WTW not closing doors on reinsurance broking after Willis Re sale

WTW, which sold its treaty reinsurance brokerage operations to Gallagher two years ago, isn’t discounting the possibility of a comeback, it’s been revealed.

When the sale of Willis Re was announced in August 2021, then WTW chief executive John Haley said: “Following the termination of the proposed combination with Aon, we have been taking time to reflect on what we have learned about WTW over the last 16 months and determine how we will move forward as an independent company.

“As part of this, we conducted a review of strategic alternatives for Willis Re, our global reinsurance business. While we highly value Willis Re and our colleagues who contribute to its success, we concluded that divestment was the appropriate path for this business and for WTW.”

Completed towards the end of 2021, the deal with Gallagher featured a two-year non-solicitation agreement, as reported by Insurance Business at the time. Now it appears WTW has not entirely closed its doors on reinsurance broking.

During WTW’s latest earnings call, an analyst cited speculation surrounding a potential re-entry for the broking giant and asked for comment on the matter.

In response, CEO Carl Hess (pictured) said: “Reinsurance is a natural fit with retail broking businesses. Many of our peers operate these businesses; we did so successfully as well. And with our non-compete with AJG (Arthur J. Gallagher & Co.) soon expiring, we are able to add reinsurance to the universe of capital allocations that we consider.

“We’ve remained well connected to the reinsurance markets. We have both a deep understanding of the strategic value of reinsurance brokerage for our business and a healthy appreciation for current market conditions as well.

“I think I’ll look at it this way: I’m not going to comment on any hypotheticals regarding capital allocation decisions or potential M&A (mergers and acquisitions) transactions. When evaluating our opportunity here, we look at it compared to any other opportunity we might have as a business.”

Hess pointed out that any such move will only be pursued if the expected returns and value creation potential are compelling compared to other available options.

“I think I’ll leave it at that,” the chief executive said.

Echoing the top leader’s sentiments, WTW chief financial officer Andrew Krasner told another analyst: “Yes, [reinsurance broking is] an attractive business, but there are other attractive possibilities as well. We want to be judicious on how we approach any such decision.”

In the third quarter of 2023, WTW’s net income amounted to US$139 million.

“In the near term, we expect year-over-year margin expansion for the fourth quarter and the full year as a result of operating leverage and increasing contributions from our expense management initiatives,” Hess noted earlier in the call.

“We’re pleased with our third quarter performance, and our progress gives us confidence in our ability to drive profitable growth and create value over the long term… Our focus on specialisation in our risk & broking segment has been one of the key drivers of our strong organic growth.”

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