Aon, Willis get good deal news; pet insurer among the biggest stock gainers

The prospects for a proposed deal between Willis Towers Watson PLC and Aon PLC improved after an announcement that the European Commission had granted conditional approval to the planned merger of the global brokerage giants.

The S&P 500 finished the week ending July 9 at another record high, climbing 0.60% to 4,369.55. The SNL Insurance Index lost 0.79% over the same time span to close at 1,386.43.

The European regulator’s approval of the broker mega-merger is subject to Willis Towers Watson selling some assets to Arthur J. Gallagher & Co. and Aon shedding certain German businesses. The deal still has a significant outstanding hurdle in the form of the US Department of Justice lawsuit attempting to block it on antitrust grounds.

The stock prices of both merger partners narrowed weekly losses after the news broke and moved up along with the broader markets. For the week, Aon lost 1.37%, while Willis slipped 1.51%.

Wells Fargo analyst Elyse Greenspan believes deal intrigue has made shares of all three publicly traded brokers involved interesting. Aon and Willis have traded down to a discount since the DOJ’s announcement, Greenspan wrote in a note to clients, adding that Gallagher would benefit from the properties it plans to buy with money from its capital raise.

“If the deal does not get done, Gallagher can buy back its shares with the proceeds from its recent equity offering,” the analyst said.

Gallagher’s shares trended upward with the broader markets on the week’s final trading day and managed a 0.14% gain for the week.

Another major insurance broker made headlines this week as Marsh & McLennan Cos. acknowledged a data breach that occurred in April. The broker said the hack did not affect its global operations and that the unauthorized access was quickly remediated. Its shares edged up 0.20%.

MetLife Inc. announced that furthered the company’s restructuring plan to enhance its group offering benefits while disposing of businesses with earnings volatility or that do not operate with a sufficient scale. The company intends to sell its businesses in Poland and Greece to NN Group NV for approximately €584 million. MetLife also announced a new pet insurance product that will be available as an employee benefit at discounted rates.

Soon after outlining its strategic vision during a 2019 investor meeting, the company closed a deal to acquire PetFirst Healthcare LLC in January 2020 and bought vision specialist Versant Health Inc. in December of that year. Vision and pet insurance, like dental, make the company’s business more attractive to the lower end of the business market in which MetLife looks to expand, Piper Sandler analyst John Barnidge said in an interview.

“Those are important benefits to have as you move into the small and medium-sized business market,” Barnedge said. The insurer could look next to seek buyers for its runoff businesses, he said.

MetLife’s shares declined 2.58% for the week.

Pet insurer Trupanion Inc. saw its shares slide the day of MetLife’s announcement before eventually regaining ground. Trupanion finished virtually with a 1.36% drop.