MMC Poised to Become Reinsurance Goliath

In the move to buy Jardines Lloyds Thompson Group (JLT), MMC (Marsh) is poised to be the biggest global reinsurance intermediary by 40% over Aon.  Both groups have been active in PEO placements and it will be interesting to see the new combined vision.

MMC (re)insurance business to be 40 percent bigger than rival Aon

By

MMC’s $5.6bn acquisition of Jardine Lloyd Thompson Group (JLT) will cement the group’s position as the industry’s largest global broker based on (re)insurance revenues and will also create a 40 percent top line differential based on 2017 results.

Last year, MMC’s risk and insurance services division posted revenues of $7630mn vs Aon’s total (re)insurance revenues of $6378mn.

However, JLT’s risk and insurance division posted revenues of £1065.8mn in 2017, the equivalent of $1396mn at today’s exchange rate of £1:$1.31.

MMC-JLT-top-line-40%-higher

On pro-forma terms, this would make the combined group’s top line based on 2017 (re)insurance revenues as high as $9026mn; a significant milestone from Aon’s $6378mn, or 40 percent higher.

Earlier today, re-Insurance revealed that a combined Guy Carp-JLT Re will become the largest reinsurance intermediary, overtaking Aon’s reinsurance arm, Aon Reinsurance Solutions Business.

Aon’s reinsurance arm posted revenues of $1.43bn while a combined Guy Carp-JLT Re will have marginally higher revenues of $1.47bn based on 2017 reported numbers.

While there will inevitably be some fall-out from such a significant M&A, the gap will be the largest between the two firms for over thirty years when they both led a major consolidation drive in the 1990s (see table).

It is also the largest ever acquisition undertaken among (re)insurance intermediaries trumping the $2bn Marsh paid to acquire another UK broking heavyweight, Sedgewick, in 1998 and the $2.1bn that Willis paid in 2008 for US retailer Hilb, Rogal & Hobbs.

Marsh’s focus on building out its US mid-market business in recent years has seen the group regain its number one position after a few years of revenue pre-eminence by Aon followings its 2008 £844mn acquisition of reinsurance intermediary Benfield and also the particular privations endured by MMC at the hands of the near-obsessed former NY attorney-general Eliot Spitzer in 2004-05.

Below is a history of major broking M&A between US and UK broking firms. The big, once again, are set to get bigger.

RiskMD is Granted a Patent

A System and Method for Valuation, Acquisition and Management of Insurance Policies

ORLANDO, September 12, 2018 / — RiskMD is granted a patent for “System and Method for Valuation, Acquisition and Management of Insurance Policies”. The patent focuses on acquiring, valuing and managing workers’ compensation client company exposures regardless of the insurance policy structure. This is the first Professional Employer Organization (“PEO”) specific patent ever issued.Since its inception in 2005, RiskMD has been focused on understanding the diagnostics of the prospective or current coemployed client companies of a Professional Employer Organization (“PEO”) within the overall portfolio of client companies of that PEO.  In order to understand what client companies fit the given portfolio and at what price, we partnered with Appulate to efficiently acquire client data to then apply a proprietary predictive model called “The Barnstable Vintage” to value and thereby price the client company in question.  The vision was “Geico meets workers’ compensation”; acquisition, underwriting, valuation and pricing of a client company based on a pure computer feed with underwriter input only on an exception basis as is shown in exhibit 1 of the patent:

While there will always be a place for underwriters and underwriting, the consistency of process in acquiring and valuing business is intended to focus the underwriter on the “art” versus “science” of underwriting.  How long in business?  Good neighborhood?  Does the owner throw birthday parties for their staff? This is the art and the mathematical formulas behind the predictive models built provide the science.

In an effort to properly manage client companies of a PEO regardless of policy structure, the last piece was to understand and then to build a process revolving around a key identifier; the client company Federal Employer Identification Number (“FEIN”).  Cathy Doss, the first Chief Data Officer for Capital One and current Data Officer for Fannie Mae, architected a similar process at Capital One with the Social Security Number as the key identifier and created a similar process for RiskMD.  The combination of these processes are what provides the foundation for this patent and the vision of RiskMD.  The end result is the ability to spin data amongst the three main data pools of a PEO; policy/application data, claims data and payroll/premium data.  Using Tableau as a visualization tool behind the SQL built mathematical formulas, the end presentations look like the below.

