Weekly Wrap: $3bn merger in doubt over rates, property market

Weekly Wrap: $3bn merger in doubt over rates, property market | Insurance Business

Weekly Wrap: $3bn merger in doubt over rates, property market
$3bn merger in doubt over rates, property market
Falling interest rates and the state’s lacklustre property market cast doubts to a proposed $3bn merger between Queensland’s peak motoring club RACQ and Queensland Teacher’s (QT) Mutual Bank, reported The Australian.

The planned merger would create a $3.9bn entity, and enable RACQ to offer its 1.6 million members home loans, alongside its insurance, travel, and lifestyle products.

Said The Australian report, the merger remains subject to due diligence, and with falling interest rates crunching QT’s margins, sources close to the transaction are questioning whether the deal will push through.

QT’s profitability, which has been hit in the recent months, forced the mutual lender to offer higher interest rates than the big banks to attract deposits and lend at relatively low rates. Unlike the big four banks that have access to cheaper capital via offshore credit markets, QT relies primarily on deposits for funding, explained The Australian.

QT profits have also been affected by the residential Brisbane property market, which prices have underperformed other major cities as a result of a surge of new apartment developments nearing completion. According to an Urbis report released last month, with about 3000 apartments to be launched in Brisbane in the next three months, some nine months’ worth of supply was on the market, with more to come.

Despite the economic difficulties, Ian Gillespie, RACQ chief executive, said he remains committed to the partnership.

“Obviously we’d prefer a better set of economic circumstances to be launching it, but we still believe the strategy will be successful,” Gillespie told The Australian.

“As a mutual organisation, we take a long-term view and we’re not just about making short-term profits.”

Willis Towers Watson CEO sees upside to Brexit

by Agnel Philip

John Haley, who merged his U.S. consulting firm with an insurance broker this year to form London-based Willis Towers Watson Plc, said the company is well-equipped to deal with disruption from U.K. voters’ decision to leave the European Union.

“In the short term, there could be some real potential for upside on helping companies with some ‘what-if’ planning,” through the consulting arm that advises corporate clients, Haley, who is chief executive officer of the combined firm, said in a conference call Wednesday with investors. “Typically, our business benefits from regulatory changes, political risk or economic uncertainty.”

Haley is seeking to reassure shareholders as many CEOs are discussing the possibility of scaling back in the U.K. The deal to join his Arlington, Virginia-based Towers Watson & Co. with insurance broker Willis Group Holdings Plc in London diversified operations and brought tax advantages. Executives in financial services have been reassessing the value of being in the U.K. after the Brexit vote that could lead to more trade barriers and hinder recruitment efforts.

The CEO acknowledged that the disruption will present challenges. Some clients may defer projects because of uncertainty over the terms of the exit.

Also, a weaker economy could pressure revenue from Willis’s traditional role as a middleman between insurers and their corporate customers, Haley said. Rival broker Aon Plc, which moved to London from Chicago four years ago, said before the vote that a Brexit would threaten the U.K.’s centuries-long leadership in the insurance industry.

Share Rebound
Willis Towers Watson plunged 8.3 percent to $117.01 Friday, the first day of trading after the U.K. results were announced, and fell further on Monday. Shares climbed 1.9 percent to $119.77 as of 2:07 p.m. in New York.

Haley stressed the company’s global reach. The firm has 39,000 employees in more than 120 countries.

“We also pride ourselves on being a company that has the agility and the nimbleness to be able to, not just to respond to change, but to prosper in it,” he said.

Bloomberg News

C-Suite Execs say they won’t pay ransom attacks, until they get hacked, survey
Will businesses pay ransom if attacked? The answer, Radware found in its survey of 200 IT executives across the US and the UK, might depend on whether they had already been a victim of ransomware.

According to the 2016 Executive Application & Network Survey, 84 per cent of US and UK IT executives at firms that had not faced ransom attacks said they would never pay a ransom; while 43 per cent from firms that had come under attack said they paid.  

The study also found that US firms who had not been attacked were far more willing to admit they would pay a ransom, at 23 per cent, compared to UK’s 9 per cent.

“This is a harbinger of the challenging decisions IT executives will face in the security arena,” said Carl Herberger, Radware’s Vice President of Security Solutions. “It’s easy to say you won’t pay a ransom until your system is actually locked down and inaccessible. Organizations that take proactive security measures, however, reduce the chance that they’ll have to make that choice.”

The survey also revealed which security threats C-suite and senior executives find most threatening, with some 59 per cent of respondents saying they are willing to hire or had hired ex-hackers to help with security.

Among the increasing risks identified in the report are work-from-home arrangements and the Internet of Things (IoT). Respondents who said they have tightened their work-from-home security policies in the last two years are at 41 per cent.

Some 29 per cent of IT executives said IoT devices are extremely likely to be top avenues for attacks, while 31 per cent said its network infrastructure. Meanwhile, wearables were less of a concern to executives, with only 18 per cent of respondents identifying it as a major target for hackers in the next three to five years.

Another concern for IT executives is the expensive cleanup after a cyberattack. More than a third of respondents said an attack had cost them more than US$1 million, and 5 per cent said they spent more than US$10 million. In the UK, 63 per cent said an attack cost them £351,245, while another 6 per cent claimed it cost them above £7 million.

The survey has also found the top concerns executives have from cyberattacks: 34 per cent of respondents named brand reputation loss, at 34 per cent; operational loss, 31 per cent; revenue loss, 30 per cent; productivity loss, 24 per cent, and share price value, 18 per cent.