While insurance merger & acquisition (M&A) activity has been high for many years, at least one CEO isn’t worried about the market being picked over.
In fact, Marsh McLennan Agency (MMA) chairman and CEO David Eslick (pictured) told Insurance Business that the firm’s M&A pipeline “has never been better.”
“There’s still some very nice-sized, high-quality firms that we continue to be in contact with,” said Eslick. “Last year, we did more deals than we’ve ever done in our history.”
With some 10,000 employees in 170 offices across North America, MMA provides business insurance, employee health & benefits, retirement, and private client insurance to organizations and individuals.
Most notably, in August, MMA acquired top-100 agency Graham Company, one of the last large independent agencies in the United States.
Following that deal, Eslick shared his views on the challenges in the M&A marketplace, noting that credit markets were “fairly tight.”
“I think there’s some real changes,” he said. “A lot of our competitors for acquisitions, private equity-backed brokers, have seen their interest expense go up dramatically, which impacts their cash flow.”
As a wholly owned subsidiary of global insurance and professional services firm Marsh McLennan, MMA isn’t held back by the credit environment, Eslick said.
“I think we are better positioned, frankly, than we’ve ever been [to continue with M&A],” he said.
“Marsh McLennan is the friendliest financial backer I’ve ever found in the industry. This enables us to not rely upon credit markets or anything else to make decisions on the right acquisitions and to have the right capital structure to do that.”
But Eslick also stressed that MMA would continue to be a discerning part of its M&A strategy.
“We think we’re going to continue to be active, but we don’t do acquisitions to do acquisitions. We only look at partners,” the CEO told Insurance Business.
“We basically ask ourselves two questions: ‘Will they make us better? Can we help make them better?’ And if the answer is ‘yes’ to both of those, then we’re going to look at a partnership.”
Large catastrophe losses that have led to carriers limiting business or withdrawing from certain markets or states are creating a challenging environment for brokers.
Eslick said MMA’s resources position it to support clients through hard market conditions and continuing economic volatility.
“We always have concerns for our clients and the risks and the exposures that they have. But I think it speaks about the success of Marsh McLennan Agency that we have been the place that our clients look to for that support because of our resources and capabilities, including data and analytics,” he said.
“We have the biggest data lake in the industry, and we can help our clients use that data to make objective decisions about the type of products they need and the exposure that they would be willing to take.”
Additionally, MMA’s “leading” position with its carrier partners helps it tap into available capacity and create solutions for its clients.
“In addition to that, we have the largest reinsurance broker in the world with Guy Carpenter. With our ability to work with carrier partners and our backstop capability, there’s no other broker in the marketplace that can do that with our size and with our scale, so it puts us in a very good position to solve clients’ needs,” Eslick said.
What are your thoughts of Marsh McLennan Agency’s M&A strategy and approach to the hard market? Tell us in the comments.
