The merger of health and financial wellness PLUS



The merger of health and financial wellness PLUS
PLUS: The merger of health and financial wellness
December 2014 •
How Mercer CEO Julio Portalatin and other top-ranked benefit
firm executives set a foundation for growth
By Elizabeth Galentine
onsultative. Strategic. Trusted. Innovative. World-class.
Julio Portalatin’s vision for Mercer is unwavering in
its call to excellence. President and CEO of the New
York City-based international employee benefit consulting firm,
Portalatin is focused on the opportunities that will keep Mercer
at the top. In fact, as revealed in EBA’s first ever-ranking of the
top large-group employee benefit brokerages in the United
States, Mercer is head and shoulders above the rest.
In partnership with business intelligence data analytics firm
miEdge, EBA introduces the first independent listing of top
large-group employee benefit firms in the country to be ranked
exclusively on health and welfare revenue. The listing is the only
ranking of its kind using information not self-disclosed by the
companies ranked. The list, based on Form 5500 Schedule A
data submitted to the Department of Labor as of Nov. 7, 2014,
shows Mercer’s in-force revenue of more than $190 million is
nearly $32 million more than the next closest firm, Arthur J.
Gallagher & Co. Note these revenue numbers do not reflect
groups under 100 lives, government entities and church plans
that are not required to file. Schedule C disclosures are also
not included. See the full list of the top firms and their in-force
revenue on p. 26.
Many of the firms in the top 25 have actually had modest
declines in revenue in the last year, but this is thanks in large
part to acquisitions. “When you do acquisitions, you have to
focus a lot of time on integrating those acquisitions and you
don’t necessarily get the uplift of the organic growth year over
year for a period of time,” explains Mark Smith, founder and
CEO of New Boston, N.H-based miEdge.
Although Mercer only experienced modest growth according
to the Form 5500 data (0.35%), Smith points out the firm has
not done as many acquisitions as others on the list, making its
clear place in the No. 1 spot all the more striking. “To be that
size and continue to be the dominant player in the marketplace
is very impressive,” Smith says.
But to maintain growth, Portalatin says, it’s imperative to
be able to grow both organically and inorganically. Mercer
takes a consultative approach to the health and benefits
marketplace: “This means that we go way beyond the basic
brokerage services and really act as a trusted adviser,” says
Portalatin. “We’re always interested in adding firms that also
fit that consultative broking model.” Such examples in the U.S.
include Washington, D.C.-based Alicia Smith & Associates
and Ft. Lauderdale, Fla.-based Mahoney & Associates, he says.
there is nothing more important
to us than to deliver through
very competent people
Willis, the No. 3 brokerage with -1.45% growth, is focused
on a coordinated global growth strategy, says Jim Blaney,
CEO, Willis Human Capital Practice. “We continue to refine
our value proposition to drive organic growth,” he says. “We
are also pursuing inorganic growth opportunities through
the acquisition of focused, sophisticated businesses with
strong franchises.” He adds, “We look toward opportunities stemming from
the consolidation underway in the regional/local brokerage
space. The market is moving quickly and some regional
brokers are seeking partners with broader platforms to
help them deliver a more comprehensive set of solutions
to clients.”
One of only a handful of firms in the top 50 to experience
more than 20% growth in the last year, Fort Worth, Texasbased Higginbotham (No. 41 with 21.48% growth) is also
embracing both forms of growth. “We’re as focused on
organic growth as an organization as we are finding new
partners to bring into the organization. We view that as a
duel strategy,” says Rusty Reid, chairman and CEO.
Just as Mercer’s Portalatin speaks to the importance of being
a trusted adviser, Higginbotham is also looking for partners
that can provide what it refers to as “day two services.”
“Day one is the day that we place the insurance or the
renewal with the insurance company, day two is all the other
services that we surround them with: communications,
technology, wellness,” says Michael Parks, chief operating
officer and managing director of financial
services at Higginbotham.