Unlocking PEO client data to make more informed decisions is foremost in understanding how to acquire, value and properly manage insurance policies and the client companies that they insure.  We are passionate about proving out the value and performance of the PEO industry and know that this now patented process will help immensely to that end.  We appreciate all of our clients and carriers support on this effort over the last five years and look forward to further deployment of this tool to the betterment of each party and the industry as a whole.

“The vision of RiskMD was to make data-driven decisions in pricing and managing PEO client companies regardless of policy structure”, said Mr. Hughes.  “Too much time was being spent diagnosing issues and not enough in treating them.  While our now patented process has been in place for years, it is very satisfying to be recognized by the United States Patent Office for the invention”.

PEO Super Bowl 2018 – NAPEO

The industry Super Bowl has started in Phoenix, NAPEO 2018!

Right off an awesome WCI 360 in Orlando wci360.com, where the PEO industry was once again given a full day of programming in the largest insurance industry conference countrywide, Phoenix Is now the destination for all things PEO’s from today until Friday.  I am sure Mr. Cleary and team have their game faces on and will throw an awesome event as always.  Beautiful facility to start for sure.

Personally, I am celebrating my 18’th NAPEO and look forward to seeing all of my old friends that also have dedicated their respective careers to PEO.  Can’t wait to rock it out again with you, starting for some of us at the NAPEO Political Action Committee dinner this evening.

Florida Workers’ Compensation Rates Plummet Again

From our friends at workcompcentral.com…

NCCI Recommends 13.4% Rate Reduction

Two years after insurers and business groups warned of dire consequences from landmark Florida Supreme Court decisions on attorneys’ fees and benefit levels, workers’ compensation rates could soon drop to their lowest level in years.

Bill Herrle

The National Council on Compensation Insurance announced Monday afternoon that it is recommending a 13.4% decrease in rates for Florida, the second straight year that the rating organization has recommended a reduction in the state.

The cut comes two years after a 14.5% rate increase on the heels of Castellanos v. Next Door Co., which struck down statutory limits on attorneys’ fees, and Westphal v. City of St. Petersburg, which held that a 104-week cap on temporary disability benefits was unconstitutional.

If approved by the Florida Office of Insurance Regulation, the latest reduction will mean that workers’ compensation rates for next year will be about 10% lower than they were before the Castellanos and Westphal decisions. That’s roughly what the rates were before the 2003 reform package passed by the Florida Legislature that limited legal fees and benefits duration.

A small-business group predicted that Monday’s filing will spark economic growth.

“The small-business economy in Florida is hot, and it’s going to get a lot hotter as a result of today’s great news from NCCI,” said Bill Herrle, executive director of the National Federation of Independent Business in Florida. “Lower workers’ comp rates equal a direct reduction in small-business owners’ expenses, which means big things for growth.”

A claimants’ attorney said the filing simply puts rates back to their correct level, and that the court rulings have had a much smaller impact that insurers had feared.

“Attorneys’ fees are a product of how well an insurance adjuster handles claims,” said Mark Zientz, a Miami attorney who filed an amicus brief in the Castellanos case. “If they’re handled correctly, there’s no need for high attorney fees.”

The rate reduction shows that insurance carriers since Castellanos have been more careful with claims, which helps them avoid expensive litigation, he said.

The size of the recommended rate reduction was not surprising, Zientz said, because “from 2003 to 2015, rates were inflated for no good reason.”

An explanation of the filing from the NCCI notes that the rate reflects fewer losses by insurers, which is largely the result of a long-term and nationwide decline in the number of claims filed by injured workers.

Some claimants’ attorneys have said the drop in claims reflects a greater emphasis on workplace safety; shows that because of reduced benefit levels in some states, some workers don’t bother with filing claim; and shows that a growing number of U.S. workers are now considered independent contractors, not employees who receive benefits.

The NCCI did not dismiss the court rulings altogether but said that full impact of the two cases will not be known for years to come. So far, though, “the favorable loss experience in policy years 2015 and 2016 has more than offset the combined cost increases that have emerged from those court decisions.”

