North America put a damper on Sedgwick Re's 1996 worldwide revenues. Revenues were down 1.5% to $128 million, making it the world's fifth-largest reinsurance broker.
"Although reinsurance brokerage revenues on a worldwide basis are relatively flat in comparison to 1996, North American reinsurance brokerage revenues have grown at a healthy rate," noted Mr. Zaffino, chairman and CEO.
This can be attributed to new program business in Sedgwick Re's treaty portfolio and an increase in facultative reinsurance buying due in part to attractive reinsurance pricing, he said.
Sedgwick's property catastrophe, workers compensation and excess casualty specialties continue to expand and also provide revenue growth, Mr. Zaffino noted.
While the market continues to challenge Sedgwick Re, Mr. Zaffino said the company remains focused on meeting client needs through innovative resources.
He specifically points to Sedgwick Re's online communication of placement and contract information, claims notices, billing, and the electronic collection and remittance of reinsurance recoverables as value-added services Sedgwick provides.
"Automated cash handling and fast-track claims processing also offer added value to the reinsurance transaction by expediting claims payments and the transfer of funds," he said.
The broker also continues to "invest heavily" in alternative risk transfer resources, such as its actuarial modeling group, INSTRAT, which provides extensive property catastrophe and related risk assessment studies.
During 1996, Sedgwick Re restructured its production activities to highlight 13 specialized areas of expertise and to facilitate the seamless delivery of services. The restructuring that has taken place in North America is in the early stages of being implemented in London, Mr. Zaffino said.
The specialties are: aviation, directors and officers liability, energy, fidelity and surety, international, marine, umbrella, agricultural, non-standard auto, professional liability, accident and health, workers compensation and property catastrophe.
A dose of creativity, technology and acquisitions contributed to E.W. Blanch's 15.8% increase in 1996 revenues to $94.3 million, making it the world's sixth-largest reinsurance intermediary.
"We hear that clients want to grow their top lines, expand their bottom lines and mitigate volatility," said Mr. Walker, chairman and CEO.
"We're trying to bring solutions to those issues. Reinsurance is one way, but it is not the only way. We've been successful in providing solutions not just off the product shelf," he said.
For example, by integrating all of its services, Blanch not only offers reinsurance solutions, but through its Paragon Reinsurance Risk Management Services Inc. unit, it also provides insurers with consulting services and reinsurance accounting and claims software. Its Capital Risk Solutions unit tracks and educates insurers on capital market solutions and other finite risk reinsurance arrangements, and its Rockwood Programs Inc. unit provides insurers with help in marketing their programs to the primary market.
The Bloomington, Minn.-based reinsurance broker also is using technology to its advantage, Mr. Walker said, adding that Blanch continues to enhance its analytical, processing and trading electronic tools.
At the same time, by increasing its stake in Swire Fraser (Insurance) Holdings Ltd., Blanch is enhancing its international capabilities.
Blanch increased its ownership share in Swire Fraser to 70% from 50% for an undisclosed amount earlier this year (BI, Feb. 17). Mr. Walker said eventual 100% ownership of Swire Fraser is "certainly a possibility," but at the moment, it is "pleased with Swire Fraser as a partner."
The partnership has given Blanch entry into Asia and Latin America.
Mr. Walker noted that Blanch is primarily distributing primary insurance in China and Vietnam but will distribute reinsurance when the opportunity presents itself.
Blanch also does business in England, Australia, China, Denmark, France, Italy, Mexico, Hong Kong, and Singapore.
Despite the reinsurance market's competitiveness and soft pricing, Mr. Walker is optimistic about Blanch's continued success.
"The marketplace is full of opportunities," he said. "From our perspective, we're trying to build expertise and competency and at the same time keep the excitement level high to take advantage of those opportunities."
Le Blanc de Nicolay
Soft reinsurance rates hampered revenue growth during 1996 at Le Blanc de Nicolay Reassurance, the reinsurance arm of broker Groupe Le Blanc de Nicolay.
Revenues dropped 3.2% to 366 million French francs and 5.7% in U.S. dollar terms to $71.7 million. It ranks as the world's seventh-largest reinsurance intermediary.
"We are doing well," said Olivier du Passage, executive vp of Group Le Blanc de Nicolay in Levallois-Perret, a suburb of Paris. "What isn't going well are the rates" in reinsurance.
