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Gallagher adds significant reinsurance assets with Aon-Willis deal



Arthur J. Gallagher & Co .:'s $ 3.57 billion purchase of lots of assets from Aon PLC and Willis Towers' Watson PLC will be "a crucial moment" for the broker, its top executive said on Wednesday.

The deal will add approximately $ 1.3 billion in annual revenue to Gallagher and greatly expand its reinsurance business, positioning it as the world's third largest reinsurance intermediary. The deal, which includes long-standing French broker Gras Savoye SA, will add significant deals in Europe and some deals in the United States.

The deal comes after European Union regulators pressured Aon to sell various business units to secure antitrust approval of its proposed acquisition of Willis Towers Watson, announced in March 2020. Gallagher, who bought Jardine Lloyd Thompson's PLC aerospace industry in 201

9 after regulators reviewed Marsh & McLennan Cos. Inc.'s proposed acquisition of JLT has long been seen as a likely buyer of Aon-Willi's assets.

Willis' reinsurance business is "the jewel in the transaction", said J. Patrick Gallagher Jr., President, President and CEO of Gallagher, in a conference call with analysts on Wednesday. The $ 750 million in annual reinsurance income from Willis Re is approximately seven times Gallagher's current reinsurance income.

The deal covers most of Willis Re's treaty and faculty activities, some UK specialty activities – including cyber, financial lines, space and aerospace – and brokerage activities in France, Spain, Germany and the Netherlands and some US brokerage activities (see chart) .

More than half of Gallagher's European business is in France. The US part of the deal accounts for $ 50 million in revenue in niches such as construction and energy. It also adds 100 employees in Houston, San Francisco and Bermuda.

The deal will increase Gallagher's annual revenue from $ 6 billion to $ 7.3 billion, which will consolidate its position as the world's third largest broker, if the Aon-Willis deal is closed. as expected. The deal will also increase the international share of Gallagher's operations to 40% of its revenue from 32%.

The acquisition was made on "economically attractive" terms with Gallagher who paid 10 times 2020 calculated pro forma earnings before interest, taxes, depreciation. and depreciation, Gallagher said.

Gallagher will use a combination of long-term debt, short-term borrowing, free cash and capital to finance the deal, said Douglas K. Howell, CFO.

The deal should not affect Gallagher's overall concentration and acquisition strategy, he said. Tuck-in acquisitions are an integral part of our growth history, he says.

In Gallagher's earnings call earlier this month, Howell said the brokerage had about $ 2.5 billion available for tuck-in acquisitions. Gallagher has long been one of the most acquired brokers.

The deal to buy Aon-Willi's assets is expected to end early in the second half of 2021, "perhaps as early as July 1," Howell said. Aon previously said that it expected to close its purchase of Willis during the first half of 2021, but said on Wednesday that it now expects to close the deal during the third quarter of the year.


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