Industry Analysis and Prognosis

Taylor Haviland
2/17/14
MGMT 498 M/W 8:00 a.m.

Table of Contents
Topic

Page Number

Introduction.3
Background. 3
Degree and Nature of Rivalry3
Strategic Groupings.4
Industry Structure4
Industry Performance4
Industry Prognosis..4
Works Cited.5
Readability Statistics..6

This paper is intended to provide a detailed analysis of Arthur J. Gallagher &

Co., provide comparative data and prognosis of the Insurance Agencies and
Brokerages Industry. I have substantial knowledge of the industry, with extended
knowledge of Arthur J. Gallagher & Co. (which for the rest of this document will be
abbreviated as AJG) as a summer Intern. My comprehensive study of the Insurance
Agencies and Brokerages industry makes me an expert on the study and analysis of
this industry. This document will provide a brief background of the industry with
specific details relating to AJG and their growth. I will also include prominent
economic data, detailed information about Porters Five Forces of Competition in
relation to AJG, statistics of the Industry Structure and prognoses of Industry
Metrics. By writing this paper I will provide you with the information to gain a
greater knowledge of the Insurance Agencies and Brokerages Industry allowing you
to make intelligent decisions regarding future company wide decisions concerning
insurance needs.
Background
Insurance Agencies and Brokerages act as agents to sell insurance policies
and annuities underwritten by insurance carriers. (Hoovers) With 199,240
companies currently in the industry and less than 0.5% of them generating over 10
million in sales (see Appendix A-2) this competitive industry has a small margin of
leadership and a high level of intensity of competitive rivalry. To eliminate length
I will be focusing my analysis on AJG, and five other prominent companies
throughout the industry. AJG was founded on October 1, 1927 in Chicago, IL, and
over its 86 years has grown significantly becoming one of the industry leaders and
currently estimating an annual revenue of $2,134,700,000 (see Appendix A-1 for
more general information.)
Degree and Nature of Rivalry
As stated earlier, with just under 200,000 companies in the industry it is very
simple to recognize this as a competitive industry. While less than 1% of the
industry makes over 10 million in sales each year a very distinct group of businesses
hold a prominent portion of the sales (see Appendix B-1 for sales comparisons
between four major companies and Appendix D-2 for market shares of major
companies) While these companies control the industry, the threat of rivalry is
extremely high. According to Hoovers while the industry is still in the mature stage
of its life cycle, this is characterized by slowing product development and extensive
merger and acquisition (IBISWorld) (see Appendix C-1 and D-3, its considered to be
medium growth. In this type of industry the bargaining power lies primarily in the
hands of the consumer, based on their income and business activity with the
companies only bargaining power being good customer service and marketing (see
Appendix C-1.) AJG and the industry as a whole are very susceptible to economic
downturns. For more information about Porters Five Forces and key success
factors (see Appendix D-4.)
3

Strategic Groupings
With such a specific industry with all of the bargaining power of customers
being the driving force businesses strategically place themselves based upon their
services and support, and their ability to build partnerships. AJG focuses heavily on
their ability build and maintain long-lasting, consistent, honest and profitable
relationships (AJG.) (See Appendix C-2 for strategic groupings) While the
industries size provides substantial substitutes for individual companies, the only
other threat is a businesses decision to go without certain insurances. For more data
on the barriers of entry (see Appendix C-3)
Industry Structure
As already stated the industry in still in its mature stage of its life cycle.
With very little capital needed to begin a business, the biggest hurdle is being able to
provide the support and building relationships needed to maintain profits. While
the ease of entry is very simple, departure from the industry is quite complicated.
It involves closing current accounts, with manly legal issues of not providing the
services you are contractually obligated. The biggest macro-environment force is
the economy, when businesses struggle financially they typically choose not to buy
insurance as it is seen as an extra cost (see Appendix C-1 for in depth explanation.)
To view the industry economic drivers and supply chain see (Appendix C-4)
Industry Performance
The industry is directly related to our economy, in the past ten years
revenues have spiked and declined (see Appendix E-2.) For industry data and
annual change (see Appendix E-2 and E-3.) AJG has been affected more significantly
than the industry as a whole (see Appendix E-4.)
Industry Prognosis
With current economic growth and the rising trend of insurance agencies,
there is a forecast to grow at a rate of 6 percent compounded annually then
potentially a decline (see Appendix F-1 and F-2.) I support this forecast based on
current trends and with the support of macro-environmental forces.
In this paper I have included economic data, information about Porters Five
Forces, statistics of the Industry Structure and prognoses of Industry Metrics.
With this information I have demonstrated the potential growth of insurance
agencies and brokerages with specific insight on AJG.

Works Cited

Gallagher, Patrick J., Jr. Arthur J Gallagher & Co. N.d. Raw data.
Http://www.manta.com/c/mm28t7p/arthur-j-gallagher-co, Itasca, IL.
"Insurance Agencies & Brokerages - Industry Facts and Trends." Insurance
Agencies & Brokerages - Industry Facts and Trends. N.p., n.d. Web. 15 Feb.
2014.
"Company Search Results." Hoovers. Hoovers a D&B Company, n.d. Web. 15
Feb. 2014.
"Insurance Agencies & Brokerages." Hoovers. Hoovers a D&B Company, n.d.
Web. 16 Feb. 2014.
"About Us - Milestones." About Us - Milestones. Arthur J. Gallagher & Co, n.d.
Web. 15 Feb. 2014.
"AON CORP." Wikinvest. N.p., n.d. Web. 15 Feb. 2014.
"Willis." Quarterly & Annual Reports. Willis Group Holdings, n.d. Web. 15 Feb.
2014.
"Life Partners Holdings, Inc." (LPHI) Annual Report (10K) Quarterly Report
(10Q). N.p., n.d. Web. 15 Feb. 2014.
"Aon History and Facts." Aon History & Facts. N.p., n.d. Web. 15 Feb. 2014.
"Willis." About -. N.p., n.d. Web. 15 Feb. 2014.
"Life Partners Holdings (LPHI) Income Statements Quarterly Statements
from May 31, 2003 to May 31, 2013." Life Partners Holdings (LPHI) Income
Statement. Life Partners Holdings Inc., n.d. Web. 15 Feb. 2014.
Hoopes, Stephen. "Insurance Brokers & Agencies in the US." IBISWorld.
IBISWorld, Feb. 2014. Web. 16 Feb. 2014.

Readability Statistics