Benefits Administration Poised for a Good Year: Part 1

If last quarter’s earnings reports are an indication of what will continue in 2012, then benefits administration service providers will have a good year.

Some of the financial highlights include Morneau Shepell’s record growth for Q1 of 22% year-over-year (y-o-y). Modest growth was reported elsewhere, but it’s significant in light of the economy and pending health care reform legislation. Providers with modest growth include Aon Hewitt, Towers Watson, Mercer, and T. Rowe Price.

Aon Hewitt’s outsourcing segment reported 3% y-o-y growth, 3% organic growth. Its organic growth began last quarter after four consecutive quarters of either flat or negative organic growth. New client wins are for its retiree health care exchange offering, dependent eligibility audits, and absence management services.

Towers Watson’s benefits segment reported 2% y-o-y growth, 3% organic growth. Its technology & administration solutions (TAS) line of business, which incorporates majority of its benefits administration revenues, had mid-single digit constant currency growth. Towers Watson also reported some new client wins for pension administration services within its retirement business.

Mercer’s outsourcing segment reported 0% y-o-y growth, 4% organic growth. The good news is that its outsourcing segment has recovered from its steady decline of organic growth that began in Q3 2011; the bad news is that growth was from 2011 client wins that came on this quarter, so this positive level might be temporary.  However, Mercer’s health & benefits consulting segment reported strong growth of 7% y-o-y, 6% organic, as did Towers Watson, which reported low double-digit constant currency growth for its health & group benefits segment. This is significant in that this strategy work may flow downstream and result in benefits administration contract awards later this year.

T. Rowe Price, although not a TBO service provider, reported 3% y-o-y growth for its administrative segment, which includes revenues from retirement plan services (RPS). RPS consists of DB, DC, and non-qualified plan administration services.

A new company to monitor is WageWorks, a H&W service provider offering reimbursement account and COBRA administration services. It commenced its IPO of 6.5m shares of common stock for $9 per share on May 10^th.

Tune in later this week to learn about the additional signs pointing to a good year for benefits administration service providers.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

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Explore posts in the same categories: BAO, benefits administration, Benefits administration growth, benefits administration outsourcing, hro, HRO Activity

Tags: Aon Hewitt, benefits administration, benefits administration outsourcing, COBRA, health and welfare outsourcing, HRO contracts, Mercer, Morneau Shepell, Outsourcing, pension administration, Reimbursement account administration, T. Rowe Price, Towers Watson, WageWorks

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