Consultative. Strategic. Trusted. Innovative. World-class. Julio Portalatin’s vision for Mercer is unwavering in its call to excellence. President and CEO of the international employee benefit consulting powerhouse, 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 not just on top, but 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 being 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 that these revenue numbers do not reflect groups under 100 lives, government entities and church plans that are not required to file. Any disclosure on Schedule C's are also not contemplated in these numbers.)

Also see: The top 50 large-group employee benefit brokerages in the U.S., part 1

Of the top brokerages, 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.

Also see: The top 50 large-group employee benefit brokerages in the U.S., part 2

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 of the New York City-based firm.

Two ways to grow

But to maintain growth, Portalatin says, it’s imperative to be able to growth 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. “So, we’re always interested in adding firms that also fit that consultative broking model.” Such examples in the U.S. include Mercer’s acquisition of Washington, D.C.-based Alicia Smith & Associates and Ft. Lauderdale, Fla.-based Mahoney & Associates, he says.

Willis, the No. 3 brokerage with -1.45% growth, is focused on a coordinated global strategy to capitalize on growth opportunities, says Jim Blaney, CEO, Willis Human Capital Practice. "Organic growth is very important and 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." 

Highlights from 2014 include Willis' May acquisition of Max Matthiessen, the largest employee benefit firm in Sweden. "In the U.S., we tend to look toward opportunities stemming from the consolidation underway in the regional/local brokerage space," Blaney addds. "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, Texas-based Higginbotham (No. 41 with 21.48% growth) is also embracing both forms of growth. “It’s really important to know that 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. It’s a strategy the company will focus on for at least the next decade as it expands throughout Texas, he adds.

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. “Philosophically and the way we operate as a company, 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 client-centric focus in mind,” says Paul Rogers, president and chief operating officer.

Focus on people

Focused on organic growth, Pacific Resources thinks of acquisitions in terms of acquiring key people, rather than companies, adds CEO Paul Barden. Looking at markets that are underserved by the general consultant community, Pacific Resources looks for “people who are successful in those areas to bring them into our organization, and then build around our current culture and our current business model,” 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. One that is very grounded in being a trusted adviser.”

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 — “their most trusted asset, which is their people,” he says.

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. That’s the challenge that our customers face every day.”

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 of business 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. “It reflects both organic and inorganic opportunities and even more importantly, our execution capabilities.”

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. We don’t do much of that.”

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” client 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, is we’ve retained business and haven’t had to backfill a lot.”

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.

“Although, the actions and tactics on how you achieve those strategies might change on a year in, year out basis, the strategies need to be sound, they need to be foundational, they need to be representative of what our clients need and, ultimately, they need to be representative of us being able to be leaders in our space.”

Strategic imperatives

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, over the years, 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 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 so that they can provide real advantage and differentiation to our clients.”

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.”

Editor’s note: This is the first in a series of articles where the leaders of many of the country’s top brokerages share their visions for the future of the industry. Other topics to be addressed include the exchange distribution model, changing client services, obstacles to overcome and ongoing innovations that are changing the industry.

Register or login for access to this item and much more

All Employee Benefit Adviser content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access