Jardine Lloyd Thompson Group and Towers Watson have today announced that JLT will acquire the reinsurance brokerage business of Towers Watson for a cash consideration of US$250m (£156m).
Upon completion, Towers Watson’s reinsurance brokerage business will be merged with JLT’s reinsurance business, JLT Re, to create a new force in the international reinsurance market, with combined revenues of US$266mi (£166m) and 700 people in 35 locations in 17 countries. The combined business will be branded for a transitional period as JLT Towers Re.
Towers Watson’s reinsurance brokerage business is one of the most respected in the market, generating revenues of US$166mii (£104m) and profit before tax of US$26mii (£16m) in the year ended June 2013, making it the 4th largest reinsurance broker in the world. This acquisition significantly accelerates JLT’s existing strategy to build out its international reinsurance brokerage operations. It combines Towers Watson’s well-established North American and London Market reinsurance businesses with JLT Re’s international reinsurance operations, dynamic brand and strong London Market operation. The combined business will benefit from considerably enhanced scale, capability and market presence.
As part of the transaction, JLT Re and Towers Watson have entered into an Alliance Agreement that will ensure clients have continued access to Towers Watson’s risk consulting and software services. This Agreement will also provide JLT Towers Re with continued use of Towers Watson’s proprietary actuarial models and software, alongside deep analytical and modelling capabilities that will be acquired with the business.
Upon formal completion of the transaction, Ross Howard, who is currently head of Towers Watson’s reinsurance brokerage business, will become Executive Chairman of the merged operation. Alastair Speare-Cole, currently CEO of JLT Re, will become CEO of the enlarged business. Alan Griffin will step down as Chairman of JLT Re, but will retain a board and advisory role.
The acquisition is subject to regulatory approvals and is expected to complete before the year end. The two businesses will be fully integrated over the course of 2014 and 2015.
Total transaction and integration costs are expected to be approximately US$7m (£4m) and US$20m (£12m) respectively. The acquisition will be made on a debt and cash free basis and financed from JLT’s cash resources and debt and is expected to be earnings accretive in the first full year following completion. The gross assets being acquired amount to approximately US$106mii (£66m).
Commenting on the transaction, Alastair Speare-Cole, said: "We have long admired Towers Watson as one of the best reinsurance brokers in the world. Towers Watson is known in the industry as a fierce advocate for its clients with deep specialist and analytical expertise.”
Ross Howard, said: "JLT offers our clients and our people a great opportunity to work with a company that shares our values and focus on clients. Together we will have the platform, market presence and support of a strong organisation to attract and retain the very best people in the market and improve our client offering."
Tricia Guinn, head of Towers Watson’s Risk and Financial Services business segment said: “We are delighted to agree to a deal with JLT that offers our clients and our people a clear and exciting future. We look forward to collaborating with JLT Towers Re through our new Alliance Agreement. We are excited by the opportunity to expand our core risk consulting and software business around the world, working in partnership with their local operations.”
Dominic Burke, Group Chief Executive of JLT said: “I am delighted to be able to welcome the Towers Watson team and their clients to JLT. Towers Watson offers us a very strong reinsurance platform in the key North American market, as well as bringing further strength in the London Market and a leading analytical capability.”
“We see a significant strategic opportunity through the merger of the two businesses to create a formidable new force and restore client choice to the reinsurance market. We are committed to investing in the business to enhance our client proposition and drive growth, as we have successfully done across the rest of the JLT Group in recent years.”
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