2020 brokerage revenue: $9.29B

Percent increase (decrease): 3.9%

Despite the distraction of a protracted regulatory approval process for its proposed combination with Aon PLC and the impact of a global pandemic and economic downturn, Willis Towers Watson PLC delivered 2% organic revenue growth in 2020.

That measure of growth accelerated in the first quarter of this year to 4% as the economy improved. 

Its proposed combination with Aon had initially been expected to close in the first half of 2021, but after European regulators raised antitrust concerns, the sale of more than $2 billion in Aon-Willis assets was agreed to in a conciliatory move. Then on June 16, the U.S. Department of Justice filed an antitrust lawsuit to block the proposed deal.  

With the DOJ filing, the odds of a successful close have diminished, said C. Gregory Peters, managing director, equity research at St. Petersburg, Florida-based Raymond James & Associates.

“More than likely it closes, but there are a lot of moving parts,” he said.

Aon in May agreed to sell much of Willis’ reinsurance brokerage business and various other businesses to rival Arthur J. Gallagher & Co.

The fact that both companies have taken many steps to satisfy regulatory concerns and found counterparties to sell the businesses to shows they are working toward getting the deal “over the finish line,” said Elyse Greenspan, managing director, equity research, insurance, at Wells Fargo Securities LLC in New York.

“Until we have all the approvals and they’ve announced the date that it’s being closed there’s still a potential that it doesn’t get done,” she said.

With the DOJ filing, the divestiture number hypothetically could increase to $3.2 billion, well above the $1.8 billion cap in the original contract, Mr. Peters said.

“Aon’s management and board have to answer the question whether they can accept a higher divestiture and if they can’t
close by Sept. 9, Willis has to decide whether they accept an extension and on what terms,” he said.

In a deal-break scenario, Aon will have to pay Willis $1 billion. If Willis were to proceed with a go-it-alone strategy, it would use the proceeds along with cash on hand to initiate a restructuring/retention plan, Mr. Peters said. 

If Willis remains a standalone company, it may report a “slightly lower organic revenue result relative to its peers for a year or two,” he said.

During Willis’ first-quarter earnings call with analysts, John Haley, the brokerage’s CEO, said some staff had left, but that these departures had not had a material effect and retention bonuses totaling $400 million would be paid at or after the deal closes. 

Many employees are veterans of “not just one but two and sometimes three mergers and so they understand what needs to be done,” Mr. Haley said in an interview before the DOJ filing. 

They understand how to function on a “business as usual basis” and what the limits are, he said. “For example, we have to be very careful that we compete as independent companies up until the day we close.”

Willis has delivered good results, “but we all want to see this resolved sooner rather than later,” Mr. Haley said.

Overall staff turnover in 2020 was lower than in 2019, he said. Willis has had some client losses, but will “work hard to get them back,” Mr. Haley said. 

Despite the loss of some back-office staff and some producers jumping to rivals, the rate environment in commercial lines has been positive and that has helped counteract the headwinds for Willis, Mr. Peters said.

Willis reported $9.29 billion in brokerage revenue in 2020, a 3.9% increase from the prior year, and retained its position as the world’s third largest brokerage. 

The 2% organic revenue growth that Willis reported last year shows that “they were able to deliver even going through a pretty sharp downturn in the economy,” Ms. Greenspan said.

Last year was the first full year of having Tranzact in the organization, and that business grew by about 40%, Mr. Haley said. Willis had acquired Fort Lee, New Jersey-based direct-to-consumer health care organization MG LLC, which does business as Tranzact, on July 30, 2019.

The reinsurance business delivered organic revenue growth of 9% in 2020, and corporate broking was another “bright spot” with strong renewals growth across all lines in North America, Mr. Haley said.