The NCCI obtained data from the state’s largest workers’ compensation carriers, and the data is consistent with NCCI’s initial assessment of how Castellanos would impact the Florida marketplace, the organization said. Most carriers reported some amount of claim cost increases, but many insurers were not materially affected.

The ratio of claimant attorney fees to benefit settlement amounts has climbed, from 13% in 2014 to 22% through June of this year, the NCCI filing said, quoting data from the Florida Division of Administrative Hearings.

Indeed, last week at the Workers’ Compensation Institute’s annual conference in Orlando, Florida’s Deputy Chief Compensation Judge David Langham presented data that showed the impact of Castellanos may be felt for a number of years.

Although the number of petitions filed in compensation claims has remained relatively flat for the past decade, claimants’ attorneys’ fees climbed 36% in fiscal 2016-2017, the year after the court ruling, Langham said at the conference. In 2017-2018, claimants’ attorneys’ fees increased another 7%.

Despite that, paid loss ratios have dropped significantly since 2010, most sharply since 2015, the NCCI filing data shows.

“The primary driver behind the recommended rate decrease is the long-term decline in claim frequency offsetting increases in claim severity, and cost increases from the Castellanos and Westphal court cases,” the filing’s explanatory memo reads. “Policy year 2017 will be the first full policy year post-Castellanos, but the full effects of that court decision will not materialize for several years to come.”

Also at the WCI conference last week, Florida Insurance Commissioner David Altmaier predicted that the expected NCCI rate recommendation would be the determining factor on whether legislation would be introduced next spring to address attorneys’ fees. On Monday, Altmaier’s office did not comment on the filing before the close of business.

If recent history is a guide, the lower rates may mean that a further attempt to cap attorneys’ fees will be all but forgotten in the 2019 legislative session. A 9.5% rate reduction earlier this year surprised many and took some steam out of employers’ demands for new limits on fees.

Herrle’s statement Monday did not mention the cost of lawyers.

“Small-business owners are reporting record high levels of optimism, according to NFIB’s Small Business Optimism Index, and news like lower workers’ comp rates fuels their confidence,” Herrle said. “Small-business owners are in the driver’s seat, and Florida’s economy can look forward to the results — increased job growth, increased wages, and unprecedented expansion overall for the small-business sector.”

The 2018 Workers’ Compensation Institute 360

#wci360

The 2018 WCI 360 is up and running in Orlando!  Every year Co-Chairmen Mr. Rissman and Mr. McConnaughhay bring this annual event to another level.  The educational programming, entertainment and ability to catch up with a multitude of people all in one place make this a can’t miss event.

The Workers’ Compensation Institute (WCI) is a nonprofit educational organization that serves as a comprehensive resource to all workers’ compensation stakeholders. The WCI is an outgrowth of the long-established Florida Workers’ Compensation Institute. FWCI remains in existence under the WCI umbrella and continues its Florida focus, while the national organization provides a broader outreach across all states.

I am honored to be able to moderate a session during the Florida Association of Insurance Agents (“FAIA”) this coming Tuesday the 21’st.

Integrating Professional Employer Organizations (PEO) And The Independent Agency System

Tuesday, August 21’st, 2018
10:15 – 11:15 am

Crystal Ballroom J1
Convention Level

Integrating Professional Employer Organizations (PEO) and The Independent Agency System

Our panel is comprised of friends and  industry stalwarts Phil Urso (CoAdvantage), Robert Rodriguez (Engage), Troy Reynolds (Stonehenge) and Andy Olwert (NextLevel).

The scope of our programming is as follows:

Historically, licensed insurance agents and Professional Employer Organizations have had some success in developing partnerships together and there have been more than a few PEO’s born out of the independent agency model. The agency brings the PEO insurance sophistication and deal flow and the PEO brings the independent agency value-added services such as payroll, human resources and regulatory compliance. It seems like the perfect integration of professional services, potentially in a one-stop arrangement in an integrated manner. There have also been misunderstandings and mistrust of the PEO model. Our panelists will explore the following subjects in detail to include but not limited to:

– Historic issues with the distribution relationship between independent agents and PEOs
– Changes in the national regulatory landscape for PEOs and independent agents when transacting co-employment
– Current definition of a PEO and value propositions
– Health insurance as a PEO driver and its impact on PEOs
– What does the future bring for PEOs and how do independent agents fit in?

Hope to see you at the convention!

