Aon to buy Willis for nearly $30 billion in insurance mega-deal

Aon to buy Willis for nearly $30 billion in insurance mega-deal

(Reuters) – UK-based insurance broker Aon Plc (AON.N) said on Monday it would buy Willis Towers Watson (WLTW.O) for nearly $30 billion in an all-stock deal that creates the world’s largest insurance broker and adds scale in a battle with falling margins.

The deal unifies the sector’s second and third largest names into a company worth $76 billion by current share prices, overtaking market leader Marsh & McLennan (MMC.N), as they face challenges ranging from the coronavirus to climate change.

First mooted a year ago, the deal also comes after a period of brutal competition which has seen insurance premiums fall while claims continue to grow.

Aon confirmed last year that it was in early stage talks with Willis Towers before quickly scrapping the plans, without giving a reason.

Analysts said at the time that an Aon-Willis deal might have trouble clearing anti-trust hurdles. The deal terms state Aon will be obligated to pay a fee of $1 billion to Willis if the deal were to fall through.

Marsh last April sealed its own purchase of British rival Jardine Lloyd Thompson for $5.7 billion, cementing its position as the biggest global player.

Under the deal, Willis shareholders would receive 1.08 Aon shares, or about $232 per share as of Aon’s Friday close, representing a total equity value of $29.86 billion. The offer is at a premium of 16% to Willis’s closing price on Friday.

Shares in Aon were down 2.7%, while Willis’ shares rose just 1.42% in trading before the bell in a New York market that was set to fall heavily across the board due to Monday’s collapse in oil prices.

“Aon generally has a successful acquisition history but given the timing it is not certain how investors will react to the acquisition in the short-term,” said Paul Newsome, managing director at brokerage Piper Sandler.

When the deal closes, existing Aon shareholders will own about 63% and existing Willis investors will own about 37% of the combined company on a fully diluted basis.

The deal is expected to add to Aon’s adjusted earnings per share in the first full year of the deal, with savings of $267 million, reaching $600 million in the second year, with the full $800 million achieved in the third year.

Newsome said the deal multiple was about 19.3 times 2020 earnings per share (EPS) estimate of $12 for Willis and about 12.3 times its 2020 core earnings (EBITDA) estimate.

This compares to the peer group median trading at about 22.6 times earnings and 13.6x core earnings, he said.

The deal is subject to the approval of shareholders and regulatory approvals and is expected to close in the first half of 2021.

Aon will maintain its headquarters in London and the combined firm will be led by Aon Chief Executive Officer Greg Case Greg Case and Aon Chief Financial Officer Christa Davies.

Aon’s financial advisor for the deal is Credit Suisse Securities, while Willis was advised by Goldman Sachs.

Aon: Over the last decade, natural catastrophes have resulted in global economic losses of USD2.98 trillion

The development of new insurance schemes, such as parametric insurance, insurance risk pools, or catastrophe bonds, will be important new ways to improve risk mitigation in the most vulnerable areas.

LONDONFeb. 5, 2020 /CNW/ — Aon plc (NYSE:AON), the leading global professional services firm providing a broad range of risk, retirement and health solutions, today brings together leaders across the private and public sector for its inaugural “Collaborating to close the protection gap” conference in London.

The event is designed to generate discussion on how the global finance and insurance industry can work more effectively with governments, humanitarian and non-governmental organisations. As losses from natural catastrophes continue to reach record levels, the goal is to close the gap between the insured and uninsured to protect global communities and build scalable solutions through shared experiences.

The conference is hosted by Aon in partnership with the City of London, The British Red Cross, ClimateWise, Insurance Development Forum, AXA XL, Pool Re, MSAmlin and Renaissance Re at London’s Guildhall. Speakers include Cyrus Ardalan, Chairman – International Finance Facility for Immunisation; Lord Bilimoria, Vice President – CBI; Greg Case, CEO, Aon plc; Marisa Drew, CEO – Credit Suisse Impact Investment and Advisory; Nick Dyer, Director General for Economic Development and International at the UK Department for International Development; Dr. Abbas Gullet, former Secretary General – Kenyan Red Cross; David Lomas, Managing Director – BlackRock; Julian Richardson, Insurance Specialist – Department for International Trade and William Russell, Lord Mayor of the City of London.

