Opportunity knocks for wider market as Aon struggles to get WTW deal over the line

Latest news from the Competition and Consumer Commission of Singapore (CCCS) that it has completed its initial review of the proposed merger between Aon and Willis Towers Watson (WTW) and has identified “areas for further review” is not going to cheer up Aon CEO Greg Case, who must now be wondering why he bothered with the idea in the first place. The news from Singapore followed swiftly on from the bombshell dropped by the US Department of Justice (DOJ) on 16 June that it is taking legal action to prevent the $30bn deal going ahead, because of serious competition concerns. The complaint filed in the US District Court for the District of Columbia alleged that the merger threatens to “eliminate competition, raise prices and reduce innovation for American businesses, employers and unions that rely on these important services”. Aon quickly responded to the DOJ action with the following: “We disagree with the US Department of Justice’s action, which reflects a lack of understanding of our business, the clients we serve and the marketplaces in which we operate.” The DOJ action of course followed similar concerns raised by the European Union which, thankfully for Mr Case, were less dramatic in wording and were seemingly satisfied by a deal struck with AJ Gallagher to sell off significant chunks of WTW’s European business and elements of its US and Bermuda operations. As part of this settlement, Aon also agreed to sell off its German pensions consulting, pension insurance broking, pensions administration and investment consulting business to Lane Clark & Peacock. The strongly-worded DOJ suit, and Aon’s terse response intimating that the regulator does not understand the business, suggests that this spat will not be so easily settled. For Mr Case and his senior management team, this is really starting to look like a dog’s breakfast that follows the PR and HR disaster of cutting Aon staff’s salaries last April in response to the pandemic, when no other major broker followed suit. The decision was reversed a couple of months later but the impact on morale at Aon staff already worried about the impact of the mega-deal cannot have been good. Shares in both Aon and WTW – up 20% and 19.92% respectively during the last 12 months – fell on the news of the DOJ suit, with Aon down 3% and Willis 2% weaker. Analysts said that, despite the latest hitch, the brokers are more likely to sell even more businesses to satisfy regulators rather than drop the deal, which has already cost a huge amount of time and money and would force Aon to pay WTW a $1bn break fee. The analysts are of course focused on the costs savings and potential for improved margin post-deal, rather than supposed potential for greater innovation for customers. Other emerging brokers – such as A J Gallagher, Howden and new boys McGill & Partners – keen to plug the gap left by the big three reducing to a big two are of course excited about the opportunities offered to them by acquiring books of business and unsettled senior Aon and WTW staff. These independent players had already received a welcome boost from the fallout of Marsh’s acquisition of JLT. A J Gallagher’s EMEA head Simon Matson told Commercial Risk Europe that he had been pleasantly surprised by the unusually positive response to the news of its planned acquisition of WTW business in Europe, giving it the chance to hopefully become a powerful option for Europe’s risk and insurance managers. The emergence of serious choice among growing brokers such as A J Gallagher and the continued rise of independent broker networks is of course the main positive to come out of this mess. Europe’s risk and insurance managers need independent and cost-effective advice more than ever at this difficult time in the insurance market, and for the wider economy. This is really the time for the broker, particularly those working outside of the big three or two, to step up to the mark and prove their worth. Focus on cost and efficiency, securing the best possible deal and truly innovative responses to hugely challenging new risk scenarios, and you will win from this situation. This time of flux also presents a real opportunity for carriers to cement their relationships with customers alongside the brokers. During the long soft market, the leading insurers talked a lot about getting closer to their customers to help deliver a more innovative service and efficient claims offering. After the brutal two years of rapid hardening in many lines, surely it is time for insurers to step up and do everything in their power, in tandem with the brokers, to ensure buyers have the choice needed to dampen such dramatic market swings in the future.

Opportunity knocks for wider market as Aon struggles to get WTW deal over the line

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