Willis Widens Canadian Presence - Analyst Blog

By Zacks | December 03, 2012 AAA

In an effort to consolidate its footprint in Canada, Willis North America, a unit of Willis Group Holdings plc (WSH), inked a deal to buy Montreal-based Avalon Actuarial Inc. Alongside, the acquisition marks Willis' foray into the Canadian employee benefits market. Though the terms of the purchase were not disclosed, it is expected to close in the final quarter of 2012.

Avalon Actuarial, a leading Canadian employee benefits brokerage and actuarial consulting services firm, has been serving corporations and public entities with group insurance, retirement and pension plans, and other risk management services since 1990.

Per the agreement, Avalon Actuarial's 45 employees and management team will merge with Willis North America's Canadian operations.

Willis noted that Canada offers solid demand for employee benefit products and enough growth opportunities. With a strong team of employees and an array of products, Willis is well positioned to capitalize on the opportunities offered.

Willis' third quarter reported earnings fell short of Zacks Consensus Estimate by 27% and the year-ago quarter by 46%. Lower revenue coupled with higher expenses weighed on the performance. We believe the acquisition will help Willis rebound and post solid numbers going forward.

The Zacks Consensus Estimates for the fourth quarter and 2012 are currently pegged at 46 cents per share and $2.59 per share respectively.

Willis has undertaken strategic acquisitions that aid its operational results. However, the last acquisition dates back to May 2012, when Willis Risk Services, the Ireland-based subsidiary of Willis, acquired Attain Consulting and its sister company, Trustee Principles for $3 million. This acquisition is expected to enhance Willis Risk's employee benefits business.

Willis currently carries a Zacks #3 Rank, translating into a short-term hold rating. With the optimism over its latest acquisition, we expect analysts to raise their estimates, providing an upward directional pressure on its Zacks Rank.

Aon plc (AON), Arthur J Gallagher & Co. (AJG) and Marsh & McLennan Companies, Inc. (MMC), which closely compete with Willis, share the same Zacks Rank.

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