Today’s event opened with a video message from The Prince of Wales: https://aon.io/HRH-ProtectionGap

Greg Case, CEO, Aon plc, said: “The protection gap places an immense financial strain on governments, businesses, communities and individuals. Yet, financial impact is only one aspect of the toll these disasters inflict. We also must consider the profoundly troubling humanitarian and social impact – lives lost, communities compromised and businesses, as well as individual livelihoods, disrupted.

“Considering the magnitude of the challenge, a solution is beyond the ability of any individual, organization or even sector. We have absolute conviction, though, that, collectively, we can make a difference. Our hope is that we will forge a shared commitment to new ways of collaborating that will allow us to build resilience at scale.”

Aon’s Weather, Climate & Catastrophe Insight: 2019 Annual report found that 2019 was another year of devastating natural disasters around the globe with economic losses of USD232 billion. Only USD71 billion of this was covered by insurance, leaving the protection gap – the portion of economic losses not covered by insurance – of 69 percent. Over the last decade, natural catastrophes resulted in economic losses of USD2.98 trillion and insured losses of USD845 billion, creating a protection gap of 72%.

The decade also highlighted the significant protection gap that persists in developing and emerging countries. No part of the world was more vulnerable to this topic than in Asia, where just 12 percent of economic losses – USD151 billion out of USD1.23 trillion – were covered by insurance. In Latin America and Africa insurance take-up rates were in the low single-digits, meaning that virtually all losses were uninsured and local populations were entirely dependent on federal or international financial support for recovery.

The development of new insurance schemes, such as parametric insurance, insurance risk pools, or catastrophe bonds, will be important new ways to improve risk mitigation in the most vulnerable areas.

Simon Meldrum, Innovative Finance Specialist, British Red Cross, added: “Our vision is of a world where every community is resilient to the impact of the climate crisis, both today and in the future. With a presence in almost every country in the world, we see first-hand the humanitarian impact of increasingly volatile weather. We are also one of the biggest organisations in the world responding to natural disasters and people in crisis. In addition, we are working in disaster risk reduction through our Climate Centre and other specialists across the Red Cross. We are now starting to explore new ways of working with private sector partners and pilot some exciting initiatives such as insurance linked securities or catastrophe bonds because we believe that cross-sector collaboration with governments, the insurance sector and non-governmental organisations will be critical to shifting the dial in the humanitarian response.”

About Aon

Aon plc (NYSE:AON) is a leading global professional services firm providing a broad range of risk, retirement and health solutions. Our 50,000 colleagues in 120 countries empower results for clients by using proprietary data and analytics to deliver insights that reduce volatility and improve performance.

SOURCE Aon plc

Related Links

https://www.aon.com/

Chubb Appoints Suresh Krishnan COO, of Accident & Health in the United States & Canada

 Eric Bartenstein Named Chief Underwriting and Digital Officer 

WHITEHOUSE STATION, N.J., Jan. 15, 2020 /PRNewswire/ — Chubb appoints Suresh Krishnan to Chief Operating Officer for its Accident and Health (A&H) business in the United States and Canada. In this newly created role, Mr. Krishnan will assist in overseeing the day-to-day operations of the business and report to James Walloga, Chubb’s Executive Vice President, North America Accident and Health.

In this capacity, Mr. Krishnan will be responsible for developing and implementing a range of strategies related to profitable growth for the business, including sales and distribution, claims and product development for the company’s large account and middle-market insurance segments. He will also oversee Chubb’s Canada A&H business. He will be based in New York.

Mr. Krishnan brings more than two decades of experience to his new role. Throughout his career, he has served in several senior leadership roles. Prior to this new position, he served as head of Europe’s Major Accounts Division, where he led the development of business strategies and oversaw the structures, processes and performance metrics that ensured clients and brokers fully benefited from Chubb’s risk and underwriting expertise, as well as its multinational network and services.

