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Insurance Brokers See 4% Revenue Drop, First in Years

Insurance brokers have turned to consulting work as a parachute to slow a drop in their business as their clients have shrunk in the past two years.

But even consulting work couldn’t offset revenue declines at Orange County insurance brokerages for the 12 months through June.

Revenue at the local offices fell about 4% from a year earlier to $460 million, according to this week’s Business Journal list.

The brokerages on our list haven’t seen a decline in more than six years.

“Insurance carriers are feeling the pinch from the economy because of the stock market hurting their investment returns,” said Arthur Schuler, managing director at No. 3 Aon Risk Insurance Services West Inc. of Irvine. “As a result, everyone is feeling pressure one way or another.”

When the economic downturn first hit in the fall of 2007, companies sought out insurance brokers for help controlling costs and protecting investments.

But the brokerages now are seeing the effects of layoffs, furloughs and plant closures, which reduce companies’ exposure, or possibility of loss, and their overall need for insurance.

“Exposure is still playing a big role in what’s going on right now,” said Tim Casey, executive vice president of No. 5 Orange-based Brown & Brown of California Inc.

Nine brokerages on the list saw lower revenue for the 12 months through June. Five saw pickups in business. Five were Business Journal estimates. Year-ago revenue for two brokerages was unavailable.

Brokerages kept their property and casualty brokers even during the past year, employing 345 people in OC, the same as a year earlier.

But the companies saw a 6.6% decline in benefits brokers to 254 people, as clients cut back on employee benefits to save money (see story, page 46).

The number of support staff workers declined 2% to 1,227 people.

Top Brokers

No. 1 Newport Beach-based Alliant Insurance Services Inc. grew revenue 4.1% to $68 million. The brokerage has 19 licensed property and casualty producers and five benefits producers here, down one each from a year earlier.

The company’s local support staff declined 4% to 143 workers.

Alliant works with hospitals, counties, school districts, law firms, oil and gas companies, American Indian tribes, real estate companies and others.

Healthcare and law clients keeping up risk management coverage helped offset a drop in business from real estate and other clients, according to Alliant.

No. 2 Newport Beach-based Marsh Risk & Insurance Service/Mercer, formerly known as Marsh & McLennon Cos., has more clients in industries hit especially hard by the recession, including real estate and construction.

It saw its revenue drop 14% to $48.4 million.

The company has 15 licensed property and casualty producers, 27 benefits producers and 154 staff workers at its Newport Beach office.

The company, which also works with technology and other industries, wasn’t available for comment.

No. 3 Aon saw revenue decline 29% to $42.5 million as the recession also cut business for some of its clients, which generally are in the real estate, construction, retail, medical and technology industries.

Aon saw its number of property and casualty brokers decline 7% to 65 people. Aon’s number of benefits producers and support staff remained flat from a year earlier. Aon has 32 benefits producers and 15 members on its support staff.

Aon has seen a boost in consulting work, Schuler said.

Clients are tapping the company to help them handle risk management as they try to position themselves to ride out or take advantage of the downturn, Schuler said.

“We’ve been taking a look at their financial ability to take risks and guide them in their decisions,” he said. “Customers are looking to their broker to help them manage costs and find ways to manage risks more appropriately.”

Aon’s clients in the technology and medical industries are seeking insurance coverage for patents and patent infringement, while real estate clients are seeking insurance for their negotiations with lenders, Schuler said.

As companies are looking for security in an uncertain marketplace, they’re becoming more selective about where they are getting their insurance and consulting work from, he said.

No. 5 Brown & Brown saw its revenue grow 4.6% to $34.6 million.

The company lost a couple national, long-term accounts—one to an acquisition and the other it dropped as a client—but since has found companies to replace the lost business.

“The loss of business hurt us from a top line point, but we’ve since filled in the hole,” Casey said.

Consolidation

Uncertainties in the marketplace have pushed some companies to consolidate.

San Mateo-based Edgewood Partners Insurance Center, a retail property, casualty and employee benefits insurance brokerage, expanded its operations in OC through the acquisition of Complete Insurance Inc. in Irvine in December.

The Irvine unit now is No. 14 Com-plete/Epic Insurance Inc.

The company saw its revenue surge 52.4% to $12.5 million due to the acquisition, according to Anthony Joseph D’Asaro, managing partner at the Irvine office.

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