“It is clear that the trend of M&A in the Lloyd’s and London market
sector will continue as businesses seek to enhance their distribution footprint and gain benefit from scale,” says Stephen Ross, insurance M&A and strategy partner at Deloitte.
It was recently reported that Gallagher International has agreed to acquire a number of broking teams from Oxygen, while talks are also reportedly taking place between AmWins, which acquired Lloyd’s broker Colemont in 2010, and Thompson Heath & Bond (THB).
It makes for an interesting comparison to analyse the trend in turnover
per employee. Although the absolute figures may be driven by business mix, eleven brokers achieved a figure of more than £150,000 per member of staff and two managed to push this ratio beyond the £200,000 mark, with Towers Watson achieving £223,000 and Lloyd & Partners achieving the remarkable figure of £246,000 per employee. All but three brokers for which the information was available, also managed to improve this efficiency ratio between 2009 and 2010—perhaps an indication of the more cost effective management approach implemented in many broking firms in response to the economic downturn.
Some of the companies that have fared well on this chart such as
Lloyd & Partners and RFIB Group have controlled headcount during the year while continuing to grow their turnover. Ross noted that, “the improvement in average turnover per employee for the whole group (from £146,000 in 2009 to £156,000 in 2010) potentially reflects the focus some businesses are gaining from increased efficiency. However this is still a
AVERAGE TURNOVER PER EMPLOYEE 2009 & 2010 300
2010 2009
250
significant opportunity for many brokers.” Perhaps more interesting to many observers—as well as the brokers
themselves—will be the graph that illustrates the operating profit of each as a percentage of turnover. This should provide a good indication of the true profitability of each broker relative to the size of their business.
On this graph (shown overleaf), a movement upwards between 2009 and
2010 indicates the company has achieved a higher profit as a percentage of its revenue and a movement to the right indicates revenue growth.
For example, the large grey circle furthest to the right indicates Cooper
Gay Swett & Crawford: its placement on the X axis reflects its 2010 £220.0 million turnover, its size as a circle, representing its £39.8 million operating profit and its placement on the Y axis, the fact that its profit equals 18.1 percent of its turnover. The equivalent figures for its 2009 results are represented by the corresponding green circle. Its strong growth, spurred by consolidation, can be clearly seen, but while its profit has also grown—from £19.4 million to £39.8 million—the size of its profits have not proportionally kept pace with its revenue growth: thus its operating profit as a percentage of turnover has slipped from 19.3 percent to 18.1 percent. Its nearest rival, Gallagher International, achieved an increase in terms of both profit and revenue, with its profits increasing from 15.0 percent to 15.9 percent of turnover.
Other companies worthy of note, include the success of Lloyd & Partners and Hyperion, which both combined strong revenue growth
200
150
100
50
0
September 2011 | INTELLIGENT INSURER | 57
Cooper Gay Swett & Crawford
Gallagher International (including Heath Lambert)
Lockton Miller
Hyperion RK Harrison Lloyd & Partners BMS Associates THB Group RFIB Group
Price Forbes Towers Watson
UIB Holdings Tyser & Co Windsor
Newman Martin & Buchan Besso Holdings
Lonmar Global Risks AHJ Holdings Oxygen Holdings GROUP AVERAGE
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