“Suresh is a strategic leader who has been with Chubb for quite some time and has a deep understanding of our business, our culture, and our clients’ needs,” said Mr. Walloga. “That background is a good reflection of our overall leadership team and is key to our consistent approach to bringing innovative products and services to market, while providing superior support to our distribution partners. I look forward to working with Suresh in his new role and further building upon our successes.”

Mr. Krishnan joined Chubb in 1999 and has held a variety of executive-level legal positions. Prior to the merger between ACE and Chubb in 2016, he led Chubb Overseas General Insurance Division’s multinational and large accounts strategy, where he assembled and oversaw cross-functional teams in Asia Pacific, Africa, Eurasia, Europe and Latin America. This included leading and managing the Global Client Executive Practice for Chubb’s Overseas General Insurance Division.

“This is yet another example of the depth of unmatched leadership that distinguishes Chubb,” said Joe Vasquez, Chubb’s Senior Vice President, Chubb Group and head of the company’s Global Accident and Health business. “I am excited to have Suresh serve in another leadership capacity and confident he will continue to represent the world class underwriting, service, and claims support Chubb is known for.”

Succeeding Mr. Krishnan as head of the Major Accounts Division, Europe will be Chubb’s Country President for France, Nadia Côté.

Mr. Krishnan holds a Bachelor of Arts degree from Colgate University and a Juris Doctor from The University of Richmond School of Law.

Chubb Creates New Digital Role for North America Accident and Health Division 

Chubb has also named Eric Bartenstein Senior Vice President, Chief Underwriting and Digital Officer for its North America Accident and Health division. In this newly created role, Mr. Bartenstein will focus on leading the transformation of North America’s A&H business into a digital environment that makes it even easier for clients and distribution partners to do business with Chubb. Mr. Bartenstein will be based in Philadelphia and report to Mr. Walloga.

“We are committed to creating an ideal environment and experience for our clients and distribution partners,” said Mr. Walloga. “I am excited to work closely with Eric to expand on our technical capabilities and ensure best practices are in place to meet our clients’ unique needs.”

Mr. Bartenstein has more than two decades of experience in A&H underwriting. Prior to this expanded new role, he served as Chief Underwriting Officer for the A&H business.

He holds a Bachelor of Arts degree in English from Syracuse University.

About Chubb

Chubb is the world’s largest publicly traded property and casualty insurance company. With operations in 54 countries and territories, Chubb provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. As an underwriting company, we assess, assume and manage risk with insight and discipline. We service and pay our claims fairly and promptly. The company is also defined by its extensive product and service offerings, broad distribution capabilities, exceptional financial strength and local operations globally. Parent company Chubb Limited is listed on the New York Stock Exchange (NYSE: CB) and is a component of the S&P 500 index. Chubb maintains executive offices in Zurich, New York, London, Paris and other locations, and employs more than 30,000 people worldwide. Additional information can be found at: chubb.com.

Chubb Insurance Company of Canada has offices in Toronto, Calgary, Montreal and Vancouver and provides its products and services through licensed insurance brokers across Canada. For additional information, visit chubb.com/ca.

SOURCE Chubb

 

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Insurance brokerage Hub bulking up Canadian benefits business with acquisition spree

The biggest insurance brokerage in Canada has been on a dealmaking blitz that may only be about halfway done, according to the company’s Ontario chairman.

Chicago-based Hub International Ltd. sells insurance, but it has also spent the past year expanding the Canadian side of its business, which advises companies on their employee benefits, such as health or retirement plans. It has been doing so in part by acquiring a number of boutique firms.

On Tuesday, Hub said it acquired for an undisclosed sum Toronto’s PDF Financial Group Inc., an independent brokerage that helps a company’s human-resources department manage employee programs. The acquisition was one of five such deals Hub has announced to date in October, involving three companies in Canada and two in the United States.

