Marsh to Buy HSBC Insurance - Analyst Blog

Expanding its insurance portfolio, Marsh & McLennan Co. Inc. (MMC) announced on Friday its decision to acquire HSBC Insurance Brokers Ltd (HIBL), a London-based wholly owned subsidiary of HSBC Bank. The deal, comprising both cash and shares, is set to be finalized for about $218 million. Subject to regulatory approvals, the transaction is expected to be sealed by the first quarter of 2010. 

Marsh & McLennan has also partnered with HSBC under a Preferred Strategic Partnership (PSP), wherein the company shall have the right to provide insurance brokerage and risk management services to HSBC's corporate and private clients. Given the weakness in Marsh & McLennan’s client retention due to the ongoing economic turmoil, this partnership can provide additional revenue opportunities through HSBC’s well-built network and banking relationships. 

The acquisition of the brokerage unit of HSBC Bank will bring with it about 1,400 employees in 30 offices across the U.K., Middle East and Asia, thereby widening Marsh & McLennan’s global exposure through HSBC’s already established distribution channels. Among others, HIBL also enjoys strong market positions in third party business generated in vital sectors such as health and contingency, education, marine and specie. 

Additionally, the PSP will help Marsh & McLennan focus on the bancassurance model with its emphasis on life, pensions and investments, indicating strategic growth potential for the company. 

Separately, on Monday, Marsh & McLennan announced that its insurance broker agency Marsh & McLennan Agency LLC has acquired The NIA Group LLC, an independent insurance agency based in New Jersey. The Marsh & McLennan Agency was established by parent Marsh & McLennan in 2008 to serve mid-sized businesses. 

Although the terms of the deal remain undisclosed, we believe that the acquisition will benefit Marsh & McLennan with an extensive national coverage. Alongside, the HSBC and NIA deals will enhance the company’s customer base, which is a significant requirement for its growth and corporate rapport that recently got tarnished by the allegations made by the state of Alaska on improper accounting of pension benefits. 

Since the customers are the key to success in the banking and insurance business, their retention and further addition are vital for revenue generation in a company like Marsh & McLennan. Hence, expanding its network of clients will help the company reduce its risk from client attrition and boost client service and solutions. 

On Monday, the shares of Marsh & McLennan closed at $21.76, slightly up from $21.69, on the New York Stock Exchange.
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