Virtually tied in the growth category
with Higginbotham is Pacific Resources
(No. 31) at 21.88% in the last year. The
Chicago firm focuses on providing
independent advice exclusively to
the large employer, national account
market. “We spend a fair amount of
time questioning status quo. We tend to
challenge conventional wisdom a lot, and
while we do that we’re taking a clientcentric focus in mind,” says Paul Rogers,
president and chief operating officer.
we go way beyond
the basic brokerage
services and really
act as a trusted
Pacific Resources thinks of acquisitions
in terms of acquiring key people, adds
CEO Paul Barden. Looking at markets
that are underserved by the general
consultant community, Pacific Resources
wants “people who are successful in
those areas to bring them into our
organization,” he says.
Cultural fit is something Mercer looks
carefully at as well, says Portalatin.
“When you’re looking at the potential
of adding value to your organization,
it’s very important that there’s a cultural
fit, that there’s obviously something we
see beyond the numbers,” he says. “We
want to be sure that we’re acquiring the
talent also that is capable of meeting the
standards of how we want our consultants
to approach clients.”
Mercer’s growth is not just about
providing more innovative services for
the companies it serves, Portalatin says, but it’s also about
innovating for the employees.
Jim Durkin, president of Gallagher Benefit Services Inc.,
a subsidiary of Arthur J. Gallagher & Co., and No. 2 on the
list, agrees. “We made a decision a number of years ago that’s
allowed us to build a business within Arthur J. Gallagher
& Co. that focuses on helping our customers manage their
most important asset, their employees,” he says.
Internally, for example, Gallagher spends roughly 60 cents
out of every dollar the company generates on its employees,
Durkin explains. “As an organization, we have to find ways
to get the most value both for ourselves as well as for our
employees out of those dollars we spend.”
Portalatin calls Mercer’s focus on people “foundational.”
He adds, “We cannot let growth outpace our ability to build
a global organization with that shared value of making sure
that we’re innovating for our clients’ people. That certainly
also influences our approach to acquisitions.”
Globally, Mercer’s health and benefits line is now the
company’s largest single business. It generates around $1.5
billion in revenue globally, according to Portalatin. “This
really speaks to the strength of our consultative brokering
approach as a competitive advantage in the marketplace,”
he says.
Meanwhile, with the highest growth percentage among
the top five firms at 4.47%, Lockton (No. 5) stands out to
miEdge’s Smith. “Lockton is impressive because they got to
that number purely by an organic growth strategy,” he says.
“They’re not buying agencies; they’re hiring people and
winning business because of their value proposition. To me,
that’s highly impressive. It’s wonderful to see.”
Mike Brewer, president, says any acquisitions are “very
strategic and typically about the leadership in the office we’re
acquiring, not necessarily about the business.”
What’s been “huge” for Lockton in terms of strategy, Brewer
says, is defining the Kansas City, Mo. firm’s marketspace and
to whom they wanted to appeal. “Then, we chose to build the
resources that resonated within the framework of what we
perceived our target market to be. And we also built those
resources in a fashion where they’re affordable, accessible and
responsive,” Brewer says.
It’s led to an “extraordinary” retention rate, he adds. “Part of
the reason for that is we’ve also always made sure that we were
taking great care of the people that we expect to take great care
of our clients. Our associate retention rate is phenomenal,” says
Brewer. “There is nothing as disconcerting to a client as having
a lot of turnover within their client service team. I think that’s
part of the reason that we’ve been able to grow the way we have.”
Mercer is highly focused on sustainable strategies as well.
One of the first things Portalatin prioritized when he became
CEO of Mercer two and a half years ago was to “make sure we
had strategies that were sustainable.”
With that in mind, Mercer has “rallied around four strategic
imperatives that really underpin our current and future
direction,” he says. They are:
1) Building broader client relationships. “We have ... built
some very strong relationships with our clients. They are often
very vertical in nature and they only encompass one or two
of the solutions that we offer,” says Portalatin. “Since we do
Launched in January of 2012, miEdge began as a prospecting
tool that would allow its clients to access individual detail on an
employer, brokerage or insurance carrier. Its analytic capabilities
have evolved since then, allowing the New Boston, N.H.-based
company to aggregate individualized data into a dynamic
analytic database that is the basis for EBA’s top 50 large-group
benefit brokerage ranking.
