P/C Broker Gallagher Widens Retirement Practice Into IMO Space

By John Hilton

While Arthur J. Gallagher & Co. is regularly acquiring new companies and expanding its gigantic Fortune 500 footprint, one January takeover generated particular notice.

On Jan. 28, Gallagher announced the acquisition of Partners Advantage Insurance Services and AMZ Financial Insurance Services. The move marked the first substantial entry by Gallagher into the independent marketing organization channel of insurance distribution.

An insurance giant based outside Chicago, Gallagher continues to expand. The third-largest insurance broker in the world, Gallagher entered the Fortune 500 list in 2016, coming in at 471. Since then, the company rose to 464 in 2017 and 454 in 2018.

Gallagher is predominantly a property & casualty broker, with a growing benefits division. The company is sending signals that it plans to be more active with indexed life insurance and possibly annuities.

"Part of our attraction is for the opportunity for product development that could be specific to our client base and we could deliver through our life business," said Jeff Leonard, head of Gallagher's North America Financial & Retirement Services division. "So it seemed like a pretty nice, unique skill set that we could add on and really help us leverage our business."

The company's Financial & Retirement Services division itself is just a few months old. Gallagher announced the new practice Dec. 13, with the goal to provide: "successful retirement planning, sophisticated investment solutions, independent fiduciary services, actuarial consulting services, executive benefit retention programs and individual life insurance needs."

Not A Typical Acquisition

In particular, greater access to IUL attracted Gallagher to Partners Advantage, Leonard said. The two companies have a longtime working relationship, so the acquisition made sense.

"It’s not one of our typical acquisitions, but from our perspective it’s a great opportunity for us to enhance our connection with carriers that we work with and that Partners works with separately," Leonard explained. "Bringing that together is a significant opportunity."

According to Gallagher's 2018 Benefits Strategy & Benchmarking Survey, 62 percent of employers are addressing the negative effect of financial stress on productivity by providing employees with access to financial advisors. Nearly half (47 percent) provide financial-literacy education to help employees make better saving and spending decisions.

Gallagher is clearly interested in providing those financial services. Asked whether annuities or additional IMO acquisitions could be part of the equation, Leonard was noncommittal.

"I do think there’s an opportunity in the IUL space and even in the annuity space," he said. "And that’s probably more from a future perspective. But I do see us doing more in the IUL space. From a carrier perspective, it does help us advance into the life carrier space pretty quickly."

Partners is one of the "biggest distributors" of indexed life, said Sheryl Moore, CEO of Moore Market Intelligence. AMZ offers product development on indexed life, she added, something only a couple of other marketing organizations do.

"I think it is interesting that a P&C shop like Gallagher is interested in a sophisticated product like indexed life," Moore said. "I will be interested to see what their strategy is."

AJG Stock On The Rise

Partners Advantage is a large IMO founded in 1993 providing insurance products, marketing, underwriting, agent development, and recruiting support for the producers and managing general agents.

According to a news release, the Partners' team will continue to operate from their current locations in Urbandale, Iowa, and in Irvine, Riverside and El Dorado Hills, Calif., under the direction of Leonard and John Neumaier, head of Gallagher's Great Lakes Region.

"This expands the network capabilities of our Financial & Retirement Services practice and deepens our service offerings by leveraging the leadership Partners Advantage has developed in its specialized wholesale space," CEO J. Patrick Gallagher Jr. said in the news release.

Since the Partners' acquisition, Gallagher stock climbed about 11 percent to nearly $80 a share, highest in company history. Ten years ago, AJG was trading between $16 and $17 a share.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com. Follow him on Twitter @INNJohnH.