This document discusses Willis' mergers and acquisitions capabilities for insurance due diligence. It outlines Willis' value proposition including their experience conducting over 5,000 transactions across industries. It then describes Willis' due diligence process, which goes beyond just reviewing insurance products to analyze financial, legal and risk management exposures. The rest of the document provides more details on Willis' approach to conducting pre-closing due diligence for areas like property & casualty, employee benefits, and developing transactional solutions.
2. AGENDA
PRESENTATION TO ADDRESS:
๏ฎ Willis M&A Value Proposition and Business Model
๏ฎ Insurance Due Diligence Mission and Process
๏ฎ Filling the Value Gap in Insurance, Risk Management & Employee Benefits Due
Diligence
๏ฎ Simplify how risk management due diligence dove tails with accounting and legal
diligence
๏ฎ Employee Benefits Strategic Planning, Transition and Implementation
๏ฎ Simplify and define those risk transfer insurance products that have been borne
out of M&A activity and transactional exposure to loss
๏ฎ Case studies providing examples of how risk management and insurance
diligence has led to better returns and protected against financial disaster
3. WILLIS M&A VALUE PROPOSITION
๏ฎ Experience of M&A Team
โ Understand how risk impacts returns across all industries regardless of size.
โ Expertise gained through over 5,000 transactions of experience enables us to
anticipate and move quickly.
๏ฎ Definition of Due Diligence
โ Go far beyond the โcommodityโ of insurance products.
โ Perform review of financial, legal, and risk management exposures, quantify those and
provide opportunities to control costs both on and off balance sheet.
๏ฎ Team Structure within Global Organization
โ Global Resources delivered locally (industry, product line, geographic) added to
diligence team to best quantify and address risk across all areas.
โ Marketing function included as part of due diligence deliverable positioning most
knowledgeable person to negotiate the most auspicious price.
๏ฎ Fully integrated production and execution resources providing single point of
contact delivering resources where and when needed.
5. PRE-CLOSING DUE DILIGENCE
MISSION
ADVISOR โ Raise potential operating risk issues, financial risk issues and business risks
issues respective to operations and human capital that will impact or potentially prohibit
the successful implementation of the post closing business model.
PARTNER โ Work with finance, legal, and operational teams throughout deal process
from pre-LOI through purchase agreement and with Portfolio management teams as
required in order that the target enterprise is properly valued.
PRICING โ Estimate the impact that cost has on the income statement and cash flow
statement as well as evaluate the impact of liability both on and off the balance sheet and
ultimately make sure these impacts are contemplated in the purchase price.
INTEGRATION โ Use pre-deal research to develop a blue print for integration including
benefits and needed employee and executive related interventions. Execute insurance
programs commensurate with current (Buyerโs) risk management strategy.
6. DUE DILIGENCE PROCESS
Pre-closing Financial/ The Deal
Research Legal/Risk/ Benefits Go โ No Go
Client Advocate
Integration into Stewardship
Re-Engineering/
Buyerโs Program & Reporting
Transition Planning
7. PROPERTY & CASUALTY
PRE-CLOSING DUE DILIGENCE DEFINED
Financial
โ Accrual Methodology
โ Collateral Obligations
โ Current Cost vs. Proforma
โ Funding Obligations
โ Predictability
Pre-Closing Due
Diligence
Legal Risk Management
โ Purchase/Sale Agreement โ Limit Adequacy
โ Historical โ Insurer Solvency
Accuistiors/Divestures โ Analysis of Losses
โ Credit Agreements โ Historical Aggregate
โ Run-off Liabilities Breaches
8. EMPLOYEE BENEFITS PRE-CLOSING
DUE DILIGENCE
HISTORICAL
๏ฎ Quantify assumed liabilities ๏ฎ Match available coverage to
DETERMINE ADEQUACY forecasted liability/headcount
๏ฎ Ultimate loss costs
OF RESERVES/ ๏ฎ Adequacy of historical
๏ฎ Collateral requirements
ACCRUALS insurance
๏ฎ Evaluate benefit funding
๏ฎ Solvency/availability of Insurers
CURRENT/POST-CLOSE
QUANTIFY ASSESS FORECAST
cost of risk/exposure adequacy/appropriateness pro-forma cost of risk
& impact on cash flow & P/L of current insurance/programs and expense reduction alternatives
9. STRATEGIC PLANNING
Willis M&A EB
Multi-Disciplined Transaction
Practice
Tax & Health &
Retirement
ERISA/Compliance Welfare/Wellness
Compensation Plan Design
International Communications HR Excellence
10. EMPLOYEE BENEFIT SUITE OF
SERVICES
โOne Stop Benefit Shopโ
Cost Containment Human Resources Media Compliance Willis Rewards
โบ Data mining & analytics โบ HR strategy โบ Multi-media: โบ Federal compliance โบ Turnkey wellness
โบ H&W actuarial โบ Total rewards review โบ Paper โบ Client support โบ Worksite reviews
โบ Retirement โบ HR audits โบ Web โบ Seminars/web casts โบ Diet content
โบ Financial reporting โบ Best practices โบ Video โบ Compliance self-service โบ Fitness content
โบ Prescription drug โบ Handbooks โบ Text โบ Publications โบ Health coaching
โบ Policy and procedures
โบ CDHC feasibility โบ Open enrollment โบ Government filing โบ Reward tracking
โบ Trainingdevelopment
โบ Plan design modeling โบ New hire orientation โบ Reward delivery
โบ Web based tools
โบ Contribution modeling โบ Newsletters
โบ Migration studies โบ Wellness roll out
โบ CDHC deployment
11. TRANSACTIONAL SOLUTIONS
REPRESENTATIONS & CONTINGENT LIABILITY
WARRANTIES INSURANCE INSURANCE
โ Seller Side Policy. โ Successor Liability Insurance
โ Buyer Side Policy. โ Legislative Contingency
โ Can be structured in conjunction โ Specific Peril Contingency
with a bid to offer more preferred
deal terms.
โ Assists in facility deal process
where there might otherwise me an
impasse.
โ Waiver subrogation against seller
(except fraud) so that seller parties
can provide more complete reps.
LITIGATION BUYOUT COVERAGE TAX INSURANCE
โ Loss Portfolio Transfer โ Insurance Proceeds avoid
โ Contingent Exposure Coverage negative cashflow
โ Can be structured to respond excess โ Disclosure issues backstopped
over existing insurance โ Respond to tax positions
โ Can provide a catastrophic cap over a โ Provides a solution in a transaction
calculated damage analysis where a specific tax position might be in
โ Can be fully transferred to a 3rd party question
12. DUE DILIGENCE ISSUES/SOLUTIONS
๏ฎ Assumed liabilities within historical retentions
๏ฎ Specific assumed liability
๏ฎ Successor environmental liability
๏ฎ Silicosis liability
๏ฎ Product liability
๏ฎ Liability buyout
๏ฎ Exposure Classification
๏ฎ Cost Mitigation
๏ฎ Certainty of Cost and Certainty of Coverage