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7. Jardine Lloyd Thompson Group P.L.C.


Jardine Lloyd Thompson Group P.L.C. is concentrating on its strengths one year after it sold its U.S. retail operations and abandoned plans to take over a U.K. rival, the brokerage's senior executive says.

Moves to build on those strengths in 2007 have included the purchase of Internet-based intermediary Pavilion Insurance Network P.L.C., the formation of a joint venture to operate in areas where insurance and financial markets converge, and rebranding its captive management group, among other things.

The world's seventh largest brokerage saw slight revenue growth in 2006 despite the weakness of the dollar, in which it derives much of its revenues, against the British pound, in which it pays the bulk of its costs.

Gross revenues increased to £478.9 million ($882.8 million) in 2006, up 3.4% compared with 2005, and brokerage revenues increased 2.5% to £459.5 million ($847.0 million). In its home currency, gross revenues increased by 2.1% and brokerage revenues increased by 1.2%.

The insurance market became significantly more competitive during 2006, making it more difficult for brokers to grow, said Dominic Burke, chief executive of London-based JLT.

But JLT managed to grow by "concentrating on areas where we are significant players," he said.

"If we are not or do not believe that we can become a major player in a sector, then we will question whether we should be in it at all," said Mr. Burke.

The company's retail operations outside of the United States performed well in 2006, Mr. Burke said, and despite the weakness of the dollar, the group's specialty and wholesale and risk and insurance businesses saw revenue growth. The brokerage says it changed its reporting of some business and, as a result, its revenue figures for reinsurance and wholesale dropped in 2006.

In addition, Mr. Burke noted, JLT's employee benefits operations continued to grow. The company's employee benefits income in 2006 was £75.9 million ($139.9 million), up from £70.6 million ($121.2 million) in 2005.

The sale of JLT's U.S. retail operations, which was announced in September 2006, reflected an acknowledgement that it would be difficult and expensive to make significant headway in that market, he said.

JLT sold its U.S. property/casualty and employee benefits retail operations to Newport Beach, Calif.-based Alliant Insurance Services Inc. in a $100 million deal.

The operation had six offices, about 240 employees and $60 million in revenue.

"I think, with the benefit of hindsight, our move into retail business in the United States was a mistake," said Mr. Burke. The brokerage established a U.S. retail capability in 2004.

"It became clear that it would be a billion-dollar game to build out the U.S. retail business to achieve the critical mass we required. We didn't have that to spend, but we did have a good business, so it made sense to sell it," he said.

Having a retail operation on the ground in the United States also posed a potential conflict of interest for JLT, which is a significant wholesaler of U.S. business into London and Bermuda, Mr. Burke said.

And with the sale of the retail operations completed in October 2006, JLT can now get on with building the rest of its operations, said Mr. Burke.

"We believe we can continue to grow our existing business organically by focusing our resources on our areas of strength," said Mr. Burke. "That being said, we are of the belief that an independent JLT should seek to acquire companies and be a consolidator. We are, however, mindful of today's prices and therefore remain cautious," he said.

Last year, JLT called off talks to buy Heath Lambert Group, a rival brokerage based in London. Reasons for the breakdown in talks were not given.

Earlier this year, though, JLT has acquired Pavilion for about £7 million ($13.9 million). The company provides insurance coverage for musicians, cyclists and photographers, among other things.

And in February it entered into a joint venture with London-based ICAP P.L.C., a specialty financial markets intermediary.

The joint venture will operate in the "areas where the market for insurance, financial derivatives and securities are converging," such as securitization deals.

This convergence is something that is gaining pace and represents an opportunity for JLT, said Mr. Burke.

In March, JLT rebranded its captive management operations, which were renamed JLT Insurance Management in March.

In a statement, the broker said "JLT anticipates that JLT Insurance Management will extend its services into the management of commercial insurance and reinsurance companies."

The company also announced it had set up two rent-a-captive facilities: Isosceles PCC Ltd., a protected cell company in Guernsey, and Isosceles Ltd., a segregated account company based in Bermuda.

In order to boost the company's international presence, Mark Drummond-Brady was appointed to the newly created role of international chairman of the group in October 2006.

Mr. Burke said JLT saw significant opportunities to grow its retail arms throughout the areas where the group operates.

In particular, JLT sees opportunities to grow its employee benefits business internationally, Mr. Burke noted, citing Asia, Australasia and Canada as areas of potential growth outside of the broker's strong base in the United Kingdom.

At the close July 6 on the London Stock Exchange, JLT's per share price was £4.27 ($8.61), with a 52-week high of £4.88 ($9.00) and a 52-week low of £3.52 ($6.49).