Case and Haley: changing client needs validate $73bn+ Aon-WTW deal

As regulators on both sides of the Atlantic examine the industry’s largest ever broking deal, the group CEOs of Aon and Willis Towers Watson (WTW) have co-authored a robust defence of the proposed ~$73bn deal.

In an eleven page report published today on both the Aon and WTW websites, Greg Case and John Haley have once again placed the onus on the changing needs of the industry’s clients as the key driver for the transaction. 

“Each company has moved the needle, albeit in different ways,” Aon CEO Case and his WTW counterpart Haley said in the report’s introduction.

“But much remains to be done. Client needs continue to outpace innovation, exposing a troubling gap, and the solution lies beyond the capabilities of either Aon or Willis Towers Watson alone,” they explain.

Regulators such as the European Commission and Department of Justice/Federal Trade Commission in the US are currently canvassing the views of clients, together with markets and competitors, for any potential antitrust implications of the deal. The all-stock WTW takeover is scheduled for completion in H1 2021. 

“Each company has moved the needle, albeit in different ways”

Case and Haley

The combination will see Aon acquire the third largest global risk intermediary/consultant WTW and leapfrog rival MMC to become by some distance the industry’s largest risk consultant with $20bn+ in annual revenues.

In the report, Case and Haley say the combination will address new forms of volatility, rethink access to capital and create more affordable and scalable products to narrow the coverage gap.

The duo argue traditional insurance brokers and benefit providers have viewed client relationships through narrow, product silos with too much emphasis on risk placement. 

Following recent shareholder approval for the transaction, the two firms are currently focused on integrating a combined organisation which will have 95,000 employees and regulated entities in almost a hundred countries.

At the time of announcement, it was confirmed Case would be CEO of the combined group and Haley executive chairman, with Aon CFO Christa Davies remaining as the finance chief of the combined entity. 

Aon president Eric Andersen and WTW’s global head of human capital and benefits Julie Gebauer have been appointed as co-heads of integration. 

Case and Haley 

The two group CEOs argue the industry is struggling to keep up with the increasingly sophisticated needs of its customers at a time when their exposure to risk continues to accelerate and many industries are under pressure to maximize the value of their human capital. They also pointed to Aon’s 2019 Global Risk Management Survey which revealed that five of Aon clients’ top ten risks remain uninsurable.

“On day one, the combination of Aon and Willis Towers Watson will enable us to combine data, analytics and technology to create new, more powerful predictive models – that look forward, and not only look back – and develop solutions at a pace not previously possible,” the presentation said.

Four areas Aon-WTW will have an impact

The two CEOs say they have identified four initial categories of client need where the combination will have “tangible, significant, immediate and long-term impact”’.

The first category is navigating new forms of volatility from traditional and emerging forms of risks such as climate change, pandemic, cyber threats and the growing health and wealth gap.

“We will expand traditional risk management to address long-tail risks that are increasingly relevant but lack comprehensive solutions,” the presentation said.

One example analysed by the presentation is climate change. Case and Haley argued the combined firm will have the capacity to become a key facilitator of the climate transition that will happen across multiple geographies and sectors in the 2020s. They said blending Aon’s catastrophe modelling capabilities with Willis Towers Watson’s climate risk modelling platforms will provide a vital analytical capability. 

The second category is building a resilient workforce. “We will provide solutions for workers on their terms to address the fundamental shift over the last decade of where, how and when work gets done,” the presentation said.

“We will provide solutions for workers on their terms to address the fundamental shift over the last decade of where, how and when work gets done”

Case and Haley

The third category is rethinking access to capital. “A primary focus of our combined firm will be to embrace and strengthen the multidimensional nature of capital to provide greater access, unlock value and protect it in novel ways,” the presentation said. 

One example that Case and Haley provided in this category was improving the quality and diversity of capital available to manage intellectual property. It pointed to the changing scope of the world’s largest companies where most of their vast assets are now technical and intangible.

Another example was deeper and diversified sources of ILS capital. 

Lastly, the fourth category is addressing the underserved. “Our combined firm will create more affordable and scalable products to broaden access to a wider range of recipients that today do not have solutions,” the presentation said.

Accelerating evolution 

The proposed mega-merger of the two brokers was announced in early March, just before the Covid-19 pandemic’s impact really took hold on financial markets. The deal is expected to close in the first half of 2021.

The presentation noted that the transaction was not designed with the Covid-19 pandemic in mind. But Case and Haley argue that the pandemic illustrates the type of challenges the combined entity will be better positioned to address. 

“These risks, once thought rare, are now becoming common and can happen at any moment, with an impact that grows more severe over time,” the presentation said.

It added: “We acknowledge that we have to accelerate our evolution and strengthen our client-serving capabilities in order to meet these new challenges and address the demands they place on our clients.”

Aon’s share price closed yesterday at $202.53, valuing the business at $46.87bn. WTW’s closed at $206.94, valuing the business at $26.43bn. On a combined basis, the group would currently be valued at $73.3bn.