Willis Sells Surplus Lines Arm To Focus On Retail

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Copyright 2009 Crain CommunicationsAll Rights Reserved Business Insurance

April 20, 2009

570 words

Willis sells surplus lines arm to focus on retail; Fortegra Financial buys former HRH arm Bliss & Glennon

SALLY ROBERTS

Willis Group Holdings Ltd. once again has exited the U.S. wholesale market with last week's sale of Redondo Beach, Calif.-based managing general agency and surplus lines broker Bliss & Glennon Inc.

By selling Bliss & Glennon to Jacksonville, Fla.-based insurance services firm Fortegra Financial Corp., Willis said it can better focus its attention and resources on its U.S. retail brokerage operations.

Terms of the deal were not disclosed. Bliss & Glennon had 2008 revenues of about $30 million.

London-based Willis previously exited the U.S. wholesale market in 2005 when it sold its longstanding wholesaler Stewart Smith Group Inc. to American Wholesale Insurance Group, amid industry concerns over conflicts of interest that could arise from retail brokerages owning wholesale operations in the United States.

Rivals Marsh & McLennan Cos. Inc. and Aon Corp. followed suit in 2005, divesting their large wholesale operations, Crump Insurance Services Inc. and Swett & Crawford Group, respectively.

Willis effectively re-entered the U.S. wholesale market with last year's $2.1 billion buyout of Hilb Rogal & Hobbs Co., which owned Bliss & Glennon.

Speculation over whether Willis would maintain and grow the wholesale operation arose after the broker launched Faber & Dumas, a new London-based wholesale operation, last September (BI, Sept. 15, 2008).

But in a statement last week, Willis Chairman and Chief Executive Officer Joe Plumeri said the brokerage will concentrate on its U.S. retail operations.

``We decided to look for a new home for Bliss & Glennon because it did not fit with our long-term strategy to focus our attention and resources on our retail brokerage business in the U.S.,'' Mr. Plumeri said.

Observers say the divestiture makes sense.

``Willis' clear focus in the U.S. is its retail broker platform,'' said Timothy J. Cunningham, a principal with OPTIS Partners L.L.C. in Chicago. ``Given Bliss & Glennon's relatively modest size in relation to its competitors and significant consolidation in the wholesale space,'' Willis likely would have been challenged to grow the operations sufficiently to compete, he said.

``I think, strategically, Bliss & Glennon is better off being owned by Fortegra vs. Willis,'' said Kevin P. Donoghue, managing director of Mystic Capital Advisors Group L.L.C. in New York. The deal not only allows Willis to divest assets that can help pay down its debt but also helps it avoid market conflicts.

``I don't know the exact makeup of the (Bliss & Glennon) book in terms of premium volume by line, but they have a significant construction book that depends on many other brokers feeding it business,'' Mr. Donoghue said. ``I think Willis would be hurt by owning this more so than HRH was in the sense that a number of competitors of Willis in the construction field would have a problem placing business with a Willis-owned entity.''

John L. Ward, CEO of insurance advisory firm Cincinnatus Partners L.L.C. in Cincinnati, said he was ``a little surprised'' by the divestiture, noting he thought Willis ``would be more likely to expand into the wholesale business than to exit it.''

But given the size of the HRH deal, he said it makes sense for the brokerage to focus on its retail business right now.

``I wouldn't necessarily predict they will forever stay out of the (U.S.) wholesale business, but it does appear that for now, they're going in a different direction,'' Mr. Ward said.