“We cleanse and normalize the data, correct things that are
clearly wrong. We consolidate the data for things like when
companies have done acquisitions, misspelled or multiple
versions of their name. We have applied a lot of normalization
logic and patent-pending algorithmic assumptions to the
data to make sure that what comes out of it at the end is an
accurate representation of what that particular carrier/broker/
consultant has for in-force business,” says Founder and CEO
Mark Smith.
The privately held company with 15 employees has more
than 2,000 clients in all 50 states. Approximately 60% are
brokerages or consulting firms, 35% carriers and 5% technology
providers, wellness consultants and a mix of other third-party
administrators, according to Smith.
The former head of USI’s New England operations, Smith
knows the employee benefit brokerage and consulting
market. “We’re founded by insurance people that have also then
created a technology company,” Smith says. “The technology,
while complex, doesn’t work unless it’s grounded on the right
understanding of the marketplace.”
The data miEdge works with, and the basis for EBA’s ranking,
comes from Form 5500 Schedule A data submitted to the
Department of Labor. “It’s a very powerful set of information to
use for brokers, consultants and carriers for general business
planning and prospecting purposes,” says Smith. “What we
found is that many of our clients also want to know market
trends, market analytics around a rollup of all of that data
in an easy-to-use format that they can use to make some
important decisions.”
1 Mercer
2 Arthur J. Gallagher & Co.
3 Willis
4 USI Insurance Services
26 Filice Insurance Agency
27 McQueary Henry Bowles Troy
28 Digital Insurance
29 Hodges-Mace Benefits
5 Lockton Companies
30 Lubin Schwartz & Goldman
6 Marsh & McLennan Agency
31 Pacific Resources
7 Aon Consulting
32 True3
8 Wells Fargo Insurance Services
33 Employee Benefit Solutions
9 HUB International
34 Buck Consultants
10 Alliant Insurance Services
35 Oswald Companies
11 NFP
36 McGohan Brabender Agency
12 BB&T
37 Hylant Group
13 Towers Watson
38 William Gallagher
14 Brown & Brown
39 Frenkel Benefits
15 CBIZ Benefits & Insurance Services
40 Seabury & Smith
16 Hays Group
41 Higginbotham Insurance Agency
17 Kelly Benefit Strategies
42 Robert G. Relph Agency
18 Corporate Synergies Group
43 Capital Benefit Services
19 Holmes Murphy & Associates
44 Burnham Benefits Insurance Services
20 Edgewood Partners Insurance Center
45 Kistler Tiffany Benefits
21 Woodruff Sawyer & Co.
46 M3 Insurance Solutions
22 AssuredPartners
47 Bolton & Company
23 Associated Financial Group
48 Sequoia Benefits
24 Mesirow Financial
49 Assurance Agency
25 J. Smith Lanier & Co.
50 The Plexus Groupe
believe that our solutions are world-class, we want to make
sure that need the clients have for those solutions is something
that Mercer can [fulfill]. So broadening client relationships is
a big piece of our strategic imperative.”
2) Driving and delivering profitable growth. “Profitable
growth allows us to stay innovative. It also allows us to invest
in the business and to invest in client solutions,” he says.
3) Invest in our people. “There is nothing more important
that we have available to us as an organization than to deliver
through some very competent and well-supported people;”
says Portalatin, “developing them and constantly putting them
at the leading edge of intellectual capital.”
4) Always make sure that we are looking not just to deliver
but to outperform in that delivery. “Outperforming what our
clients’ expectations are, outperforming the competition in
the space is very important to us as we measure our success
going forward,” he says.
Client needs and market forces will cause shifts in the future,
Portalatin adds, “but these four strategic imperatives will remain
our core pillars going forward, and we believe will serve us
well to really stay on the leading edge of all the changes taking
place.” EBA
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