Marsh Acquires HSBC Insurance - Analyst Blog

Expanding its insurance portfolio, Marsh & McLennan Co. Inc. (MMC) announced on Wednesday the completion of its acquisition of HSBC Insurance Brokers Ltd (HIBL), a London-based wholly owned subsidiary of HSBC Bank (HBC). The company arrived at this agreement with HIBL in December 2009. 

Marsh & McLennan acquired the HSBC wing for an all cash transaction of £135 million (approximately $205 million). While the deal has been sealed in most of the global locations, Marsh & McLennan expects to close the deal in Abu Dhabi and Saudi Arabia in the second quarter of 2010. 

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. 

Alongside, 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. 

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. 

Earnings Recap 

Marsh & McLennan’s fourth quarter adjusted earnings of 38 cents per share were a penny ahead of the Zacks Consensus Estimate and also up from 36 cents reported in the year-ago quarter. Results were aided by strong margin improvement in the Risk and Insurance Services as a result of improved profitability at Guy Carpenter and were offset by increase in expenses, lower interest and investment income and the strengthening of the U.S. dollar. 

Since 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.
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