In May, the intermediary restructured its operations to allow teams to focus on major clients in certain sectors. The four teams concentrate on:
Primarily French multiline insurance companies. This would include the AXA-UAP Group.
Direct mutuals, which control more than 50% of the private homeowners insurance market in France.
French companies outside Paris.
Bankassurance, where the clients are the insurers owned by French banks that offer mainly life insurance policies to their customers.
Reinsurance for bankassurance is a new idea for LBN Reassurance, first set up in the group in January, said Mr. du Passage. The intermediary has placed treaties that cover the bank insurer's assets as well as liabilities. The broker may be the only one in France to have placed such treaties, he said.
Besides being one of the top reinsurance intermediaries in France, Le Blanc de Nicolay also places business for clients in Eastern European countries, such as the Czech Republic and Poland. And LBN Reassurance considers itself one of the largest reinsurance intermediaries in Italy, Belgium and Spain. It also set up a new office in Cologne, Germany, during the year.
What eludes Group Le Blanc de Nicolay, and therefore its reinsurance arm, is a London partner, said Mr. du Passage. "There is no need for us to join a huge group, but we miss an association with a London broker."
"The problem with Le Blanc is that we're too continental," he said.
GLN is talking to a few London brokers at the moment to see if some arrangement can be made.
Earlier this year, a merger with London-based Crawley Warren & Co. Ltd. fell through because "we regret we couldn't meet terms," said Mr. du Passage. GLN still works with Crawley Warren, however, particularly through International Space Brokers, a Rosslyn, Va.-based consortium that also includes Frank Crystal & Co. Inc.
Jardine Lloyd Thompson
Reinsurance Holdings Ltd.
The newly combined reinsurance operations of JIB Group P.L.C. and Lloyd Thompson Group P.L.C. reported an acquisition-driven 37.2% increase, in dollar terms, in gross revenues in 1996 to 43 million pounds ($67.1 million), making it the world's eighth-largest reinsurance intermediary.
Since the merger last February, the combined reinsurance group, Jardine Lloyd Thompson Reinsurance Holdings Ltd., has seen "a tremendous amount of new business by marrying those two parts together," said Mr. Corben, chairman and CEO of JLT Re in London. However, this doesn't necessarily show because there have been rate reductions.
The newly formed JLT Re aspires to be the most profitable specialist or boutique reinsurance broker in the world, according to Mr. Corben. "We see ourselves very much as a specialist reinsurance broker, not necessarily highly visible in the so-called 'plain vanilla' business-simple property, excess-of-loss and so on-although we do a lot of that," he said. "But our growth is in the specialist and more difficult areas where we have an opportunity to bring our knowledge, expertise and the over-worked word 'value-added'*" to clients.
Some specialties include reinsurance for medical insurance products, financial reinsurance or some of its derivatives, reinsurance of Lloyd's syndicates, and leading roles in aviation, aerospace and marine programs.
JLT Re also believes it pioneered some package reinsurance programs in the Far East.
"We're far from conventional in the way we do things," said Mr. Corben. "We see specialization as adding value, and don't seek to be a mega brokers. . . We seek to be one of the largest and certainly the most profitable of the specialist brokers in our chosen specialties, where we are either market leader or we aspire to be in two or three years."
It took JLT Re just three months to merge its operations, because the two reinsurance brokerage companies were a good fit, said Mr. Corben, who was CEO of reinsurance for Jardine. Though there was some overlap in the London reinsurance offices of Jardine Thompson Graham Ltd. and the reinsurance division of Lloyd Thompson, only Jardine had overseas offices, so there were no changes to be made.
JLT Re operates in four regions:
London, by far the largest office, where the combined companies have about 27 million pounds ($42.1 million) in brokerage revenues. Jardine had about 160 employees and Lloyd Thompson had about 40 employees, and now there are 160 employees as a result of some redundancies.
The United States, through treaty reinsurance broker Jardine Sayer & Co. Inc. in Lawrenceville, N.J.; and wholesale managing general agent Intermediary Insurance Services Inc. in San Francisco. IIS, which specializes in accident and health coverage, has a premium volume of about $70 million. The two companies produce about $8 million each in brokerage revenues.
