Marsh & McLennan May Buy HSBC's Insurance Brokerage Unit

Less than a month ago insurance broker Marsh & McLennan CEO Brian Duperreault announced that he was going on a buying spree for acquisitions that would be "relatively small" individually, but "mighty" collectively.

Duperreault, the former boss of Ace Ltd., moves fast. The latest rumor in the London Daily Telegraph is that Marsh is in "advanced talks" with HSBC, the world's third largest bank by market capitalization, to buy its HSBC Insurance Brokers Ltd. unit. The unit itself is the ninth largest broker in the United Kingdom with a value of as much as $330 million. Both Marsh and HSBC Insurance declined comment, according to Business Insurance.
Under Duperreault, who took over in January 2008, Marsh has regained some of its former bravado. What it hasn't regained is its position as the nation's No. 1 insurance broker, which it lost to Aon.
Size matters in this industry and business is getting tougher for brokers who go out and negotiate deals between insurers and companies. While Marsh improved its profit picture in the third quarter, revenue was down 11 percent year over year. And according to Duperreault, "the economic environment continues to be challenging."

Experts say that "organic growth," the kind that comes from growing your existing stores rather than adding stores and outlets, is hard to find in this industry. But when the going gets tough, the tough make acquisitions, and that seems to be the case for insurance brokers. All of them are making noise about scooping up smaller successful independent brokers who aren't bound by the rules forced on the major brokers by one-time New York Attorney General Eliot Spitzer.

If Marsh does buy HSBC's insurance brokerage unit, it will pit it in head-to-head competition with Willis Group Holdings, the third largest broker in the world. Willis was once based in London, and still retains a large presence.

In the battle to be the biggest, one thing is clear: unless you bake a larger pie, somebody isn't going to get a piece.