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Fitch affirms Aon, stays positive on WTW despite merger uncertainty

19th March 2021 - Author: Charlie Wood

Fitch Ratings has affirmed the ‘BBB+’ Issuer Default Rating (IDR) for Aon and removed its Negative Rating Watch, while maintaining Willis Towers Watson’s ‘BBB’ Long-Term IDR and issue-level ratings on Rating Watch Positive.

aon-willis-towers-watson-merger-antitrustThis move from the ratings agency is directly linked to the much-talked about combination between the two broking giants.

For Fitch, while the deal remains pending and there remains some uncertainty around pro forma financial policy, it believes Aon is strongly positioned at the ‘BBB+’ rating category with or without the deal closure.

Furthermore, Fitch sees Aon as having once again proved its strong performance through the cycle with organic revenue growth during 2020 despite the negative economic impacts from the coronavirus pandemic.

The IDR and security ratings for Aon impact approximately $7.8 billion of debt outstanding as of December 2020, not including unused capacity under the company’s $1.65 billion multi-currency, senior unsecured revolving credit facilities.

WTW’s Positive Watch reflects the pending acquisition of the company by Aon plc (BBB+), which Fitch says could positively impact the IDR upon deal completion.

The IDR and security ratings impact approximately $5.6 billion of debt outstanding as of Dec. 20, 2020, not including the company’s $1.25 billion senior unsecured revolving credit facility.

Fitch views WLTW as one of the leading operators in the insurance brokerage and professional services space, and says its ratings benefit from a strong and stable market position.

In addition, WLTW’s ratings reflect the company’s top-tier competitive position in the insurance brokerage and HR consulting industries, stable financial leverage, good financial flexibility with a strong cash generation profile, and historically stable profits and margins.

Recent reports in specialist antitrust publications suggest concerns from the US government may have a reinsurance focus, as well as in other areas like benefits and large corporate clients.

While sources are increasingly confident a sale of reinsurance broker Willis Re will likely be required, divestitures are not seen as stopping there, as sources believe remedies may need to go beyond and into the corporate insurance broking space as well.

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