Marsh McLennan has agreed to buy McGriff Insurance Services for $7.75 billion, as the industry anticipates increased spending from businesses due to a better economy.
Growth and rising prospects of a soft landing have allowed businesses in a variety of industries to reinvigorate spending on insurance policies despite higher rates, raising commissions collected by brokerages based on the premiums insurers charge.
Marsh McLennan said the transaction, made through its Marsh McLennan Agency company, will strengthen the unit’s capabilities in commercial property and casualty, employee benefits, management liability, and personal insurance lines.
Last year, Aon, an insurance broker, agreed to buy privately held NFP for approximately $13.4 billion to expand into the rapidly rising middle-market area.
McGriff, established in 1886, is a unit of TIH Insurance Holdings and a supplier of insurance broking and risk management services in the United States.
The company’s trailing 12-month revenue was $1.3 billion as of June 30, 2024. It also covers corporate bonding and surety services, as well as cyber and title insurance.
The insurance industry, which is often thought to be recession-proof, has seen consistent revenue growth this year, in contrast to other financial sectors that have been hit hard by market swings and macroeconomic challenges.
Marsh McLennan expects the cash transaction to finalize by the end of the year. It would be funded using a combination of cash and proceeds from debt financing.
After the purchase is completed, the McGriff team of over 3,500 workers, including CEO Read Davis, will join Marsh McLennan Agency and continue to operate from their current office locations.
Marsh McLennan’s stock was down slightly in morning trading. This year, the stock has increased by 18%, while the benchmark S&P 500 (.SPX) is up 20%.