Willis IPO Exceeds Estimates at $13.50 Per Share

June 12, 2001

Hardening insurance rates and increased profit expectations propelled Willis Group Holdings’ initial public offering price well beyond the expected $10-$12 per share range.(See previous article) All 20 million shares were sold yesterday to investors for $13.50 per share, raising $270 million for the world’s third largest broker.

Willis’ shares will begin public trading on the New York Stock Exchange today. Its total market value, based on the share price, would now be estimated at around $1.9 billion. When management buyout firm Kohlberg Kravis Roberts led a group of insurance companies in acquiring Willis three years ago its value was approximately $1.4 billion. It remains to be seen if KKR, or any of the insurers, will sell any of their shares.

Willis’ successful IPO highlights the renewed interest in insurance related securities, and confirms the general impression that premium increases will increase earnings for both insurers and brokers.

An analysis from London’s Financial Times states that, “One reason for the change in outlook is improved growth prospects for property and casualty insurers. After years of fierce competition and inability to raise prices, there have been signs in recent months that P&C companies are finally having some success charging higher premiums.”

If the trend continues more insurance companies and brokers can be expected to seek capital financing in the equity markets.

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