2020 brokerage revenue: $11.04B

Percent increase (decrease): 0.9%

Aon PLC’s offer to buy rival Willis Towers Watson PLC remains a prospective acquisition rather than a completed deal more than a year after it was first announced, and it remains unclear how much of its rival Aon will buy if the deal goes through.

Regulators have already forced the proposed sale of more than $2 billion in annualized revenue over competition concerns, and following a U.S. Department of Justice antitrust lawsuit filed last month more divestitures are likely needed for the deal to be approved.

Included in the asset divestitures already agreed to — and contingent on the Aon-Willis deal being completed — are the sales of most of Willis’ reinsurance business and several other European and U.S. businesses to No. 4 ranked Arthur J. Gallagher & Co., and various retirement and health businesses to other buyers. EU regulators have conditionally approved the deal.

Additional divestitures would likely involve Willis’ large account property/casualty and employee benefits brokerage business, which were singled out in the DOJ lawsuit, said Meyer Shields, Baltimore-based managing director at Keefe, Bruyette & Woods Inc.

Aon, though, could still get value from buying a more restricted portion of Willis and would have to pay a $1 billion break-up fee to Willis if the deal is scrapped, he said.

“Our expectation is that Aon still wants to get the deal done, Willis Towers Watson still wants to get the deal done, and the easiest way of accomplishing that would be to find some way of settling with the Department of Justice,” Mr. Shields said.

The Aon and Willis management teams appear to be committed to completing the deal, said J. Paul Newsome Jr., Chicago-based managing director of equity research at Piper Sandler & Co.

“The senior management of both firms are very invested in this transaction,” he said.

However, there are few past antitrust cases in the insurance sector to look to for guidance, and the DOJ is focusing on the brokerages’ core business, Mr. Newsome said. 

The judge in the case set a November trial date for the DOJ suit. Aon said it continues to expect to achieve $800 million in annual savings through the merger with Willis.

Aon reported a less than 1% increase in brokerage revenue in 2020 as economic activity fell during the pandemic, but revenue rose sharply in the first quarter of this year. Total revenue rose 9.5% in the first quarter and was up 6% on an organic basis. Aon remains at No. 2 in Business Insurance’s ranking of the world’s largest brokerages.

The brokerage’s core business performed well “all things considered” during the pandemic, but some discretionary insurance purchases declined, and consulting income fell, said Eric Andersen, president of Aon, in an interview before the DOJ filed its lawsuit.

“The discretionary parts of the business really began to pick up as confidence returned to the businesses that we serve. You started to see construction projects, you started to see M&A, you started to see employment levels begin to rise, and all had a positive impact on the business,” he said.

Several of the changes in work practices that Aon implemented during the pandemic, such as bringing experts to client meetings virtually, will likely remain, but there is still value in collaborating through in-person meetings, Mr. Andersen said. 

“We are studying ourselves hard. We want to see what it is that we want to take out of these past 15 months,” he said.

Rival brokers have hired away several high-profile Willis executives and brokers over the past year. However, Aon’s and Willis’ staff retention statistics remain higher than prior to the pandemic, Mr. Andersen said.

But the extended timeframe for the completion of the merger might lead to further departures, Mr. Shields said.

“The longer the uncertainty persists, it’s tempting to go elsewhere, and there’s no shortage of elsewheres that would be happy to hire some talent from Aon and Willis Towers Watson,” he said.

Like some other larger brokers and insurers, Aon suspended its contributions to political campaign committees after the attack on the U.S. Capitol on Jan. 6, and it has not reinstated them, Mr. Andersen said. Aon also cut its ties with the Trump Organization, which had been a long-time client.