Top insurance brokers, No. 3: Willis Towers Watson PLCPosted On: Jul. 1, 2019 12:00 AM CST
2018 brokerage revenue: $8.41B
Percent increase (decrease): 3.7%
Willis Towers Watson PLC continued to pursue a strategy of acquiring companies either connected to or adjacent to its core businesses while completing its integration of two legacy companies in 2018.
The brokerage also made headlines in March with the disclosure and subsequent abandonment of a bid for Willis Towers Watson by a key competitor.
While 2018 marked the third and final year of the integration process following the January 2016 completion of the $18 billion merger of London-based brokerage Willis Group Holdings PLC and New York-based consulting firm Towers Watson & Co, Willis Towers Watson “made a lot of progress in financial performance and started to see the potential that exists,” said Todd Jones, global head of corporate risk and broking.
Willis Towers Watson reported $8.41 billion in brokerage revenue in 2018, a 3.7% increase from the prior year, and delivered organic growth of 5% overall. It remains No. 3 in Business Insurance’s 2019 ranking of the world’s largest insurance brokers.
“As an industry we operate in a lot of dynamic markets, so we have political challenges, economic challenges, risk issues that are more prevalent in some parts of the world than others. In all those situations … each of our businesses had their own unique challenges, but each responded very well and delivered results in 2018 that were very helpful to the overall performance,” Mr. Jones said.
In December 2018, Willis Towers Watson, through its majority-owned London-based broker Miller Insurance Services LLP, completed the acquisition of Alston Gayler, a U.K.-based insurance and reinsurance broker for $67 million.
Then in April 2019, Willis Towers Watson announced it was buying Fort Lee, New Jersey-based direct-to-consumer health care organization MG LLC, which does business as Tranzact, for $1.2 billion. The deal is expected to close in the third quarter of 2019.
Both deals reflect Willis Towers Watson’s strategy of making acquisitions in areas either connected to or adjacent to its core businesses, said Mr. Jones.
Willis Towers Watson CEO John Haley signaled at an investor day earlier this year that mergers and acquisitions historically have been and continue to be a core part of the brokerage’s growth strategy, but the company is a “discriminating buyer,” said Mr. Jones.
“We are not looking to do deals just to do deals,” he said.
For every eight to 10 target organizations that Willis Towers Watson considers, one may pass through the filter in terms of its cultural and strategic fit, and “if they get through that filter, we believe we represent an interesting home for organizations that may be looking to find the right strategic home,” Mr. Jones said.
The Tranzact acquisition should help the company access the double-digit growth potential of the Medicare space, according to analyst C. Gregory Peters, a managing director in the equity research department at St. Petersburg, Florida-based Raymond James & Associates.
“They identify levers and opportunities, and the Tranzact acquisition is one of the levers (Willis Towers Watson) has identified which will help position them to further organic revenue growth,” said Mr. Peters.
Earlier this year, a story broke that Aon PLC, the world’s second largest brokerage, was looking to make a bid for Willis Towers Watson. However, the transaction didn’t completely make sense “because there could have been some antitrust issues,” said Elyse Greenspan, director of equity research for property/ casualty insurance at Wells Fargo Securities LLC in New York, especially given that Jardine Lloyd Thompson Group PLC had to sell its aerospace practice as part of its acquisition by Marsh & McLennan Cos. Inc.
While ongoing consolidation and competition in the brokerage sector creates potential opportunities for Willis Towers Watson from a talent and client perspective, it’s important not to get distracted, Mr. Jones said.
“We want to be thoughtful about the talent opportunities and make sure that there’s a cultural fit and that the acquisition of talent supports the overall strategy.
On the client side I have yet to meet the client that says less choice is good … so we want to be an alternative for those clients that are looking for the capabilities and credentials that we can bring,” he said.
“We need to pay attention to what’s happening externally and make sure Willis Towers Watson takes advantage of the opportunities to become a better organization. But our priority needs to be with our clients,” said Mr. Jones.