Why Hub bought Morneau Shepell’s benefits consulting practice

Hub International’s recent acquisition of Morneau Shepell’s benefits consulting practice will allow the global brokerage to better serve the needs of both large employers and mid-market customers, the brokerage told Canadian Underwriter Tuesday.

“[Morneau Shepell’s] focus on large and jumbo clients – where having deep expertise in strategy, complex plan design (like flex) consulting and actuarial services – is imperative,” said Mike Barone, president of employee benefits at Hub International. “This allows Hub to better serve the needs of large employers in Canada. We also believe many of their unique capabilities will significantly benefit mid-market customers, where Hub has a massive client footprint in both P&C and employee benefits.”

Barone was responding to a question from Canadian Underwriter about the strategy behind the acquisition and if they bring any unique offerings or abilities to Hub (given that Morneau Shepell obviously has name recognition given its size).

Hub announced the purchase of Morneau Shepell’s benefits consulting practice Mar. 2. The practice focuses on providing tailored benefits solutions to clients (mainly large organizations, but also small to medium) that include actuarial services, integrated data analytics across lines of benefit, organizational health consulting and financial analysis solutions.

“As the largest brokerage firm in Canada, Hub provides P&C consulting services for some of the largest companies in Canada,” Barone said. “Much as we did with the acquisition of Integro, which brought complex risk management expertise to Hub for large clients, Morneau does the same for employee benefits.”

Barone was referring to the acquisition of Integro (Canada) Ltd., announced September 2017. With offices in British Columbia, Ontario and Quebec, Integro Canada is a commercial property and casualty brokerage specializing in complex risks, including construction, transportation, professional services, manufacturing, real estate, entertainment, mining and financial services, Hub said at the time.

Related: Hub International acquires Integro (Canada) Ltd.

In the most recent acquisition, Morneau Shepell reported that Hub purchased the benefits consulting practice for $70 million. Morneau Shepell has also exited the benefits consulting business, which represents approximately 3% of the company’s overall revenue and has margins slightly above the aggregate margins of the overall business.

“With Morneau Shepell’s benefits consulting practice, Hub will deliver highly differentiated services across all five lines of our business – property and casualty, employee benefits, retirement, risk services and personal lines – to clients large and small, in-country and cross-border,” Hub International Canada president Tina Osen said in a release Mar. 2.

By adding the benefits consulting practice, Hub expands its strategic benefits solutions, adding actuarial services to its already established products: pharmacy plan design; total health strategies and services for physical, mental, organizational and financial wellness; retirement preparedness and plan design; benefits communications and design services; digital benefits platform solutions; and cross-border benefits consulting.

Related: How M&A is tracking so far this year in the Canadian insurance space

The acquisition allows Hub to round out its Canadian employee benefits solution with extensive actuarial services, the brokerage said. What are some of the benefits of improved actuarial services?

“The ability to accurately predict employee benefits costs and model several different scenarios based on a variety of factors such as: changes in employee demographics, plan design, Rx formulary design and claim utilization,” Barone said. “The ability to understand and interpret all the data available is critical to helping our clients make the best decisions. [Morneau Shepell is] also the Canadian market leader when it comes to valuations of non-pension post-employment and post-retirement benefits, again giving the opportunity for Hub to offer more in large market employee benefits.”

Since launching the initiative to expand its Canadian employee benefits solution in 2018, Hub has acquired 28 Canadian brokerages and grown its employee benefits practice to more than 20 offices.  Hub’s Canadian employee benefits practice includes over 400 staff and in excess of $100 million in revenue and $1.5 billion in premium.