美股保险行业-保险买方调查：并购有望继续

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1、ABGlobalResearch16July2018NorthAmericaEquitiesUBSEvidenceLab:InsuranceBuyerSurveyStuckinalow-singledigitorganicgrowthworld;M&AexpectedtocontinueLowtomid-singledigitorganicrevenuegrowthtocontinueWhileseveralinsurancebrokersreportedanimprovementinorganicrevenuegrowthin1Q18,wedonotseeenoughsupport

2、fororganicrevenuegrowthtobreakoutofthe2-4%rangeithasbeeninoverthelastdecade.82%ofinsurancebuyersarebudgetinginsurancespendingtobeflattoup4%overthenexttwelvemonths,roughlyinlinewith76%thatreportedspendingflattoup4%overthelasttwelvemonths.AcceleratingGDPgrowthcouldmodestlyimproveorganicgrowth,how

3、ever,buyersarenotanticipatingit.Oneareathathasaidedinsurancebrokerorganicrevenuegrowth,andwilllikelycontinue,ishighercommissionrates/fees.StablerelationshipsshouldcontinuetodriveM&AinthespaceTheoverwhelmingmajorityofinsurancebuyersremainsatisfiedwiththeirinsurancebrokersandonly12%expecttochange

4、overthenexttwelvemonths.Givenhighcustomerretentionrates,afragmentedindustryandstrongfreecashflow,M&Ahasandwillcontinuetobeameaningfulcontributortooverallrevenuegrowthforthepubliclytradedinsurancebrokers.Moreover,givencostsynergies,M&Ashouldhelpwithcontinuedmarginexpansionandcouldboostearningsfo

5、rthebrokers.Thereweremorethan$6bnworthofdealsinvolvinginsurancebrokersintheUSinboth2016and2017.WLTWremainstoppickamongtheinsurancebrokersWLTWremainsourtoppickgivensubstantialgrowthinfreecashflowoverthenexttwoyears(morethandoublingasexpensesavingsprogramsyieldcashbenefits),marginsexpandonimprove

6、dorganicgrowthin2018.WebelievefreecashflowwillsupportincreasedsharebuybackandpotentiallyaccretiveM&Agivenmanagement'scommentsthatitcouldlooktogrowinorganicallyagain.TheCEO'sincentivecompprogramhasabigincentivetoincreaseWLTW'ssharepricebyyear-end2018,anditssharescontinuetotradeata1-2xdiscounttop

7、eersonanEV/EBITDAbasis(Figure1).Insurance,Property&CasualtyBrianMeredithwww.ubs.com/investmentresearchThisreporthasbeenpreparedbyUBSSecuritiesLLC.ANALYSTCERTIFICATIONANDREQUIREDDISCLOSURESBEGINONPAGE17.UBSdoesandseekstodobusiness