IBJNews

Gallagher sees more broker mergers coming

Back to TopCommentsE-mailPrintBookmark and Share

The Carmel office of Arthur J. Gallagher & Co. just made its sixth acquisition in five years, and it expects looming changes to tax and health laws to produce even more chances to snap up benefits brokers this year.

The local Gallagher office acquired DeHart Benefit Solutions on Jan. 4. President Becky DeHart brought over about 50 clients, who she now serves under the Gallagher umbrella.

Meanwhile, Illinois-based Gallagher tapped Dane Hudson—the man who engineered the six deals in Indiana—to pursue acquisitions in 11 Midwestern states. Hudson still works out of the Carmel office, but Gallagher’s operations are now led locally by longtime benefits broker Jess Stump.

Stump, who joined Gallagher by selling his business in 2008, will continue to serve all his old clients, as well.

“It’s a great way to grow when organic growth is slow,” Hudson said of Gallagher’s acquisition strategy. “The interest is huge from a merger-partner prospect standpoint.”

A big factor driving interest this year, Hudson said, is the prospect that the capital gains tax cuts pushed by President Bush in 2003 are set to expire at year’s end. That means if a business owner is thinking about selling, doing so now could yield 5 percent to 10 percent more in proceeds than it would next year.

And there are plenty of trends in the industry that could push benefits brokers to sell. DeHart found that it took as much or more time to stay on top of the new regulations flowing out of the 2010 health reform law as it did finding and serving clients.

In addition, brokers are seeing their commissions squeezed because the Obama administration declared such costs an administrative expense as part of the health reform law’s requirement that health insurers spend no more than 20 percent of premiums on administration and profits. As a result of that ruling, many health insurers have reduced their commissions to brokers.

Stump thinks many small benefits brokerages are feeling the pinch. He thinks Gallagher can boost its annual revenue in Indiana from $5.5 million now to $8.5 million by year end, just through acquisitions.

“It’s almost impossible to try to run a business and keep up with all this stuff,” he said, noting that Gallagher will look not only at health insurance brokers, but also human resources consultants and retirement plan advisers.

As Gallagher’s Carmel office has grown, it hasn’t held on to all its employer clients. After Hudson sold his firm, Strategic Health Plans, to Gallagher in 2007, the firm lost its account with Subaru of Indiana Automotive. And even after adding DeHart’s clients, Gallagher has fewer clients now—270—than the 300 it had in 2009.

But Hudson and Stump are confident the resources of Gallagher—the fourth-largest benefits firm in the nation, according to Business Insurance magazine—will help it add $1 million in organic growth this year.

Those resources include local actuaries to help employers track their health care spending and push back if insurance companies come up with wildly different numbers. They also have teams of attorneys and custom software tools to help employers comply with the new regulations from the health reform law, and tools to help employers improve communication with employees, which is key for successful wellness programs.

“It’s going to be very hard for the small broker to compete,” Hudson said.

 

ADVERTISEMENT

Post a comment to this story

COMMENTS POLICY
We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
 
You are legally responsible for what you post and your anonymity is not guaranteed.
 
Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
 
No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
 
We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
 

Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

Sponsored by
ADVERTISEMENT

facebook - twitter on Facebook & Twitter

Follow on TwitterFollow IBJ on Facebook:
Follow on TwitterFollow IBJ's Tweets on these topics:
 
Subscribe to IBJ
  1. I took Bruce's comments to highlight a glaring issue when it comes to a state's image, and therefore its overall branding. An example is Michigan vs. Indiana. Michigan has done an excellent job of following through on its branding strategy around "Pure Michigan", even down to the detail of the rest stops. Since a state's branding is often targeted to visitors, it makes sense that rest stops, being that point of first impression, should be significant. It is clear that Indiana doesn't care as much about the impression it gives visitors even though our branding as the Crossroads of America does place importance on travel. Bruce's point is quite logical and accurate.

  2. I appreciated the article. I guess I have become so accustomed to making my "pit stops" at places where I can ALSO get gasoline and something hot to eat, that I hardly even notice public rest stops anymore. That said, I do concur with the rationale that our rest stops (if we are to have them at all) can and should be both fiscally-responsible AND designed to make a positive impression about our state.

  3. I don't know about the rest of you but I only stop at these places for one reason, and it's not to picnic. I move trucks for dealers and have been to rest areas in most all 48 lower states. Some of ours need upgrading no doubt. Many states rest areas are much worse than ours. In the rest area on I-70 just past Richmond truckers have to hike about a quarter of a mile. When I stop I;m generally in a bit of a hurry. Convenience,not beauty, is a primary concern.

  4. Community Hospital is the only system to not have layoffs? That is not true. Because I was one of the people who was laid off from East. And all of the LPN's have been laid off. Just because their layoffs were not announced or done all together does not mean people did not lose their jobs. They cherry-picked people from departments one by one. But you add them all up and it's several hundred. And East has had a dramatic drop I in patient beds from 800 to around 125. I know because I worked there for 30 years.

  5. I have obtained my 6 gallon badge for my donation of A Positive blood. I'm sorry to hear that my donation was nothing but a profit center for the Indiana Blood Center.

ADVERTISEMENT