A Deserved Boycott Against MGM

Pretty sad.  The accountants and lawyers are typically not the curators of brand and reputation management, but seem to be here —

MGM Facing Boycott for Suing Las Vegas Shooting Victims

It took just minutes for the hashtag #BoycottMGMResorts to appear on Twitter, and for people to declare they would no longer patronize the largest casino owner on the Las Vegas Strip.

“Was going to stay in November already changed my reservations,” a man named Brandon Tur wrote on Twitter. “One of the things you have to see multiple sources to believe it is real,” a woman named Susanne Abrams said.

The reaction to MGM Resorts International’s lawsuits against victims of the worst mass shooting in U.S. history was harsh, and probably not surprising.

“It’s rare to see a major brand blisteringly bury itself alive,” said Eric Schiffer, chairman of Los Angeles-based Reputation Management Consultants. “They were trying to create a chilling effect. Instead, it’s their brand that got chilled.”

MGM — whose Vegas resorts include the MGM Grand, Bellagio and Mandalay Bay, where the Oct. 1 shooting occurred — is seeking a court declaration that it can’t be held liable for deaths, injuries or other damages.

“We are not asking for money or attorney’s fees. We only want to resolve these cases quickly, fairly and efficiently,” MGM said in a statement. Company officials declined to comment for this story.

The Facts

The facts aren’t in dispute: Frequent gambler Stephen Paddock opened fire at festival goers from a 32nd-floor suite at Mandalay Bay, killing 58 and wounding about 500 before he committed suicide. More than 2,500 people have filed or threatened to file lawsuits against MGM, the company said in its complaints.

MGM argues that it hired a company, Contemporary Services Corp., that was certified by the U.S. Department of Homeland Security to provide security at the Route 91 Harvest Festival. As such, according to MGM, it complied with the Support Anti-Terrorism by Fostering Effective Technologies Act, a 2002 law that limits liability arising from mass attacks in the U.S.

In legal documents, MGM has said courts have repeatedly rejected claims of negligence filed after mass shootings, finding there is no “premises liability” where a third party “carried out a cold, calculated plan of extreme lethal violence.” To hold MGM responsible would “saddle businesses across the country with crippling liability for the evil acts of madmen — acts those businesses can, in the end, neither foresee nor prevent.”

MGM has filed at least nine nearly identical suits in federal courts against survivors and victims’ relatives who have sued the company.

A Stretch

Patrick McNicholas, a Los Angeles attorney who represents about 100 of the victims, called MGM’s attempt to use an anti-terrorism law to protect itself from liability “a stretch.” Instead of going after the injured and bereaved, he said, “they could have done it a more humane way.” For example, the company could have filed motions only in cases already in the courts.

In a hearing Tuesday in Los Angeles, attorneys for MGM said that they needed to specifically name the parties in order to establish a single legal ruling that applied to all of them.

The challenge for MGM, as one of its own lawyers acknowledged in a filing, is that the 2002 law “apparently has never been applied by a federal judge,” said Carl W. Tobias, a law professor at the University of Richmond’s School of Law in Virginia. There’s no history to suggest whether the approach will work.

MGM and other casinos stopped marketing their properties for several days in the wake of the shooting, and later with the city’s convention and visitors bureau created videos with local celebrities urging customers to return to America’s gambling capital.

MGM’s Chief Executive Officer James Murren said at a Bloomberg sponsored diversity summit in May that he has been trying to change the culture in Las Vegas.

Now, with the lawsuits making headlines, all that goodwill is at risk.

Oasis Acquires Aureon

It was announced on Tuesday that Aureon (fka Merit Resources) out of West Des Moines Iowa was acquired by industry stalwart Oasis Outsourcing.  What a class organization.  Congratulations to Joel, Melissa and the rest of the Aureon team!

NEWS PROVIDED BY

Oasis Outsourcing Holdings, Inc.

Jul 17, 2018, 10:15 ET

WEST PALM BEACH, Fla., July 17, 2018  /PRNewswire/ — Oasis Outsourcing, the nation’s largest privately held Professional Employer Organization (PEO), has announced the acquisition of Aureon HR, a subsidiary of Aureon. Headquartered in West Des Moines, IA, Aureon HR has been a leading Midwest-based HR outsourcing company with a reputation for superior customer service for more than 30 years. The combined company will now serve more than 8,000 clients and 270,000 worksite employees nationwide. Terms of the deal were not disclosed.

