UK Insurance Mergers & Acquisitions: Could HSBC sale see Marsh and Aon on par again in 2010?

As 2010 warms up Insurance Blog has let resident Insurance journalist Kris Oldland give his UK Insurance insiders view as he plays Nostradamus with HSBC Insurance Brokers…..

In a year that has seen considerably less Insurance Mergers & Acquisitions activity than we had become accustomed to in the latter half of the noughties, the UK Insurance press at large has seemed occasionally a little desperate for gossip. So when one company keeps returning to the forefront of the latest trade press pages we can’t be blamed for thinking that we may have heard it all before…

However there is a certain persistence in the continuing rumors that Marsh are intent on purchasing HSBC Insurance Brokers to make me think that there could be just the tiniest hint of truth behind all this.
Of course from a strategic point of view it would make absolute sense for Marsh to make a bid also.
The market speculation is that Marsh has offered to buy the bank’s broking arm, HSBC Insurance Brokers. The inference that is being made in somewhat hushed tones however, is that this is all just part of a wider strategy by Marsh to get the banking giants on side. The long-term aim it is suggested is then to broker an affinity deal with the bank.
To date both companies have refused to comment on the speculation despite the rumor being reasonably widespread for some time now.
What is clear though is that a decision of HSBC to sell the division would fit in with plans for a wide reaching shake up of its insurance operations. In the previous financial year the bank disposed of its insurance operations based in Malta, Guernsey and Bermuda. The latter being perhaps the most telling move of all that the bank sees insurance as becoming non-core to their overall strategies.
Then as if further re-enforcing this position HSBC Insurance made the announcement that it was to cease underwriting motor insurance completely, swiftly putting HSBC Insurance (UK), its UK motor insurance vehicle into run-off.
It was at this time – when HSBC made the announcement that the corporate strategy was now to be focusing on pensions, investments business and life insurance and moving away from (motor) underwriting in the UK, that tongues really started to wag regarding the other insurance elements.
Various suitors have been referred to in the insurance press ever since, however for me, the fact that through this one acquisition Marsh could make a serious dent in the gap between themselves and their largest and oldest rival, super broker Aon (who of course pulled a similar trick last year when they bought Benfield) would suggest there is more than idle gossip involved here.
Based on the figures produced by IMAS corporate advisors earlier this quarter, the gap between these two giants of the broking sector is currently at £214m. HSBC Insurance Brokers are currently ranked ninth in the UK and should there revenue of £146m come under Marsh control then the gap between Aon and Marsh would come down to a rather more competitive £68m. What this would mean for the rest of the UK Insurance Brokers market is a topic for another article entirely though!
So for Marsh the attraction of picking up HSBC Insurance Brokers, especially from a parent company who appear keen to exit this sector, could be a little to tempting to resist? Well add into this mix the fact that the current CEO of HSBC Insurance Brokers, Phillip Gregory is an ex Marsh man. (CEO Europe, Middle East and Africa)
So with a tailored made CEO to oil the process of transition, should the question perhaps be when rather than if this deal is going to go through?
Well I’m not one to gossip but….

Interesting analysis Kris!
We’ll keep you posted here of any developments.

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