Ratings agencies revise outlooks for Aon and WTW

March 11 2020 by Andrew Tjaardstra

Following rating agencies Moody’s and S&P Global Ratings have revised their outlooks for Willis Towers Watson (WTW) to positive, while maintaining a stable view on Aon.

Yesterday the companies announced an agreement to combine in a US$29.9 billion all-share offer with an implied combined equity value of approximately US$80 billion. The UK’s Competition and Markets Authority will need to agree to the deal.

Scheduled for completion in the first half of 2021, the transaction will produce the world’s largest re/insurance broking and consulting firm, with pro forma revenue of about US$20 billion and pro forma net income of US$3.6 billion based on 2019 results.

The rating agency expects that the combined group will maintain credit metrics consistent with Aon’s current levels, while also strengthening its position in markets such as the US, the UK and Europe.

At the same time, the combination is expected to improvement the respective product capabilities of Aon and WTW across their major business lines of commercial risk, retirement, health, reinsurance, and data and analytics.

S&P agreed that the combination would have no immediate effect on its issuer credit rating for Aon (A-/Stable/A-2). It noted that Aon’s credit measures have shown relatively good stability over the past five years through a period of sustained focus on organic growth.

Moody’s affirmed WTW’s Baa3 senior unsecured debt rating and changed the rating outlook on the broker to positive from stable, based on the view that it will be part of a larger organisation with stronger operating margins and credit metrics.

Similarly, S&P placed its ‘BBB’ long-term issuer credit rating on WTW on CreditWatch with positive implications.

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