“We are delighted to join forces with Aureon HR, an industry leader that has an outstanding track record in the Midwest and in all markets it serves,” said Mark Perlberg, President and CEO of Oasis Outsourcing. “In addition to significantly expanding our national client base, Aureon HR brings Oasis best-in-class HR expertise in the Senior Living industry, and yet another talented, experienced group of associates, who will make important contributions to our overall ongoing expansion and growth.”

“Oasis has built a strong and reputable business with great talent and, like Aureon HR, has an unwavering commitment to great service and innovation,” said Ron Keller, CEO of Aureon. “Moving forward, Aureon HR clients will receive the benefits that an even larger industry leader can provide, while continuing to receive outstanding performance and support from the local Aureon HR team.”

The Aureon HR acquisition is Oasis’ sixth since joining forces with Stone Point Capital nearly four years ago. Aureon HR will continue to operate from its current locations in West Des Moines, IA and Denver, CO with the current team of associates.

About Oasis Outsourcing Holdings, Inc.

Oasis Outsourcing is a Florida-based Professional Employer Organization (PEO) serving more than 270,000 employees and 8,000 clients nationwide. Founded in 1996, it specializes in providing human resources services, employee benefits administration, payroll and tax administration, risk management services and staffing solutions to small- and medium-sized businesses throughout the United States. Oasis is accredited by the Employer Services Assurance Corporation (ESAC), ensuring the highest level of ethical, financial and operational standards in the PEO industry and has received SOC 1 Type II (formerly SAS 70) certification for its high level of accuracy and performance. Oasis, through its subsidiaries, is qualified to offer IRS-certified professional employer organization (CPEO) services.

Oasis is majority-owned by private equity firms Stone Point Capital and Kelso & Company, with the remainder owned by Oasis management. Offices are located in Atlanta, GA; Austin, TX; Boca Raton, FL; Boston, MA; Charlotte, NC; Dallas, TX; Denver, CO; Edison, NJ; Houston, TX; Jacksonville, FL; Los Angeles, CA; Manhattan, NY; Miami, FL; Minneapolis, MN; Nashville, TN; New Haven, CT; Orlando, FL; Phoenix, AZ; Provo, UT; San Diego, CA; Sarasota, FL; St. Louis MO; Tampa, FL; Tucson, AZ; West Des Moines, IA and West Palm Beach, FL. For more information about Oasis Outsourcing, visit www.oasisadvantage.com.

Media Contact: Laura Burns 954-370-8999 lburns@boardroompr.com

SOURCE Oasis Outsourcing Holdings, Inc.

Related Links

http://www.oasisadvantage.com

New York Workers’ Compensation Rates to Drop 11.7%

For the third year in a row, rtes will drop in New York this year.  This adjustment was recently approved and will take effect on 10.1.18.  More from our friends at the Insurance Journal…

Regulators Approve 11.7% Rate Reduction for Third Cut in Three Years

The New York Department of Financial Services has approved an overall loss-cost rate decrease of 11.7%, the third straight year that the department has fully endorsed a recommended rate cut.

The New York Compensation Insurance Rating Board recommended the latest reduction in May, and the DFS approved it last week. It takes effect Oct. 1.

The recommended change, following a 4.5% reduction a year ago, was based on the latest statistical data reported by the rating board’s member carriers and reflects the application of generally accepted actuarial principles and methodologies, the board said in May.

Insurance and employer groups have said the reductions are largely the result of legislation over the last two years that was designed to cut benefits expenses for employers. Workers’ advocates said the cuts are due more to the fact that the number of claims have dropped significantly nationwide, more workers are considered independent contractors, and workers may have difficulties navigating New York’s complex comp system.

The 11.7% reduction also comes a month after the state Board of Workers’ Compensation announced a plan to raise medical fees for the first time in years — as much as 23% for physicians. Without that, the recommended rate reduction would have been even greater, the rate filing memorandum suggested.

Loss-of-use impairment guidelines, passed by the 2017 Legislature, accounted for almost a third of the proposed rate reduction, the filing said. Under previous guidelines, some injuries could be “stacked” to provide higher impairment ratings.