Business Moves

Marsh

Marsh & McLennan Companies Inc., the No. 2 global insurance broker, said the 2008 restructuring at Marsh Inc., its flagship insurance brokerage unit, was on track to generate annual savings of $200 million, and it plans further spending cuts in its consulting units.

Fourth-quarter net income fell 6 percent to $80 million, while revenue fell 9 percent to $2.7 billion. Revenue at Marsh Inc. fell 5 percent to $1.1 billion, but rose 1 percent in North America, a region that accounts for more than half its revenue.

Marsh & McLennan has been restructuring to boost savings after an industrywide probe in 2005 led big brokerages to drop lucrative commissions they had received from insurers. The company, which was the biggest insurance broker before slipping behind Aon last year, cut about 1,900 jobs in 2008 and outsourced another 700. It plans more cuts in 2009.

Chief Executive Brian Duperreault told Reuters he saw “restoring MMC to a preeminent position as a multiyear process.”

Insurance rates have been falling in recent years and although there are signs that prices will rise in the coming year, Duperreault said economic factors could limit the ultimate benefit.

Despite such conditions, the company expects to grow profits in 2009. Duperreault told Reuters that acquisitions could help boost growth for its brokerage business. “Marsh can actually make acquisitions now,” he said. The unit could not have done so a year ago when it was hampered by a feeble financial state, he said.

Duperreault said Marsh Inc. would pursue U.S. deals, especially for a new division that serves the needs of small businesses, and is also looking at opportunities abroad for both Marsh and its reinsurance brokerage unit Guy Carpenter. “Valuations are much better,” he said. Acquisitions will likely be small but could have a big impact collectively, he added.

Beazley, First State

London-based insurer and reinsurer Beazley Group is acquiring Boston-based First State Management Group, an underwriting manager specializing in excess and surplus lines commercial property insurance for $35.4 million in cash. First State is a subsidiary of The Hartford Financial Service Group and is led by president and chief operating officer Judy Patterson.

The acquisition will increase Beazley’s presence as an insurer of mid-sized U.S. commercial property business that does not normally come to Lloyd’s. Officials said that First State plans to underwrite around $150 million of gross premium for 2009, balancing the specialty lines business — professional and management liability business— that Beazley has been writing locally in the U.S. since 2005.

The Hartford said the move is part of its strategy of moving away from excess and surplus lines business and was not triggered by recent troubles with its life insurance operations. “This is an agreement we have been working on for many months. We are entering into this transaction to reduce our exposure to excess and surplus lines property insurance, which is not core to our business,” said Gary Thompson, executive vice president of The Hartford’s property and casualty middle market and specialty lines insurance.

Thompson said First State’s livestock and nursing home programs would transition directly to The Hartford.

AIG, Zurich

American International Group is in advanced talks to sell its U.S. auto insurance unit to Swiss insurer Zurich Financial Services AG, Reuters reported. The auto insurance business is expected to fetch around $2 billion. The unit being sold includes the 21st Century Insurance Group business, which AIG took over in 2007.

Unitrin, Direct Response

Trinity Universal Insurance Co., a Unitrin, Inc. subsidiary, has completed its acquisition of Direct Response Corp. and its subsidiaries for $200 million in cash.

Direct Response is based in Meriden, Connecticut and sells personal auto insurance directly to consumers under both the Response Insurance and Teachers Insurance Plan brand names. For 2008, Direct Response recorded direct written premiums of $156 million.

Donald G. Southwell, Unitrin’s chief executive officer, said Direct Response will continue to market its products under both brand names and will be reported as part of the Unitrin Direct business segment. Unitrin’s brands include Kemper, Unitrin Specialty and Unitrin Direct.

PGI, Underwriters & Brokers of Michigan

PGI Commercial has acquired the assets of Underwriters & Brokers, Inc. of Troy, Michigan. PGIC said it would merge the platform and staff of UBI with its existing Michigan office.

Underwriters & Brokers, Inc. handles middle-market commercial risks with a focus on professional liability and liquor liability.

PGIC is part of the Bermuda-based Primary Group Limited and manages property and casualty programs nationwide.

Valiant

New York-based specialty insurer Valiant Insurance Group, Inc. has established a new insurance vehicle, Valiant Specialty Insurance Co., a Delaware-licensed property/ casualty excess and surplus lines insurance carrier for Valiant’s U.S. operations.

Valiant said it intends to continue to seek additional state surplus lines eligibilities for Valiant Specialty Insurance Co.

Gary Dubois, president and CEO of Valiant, said that the new carrier, together with the broadly-licensed admitted carrier, Valiant Insurance Co., means his firm can provide a wider range of commercial insurance products. Current product offerings include professional liability, marine, casualty and management liability. Valiant Insurance Group is a subsidiary of Ariel Holdings Ltd.

Merchants National E&S

Buffalo, N.Y.-based Merchants National Insurance Company, a wholly-owned excess and surplus lines subsidiary of Merchants Insurance Group, began accepting new business on Feb. 1, 2009. The company reported as of that date it has been approved in the 10 states of Alabama, Georgia, Louisiana, Michigan, Mississippi, North Carolina, Ohio, Pennsylvania, Texas and Vermont.

The new company targets franchised hotels and motels, and writes the business in conjunction with Southern Hospitality Underwriters, a Georgia-based wholesale brokerage agency that specializes in business insurance for the hotel industry.

Topics USA Michigan