Asia, through Jardine Thompson Graham Asia Pte. Ltd. in Singapore, which was set up in 1982. "Fifteen years on it was an inspired choice" as there are now 50 reinsurance companies in Singapore, which has become the largest reinsurance market in the region, said Mr. Corben. The company earned about 3 million pounds ($4.7 million) in brokerage revenue last year but is growing faster than London.
Jardine Thompson Graham (Australia) Pty. Ltd. in Sydney, which handles mainly treaty reinsurance in New Zealand and Australia. The company had about $1.25 million in brokerage revenue last year.
Towers Perrin Re
Geographic expansion and strategic hiring helped nudge Towers Perrin Re's revenues up 2.4% in 1996 to $42.5 million.
The Philadelphia-based unit of consultant Towers Perrin ranks as the world's ninth-largest reinsurance intermediary.
Over the past 12 months, Towers Perrin Re has hired several senior people who have brought in new business and enhanced presence in such cities as Chicago, Seattle, Toronto and Philadelphia, said Mr. Van de Graaf, chairman and CEO.
Some of these people came on board as a result of the megamergers, Mr. Van de Graaf said. "They came to us because they didn't want to work for a huge organization and would prefer to work for a private firm."
At the same time, the intermediary is looking to expand internationally.
"It's high on our radar screen," Mr. Van de Graaf said. Despite the broker's twice-failed attempt to expand internationally-he attributes the failures to the wrong strategy and wrong implementation-he said that "the world is changing, and we have to look elsewhere for growth."
This international growth may come organically, through acquisitions, through a joint venture or through some combination of those three, he said.
While reinsurance rates still are soft, Towers Perrin Re's accident and health business is going strong, as is its program business, he noted.
In addition, the broker's fee-based Integrated Reinsurance Risk Management unit, which provides unbundled reinsurance services, such as catastrophe modeling, financial analysis and reinsurance program analysis, also is generating growth.
While Towers Perrin Re did not acquire any firms in 1996 or so far in 1997, Mr. Van de Graaf said it has looked at a number of firms. "We talked to one firm very, very extensively, and we made, what we thought were two very attractive offers," he said. The deal did not come to fruition due to differences over price.
Lambert Fenchurch Group's near 47% growth in gross revenues is largely attributable to "steady growth generally" and to a global drive on the wholesale side, said Michael Caley, CEO of Kininmonth Lambert Ltd., the company's main reinsurance subsidiary.
Kininmonth Lambert and the four smaller subsidiaries that comprise London-based Lambert Fenchurch Group's reinsurance brokerage revenues grossed $37.5 million in 1996, ranking it as the world's 10th-largest reinsurance intermediary.
"We were already pretty significant on the retail side in the U.K., but we've been looking for more wholesale business as a balance," Mr. Caley said.
While Kininmonth Lambert's biggest account has been non-marine, it has been expanding into other areas. A push over the past three to four years into motor excess-of-loss, particularly in the United Kingdom, has made that "a real growth area," he said. As a result, the company now does motor excess-of-loss business around the world.
Talks over the past seven years with the countries of the former Yugoslavia about motor excess-of-loss have finally paid off in Slovenia, noted Mr. Caley. There, the leading insurers and reinsurers have come to Kininmonth Lambert for much of that market's motor excess-of-loss protection. "That's not big in terms of brokerage volumes, but it's significant for the future," he maintained.
On the marine side, Kininmonth Lambert bought a team from Minet Group in November 1996 that specializes in marine protection and indemnity reinsurance. Kininmonth Lambert already was big in P&I, but the Minet team brought business and is now helping develop general marine reinsurance operations.
In August, Kininmonth Lambert opened a Singapore office to serve the Asian market, "which should certainly affect the '98 figures," Mr. Caley said.
At the start of the year, it opened Kininmonth Lambert Australia Pty. in Sydney. So far, "it's been really quite successful," he added.
Mr. Caley was reticent about giving away secrets regarding planned new products but said Kininmonth Lambert has been quite successful this year in health care products, particularly in Brazil, and potentially in Eastern Europe.
Lambert Fenchurch Group was itself formed by the merger in February of Lowndes Lambert Group Holdings P.L.C. and Fenchurch P.L.C., and Mr. Caley said he does not believe the group's merger and acquisition activity is over.
Lambert Fenchurch has gradually developed both organically and by acquisition during the 1990s, "and I see no reason for us to expect that to change," he said.
Edwin Unsworth contributed to this report