AJ Gallagher to buy WTW reinsurance business for $3.25bn

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AJ Gallagher has announced an agreement to acquire the treaty reinsurance brokerage operations of Willis Towers Watson (WTW) in a deal that is expected to close during the fourth quarter of 2021.

For the year ended 31 December 2020, these operations generated $745m of estimated pro forma revenue and $265m of estimated pro forma EBITDAC

Gallagher will acquire the combined operations for an initial gross consideration of $3.25bn, and potential additional consideration of $750m subject to certain third-year revenue targets.

The acquisition of Willis’s reinsurance business was originally part of the failed bid by Aon to acquire WTW. Aon hoped that by selling off the reinsurance business it would satisfy regulatory concerns but in the end it was not enough.

“Broadening our reinsurance brokerage offerings has been a strategic objective at Gallagher and this acquisition will significantly enhance our global value proposition,” said J Patrick Gallagher, Jr, Chairman, President and CEO.

“We were very impressed with the Willis Towers Watson reinsurance professionals we met during our initial due diligence and strongly believe a combination will significantly enhance our offerings to clients and prospects. I look forward to welcoming the 2,200 new colleagues joining us as part of this transaction to our growing Gallagher family of professionals,” he added.

Gallagher listed the benefits of the acquisition to include:

Expanded global value proposition within reinsurance brokerage
A broad suite of analytics capabilities including actuarial services, catastrophe modelling, dynamic financial analysis, rating agency analysis and capital modelling
Addition of talented management team
Increased product breadth & offerings
Further leveraging of Gallagher’s industry-leading alternative risk and ILS business; and,  Strengthened relationships with major insurance carriers.

Willis Re’s treaty reinsurance business operates in 24 countries, places over $10bn of premium annually and represents over 750 insurance and reinsurance company clients.

The US-based broker said that integration is expected to take approximately three years with total non-recurring integration costs estimated to be approximately $250m.

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