Reinsurance News

Aon still confident WTW combination will close in H1

8th February 2021 - Author: Matt Sheehan

Executives at re/insurance broker Aon have confirmed that they still expect the planned business combination with Willis Towers Watson (WTW) to close in the first half of 2021, despite an ongoing investigation by EU regulators.

aon-and-willis-towers-watson-logosSpeaking as part of a fourth quarter earnings call, Chief Financial Officer (CFO) Christa Davies said Aon and WTW were still “on track” to meet the original closing date within H1.

Aon reported 3% revenue growth to $3.0 billion in Q4, including organic revenue growth of 12% in its Reinsurance Solutions division.

The broker also recently unveiled the new leadership team that will come together to lead the combined Aon / WTW entity, once the transaction is finalized.

But there are concerns in the market that the European Commission investigation into the deal could delay its completion, or require significant divestitures on anti-competition grounds.

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For instance, 73% of respondents to a Reinsurance News poll felt that a sale of WTW’s reinsurance broking arm, Willis Re, could be necessary for the combination to go ahead.

But management at Aon are still confident that the deal will be taken to completion as planned, with Davies assuring that both parties remain “incredibly committed” to seeing it through.

“The businesses are complimentary and operate in competitive areas of the economy,” Davies noted. “And we believe we’ve got the arguments and evidence to ensure a positive outcome. We continue to work collaboratively with the appropriate regulators to gain approvals in a timely manner.”

Furthermore, CEO Greg Case argued that the pandemic and its associated economic impacts had actually increased Aon’s conviction of the need to merge with WTW, rather than prompting the firm to reconsider.

“Our excitement about the combination as well as the leadership and talent from both sides continues to grow,” he said.

“Last week, we reached another important milestone with the announcement of the combined executive committee that will be in place once the combination is closed. This team embraces the commitment to a one firm mindset and brings together the best expertise, talent and leadership from both organizations,” Case continued.

“We begin 2021 in a position of strength to continue executing our strategy and making progress on our key financial metrics, both the standalone Aon and in our pending combination with Willis Towers Watson creating a significant growth opportunity for clients, for colleagues and for shareholders.”

Davies further stated: As I look towards 2021, and our pending combination with Willis Towers Watson, I’d like to reiterate how excited we are about the newly announced leadership team and the significant shareholder value creation potential we see in bringing together our two complimentary businesses, both from a top line growth driven by accelerated innovation for clients, and from the bottom-line impact of $800 million in cost synergies.”

“We continue to work collaboratively with the appropriate regulators to gain approval, and are focused on achieving a result that optimizes shareholder value. We remain committed to an expected close in the first half of 2021.”

Addressing the $800 million cost saving figure, Davies noted that this estimate is based on 5.5% of the combined base, compared with 11% of the combined cost base that Aon has achieved on Hewitt and 18% on its Benfield acquisition.

“As we’ve gone into the integration planning, we feel extremely confident about achieving the $800 million,” she said. “And as we’ve said, this year we’re very sort of confident about achieving that through this based on the strength of Aon Business Services platform, which is allowing us to bring together the operations of Aon and drive improved quality, consistency, and then efficiencies over time.”

“We had very high expectations when we announced March 9 and they’ve been exceeded substantially in multiple categories,” Case added.

“We’re thinking about the opportunity to drive growth, organic growth on behalf of clients. And we see it in multiple categories, all of these things come together to reinforce opportunities to both drive top line and also drive margin improvement.”

“We see tremendous opportunity, both on the top line side, and on the margin side for the combined firm, for all the reasons Christa has outlined. And everything we’ve seen since March 9 has only reinforced that it’s just been terrific.”

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