Hub is Canada’s biggest property and casualty insurance broker by a “healthy margin,” but it had heard back from some clients wanting advice about benefits and pensions as well, according to Gregory Belton, the executive chairman of Hub Ontario.

“We’re not only getting larger and filling out a geographic footprint, but we’re developing services for what we think is the under-served middle market of Canadian business,” Belton said in an interview with the Financial Post.

After announcing its Canadian benefit strategy in July 2018, Hub noted at the beginning of this year that it had already acquired 13 Canadian employee-benefit and pension brokerages since 2018, increased fee revenue to more than $50 million and opened seven new offices. Hub wants to earn more than $100 million in commission fees by 2021, and said it expected to open an additional 10 offices.

“I would say that we’re about halfway done in our acquisition strategy,” Belton said. “We have a fairly robust pipeline across the country, and you’ll see further acquisitions being closed in the coming months.”

Mike Berris, a partner at accounting firm Smythe LLP who specializes in valuations and M&A consulting in the Canadian P&C insurance industry, said he expects more activity in the benefits space — although not all brokers may be able to pull it off.

Even though it’s a risk-based product, you really have to have scale and expertise to do it properly.

Mike Berris, partner, Smythe LLP

“There’s a lot of desire, but there’s only so many people who are capable of doing that,” Berris said. “Even though it’s a risk-based product, you really have to have scale and expertise to do it properly.”

Hub has been scaling up since it formed in 1998 with the merger of 11 Canadian brokerages. It went public soon after, expanded into the U.S. and in 2007 was bought by private-equity firm Apax Partners and investment bank Morgan Stanley.

In 2013 Hub announced it was being acquired by funds advised by another private-equity firm, Hellman & Friedman LLC, in a deal that valued the brokerage at around US$4.4 billion.

Hub then said in October 2018 that it had agreed to a deal involving “a substantial minority investment” from funds managed by Toronto-based investment firm Altas Partners. The agreement implied a total enterprise value for Hub of more than $10 billion.

Since the deal, Hub’s website shows it has made more than 50 acquisition-related announcements. Currently, the brokerage has more than 11,000 employees, with more than 250 offices in the U.S. and about 200 in Canada, a spokesperson said.

“Like a lot of private-equity-owned brokerages, they have been very, very aggressive and they’re very, very effective in growing through acquisitions,” Berris said.

Belton said most Canadian businesses fit the mid-market mold, but that there is no “dominant player” in that section of the market right now for the sort of benefits business Hub is expanding. Even so, he said there has been “very robust competition” for the types of companies Hub is buying.

“Our aspiration is to become the dominant player, just as we are in the property-casualty side of the business,” Belton said.

Hub International Acquires Ontario-based PDF Financial Group Inc.

Chicago, October 8, 2019Hub International Limited (Hub), a leading global insurance brokerage, announced today that it has acquired PDF Financial Group Inc. (PDF). Terms of the transaction were not disclosed.

Based in Toronto, Ontario, Canada, PDF is an independent brokerage offering consulting and outsourcing services for employee benefit programs, human resources, and related financial advice. Peter Demangos, Founder and President of PDF, will join Hub International Ontario Limited (Hub Ontario).

The move continues to reinforce Hub’s ongoing Canadian employee benefits growth and services strategy to expand its best-in-class employee benefits and retirement solution, addressing the challenges clients are facing, including in benefits communication, health and wellness, and retirement.

About Hub’s M&A Activities
Hub International Limited is committed to growing organically and through acquisitions to expand its geographic footprint and strengthen industry and product expertise. For more information on the Hub M&A experience, visit WeAreHub.com.

About Hub International
Headquartered in Chicago, Illinois, Hub International Limited is a leading full-service global insurance broker providing property and casualty, life and health, employee benefits, investment and risk management products and services. With more than 11,000 employees in offices located throughout North America, Hub’s vast network of specialists provides peace of mind on what matters most by protecting clients through unrelenting advocacy and tailored insurance solutions. For more information, please visit www.hubinternational.com.

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