Arthur J. Gallagher & Co. will pay significantly more for Willis Towers Watson PLC's reinsurance brokers if the second iteration of the deal goes through as planned, but the acquisition will help Gallagher continue in many ways, says its top executive.
Adding Willis' reinsurance contract will improve Gallagher's capabilities in other industries, in addition to toppling Gallagher to the top level in the reinsurance brokerage sector, J. Patrick Gallagher Jr., the company's chairman, president and CEO, said in an interview Friday.
The announcement came after an earlier agreement by Gallagher to buy Willis 'reinsurance business and various other insurance brokerage firms for about ten times the companies' pro forma revenues fell apart. The previous agreement was dependent on Aon PLC's plan to buy Willis, but it was shaken by regulatory objections. The Gallagher-Willis deal will also require the approval of several regulators.
Although Gallagher will pay a higher multiple for the Willis business ̵
“This was a deal for us that was expensive; "We are very happy, we think it's fair," Gallagher said.
Willis' reinsurance business is independent, has a successful history, good growth strategies and an excellent management team, he said.
it is not about synergy savings. This is a world-class opportunity and it is a world-class team, and we see this as our opportunity to play as a major reinsurance broker, says Gallagher.
Gallagher is currently fifth in the Insurance Insurance ranking of reinsurance brokers, with $ 100 million in annual revenue, but its combination with Willis Re will make it the third largest broker with nearly $ 1 billion in annual income.
In addition, significantly more reinsurance opportunities will increase Gallagher's services to retail customers, he said.
For example, Risk Placement Services Inc., Gallagher's managing agency, will have access to more reinsurance resources, he said.
"There is nothing that an MGA needs more than their reinsurance relationship," Gallagher said.
All leading Willis Re leadership will join Gallagher, and James Kent, global CEO of Willis Re, will lead the combined Gallagher and Willis reinsurance business, Gall. agher sade.
Gallagher expects to spend $ 250 million in integration costs, which will include storage payments to Willis Re staff. Rivals have recruited many brokers from all of Willi's operations since the Aon deal was announced in March 2020.
"There are over 200 people we have sat down and said," Here is a storage package. “We have always believed in using our equity in these packages and in our long-term incentives. … We have ensured that they know that they have a large share in our company if they stay with us, says Gallagher.
And the purchase will not interrupt Gallagher's prolonged "stop". acquisition strategy where it buys several smaller brokers each year, he said.
"Our appetite has not diminished at all, and our ability to close is not impaired at all by this," he said.