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Willis Towers Watson's stock soars; broader market slides

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Willis Towers Watson's stock soars; broader market slides

Willis Towers Watson PLC shares jumped after the company disclosed a new strategic plan to improve margins and revenue, grow the business and overcome staff retention issues that it has suffered in the fallout of its terminated merger with Aon PLC.

More generally, insurance stocks and the broader market lost ground during the week ending Sept. 10, with the S&P 500 dropping 1.69% to 4,458.59 and the S&P 500 Insurance index sliding 1.02% to 524.28.

Piper Sandler analyst Paul Newsome in an interview said Willis Towers Watson presented an "investor-friendly" image by showing confidence that could overcome retention issues and announcing "pretty aggressive" margin improvement goals along with a large stock repurchase.

"I think investors were fairly happy," Newsome said. "The biggest pushback seems to be they don't have a great history of meeting such lofty expectations."

Newsome noted that the broker is completely reorganizing its management team, which adds to the difficulty in assessing whether or not it will be able to meet its goals. As time goes on, the Piper Sandler analyst will be looking closely at Willis Towers Watson's organic growth as an indicator to help determine whether the broker can reach its financial goals.

Newsome said Willis Towers Watson's competitors, mainly former merger partner Aon and Marsh & McLennan Cos. Inc., are openly trying to go after the broker's producers. If Willis Towers Watson grows more slowly than the two competitors it would be a sign that they have done a "pretty good job" in picking off their effective producers, the analyst said.

Willis Towers Watson ended the week up 3.51%.

Meanwhile, stocks in the property and casualty space continued to slide as loss estimates from Hurricane Ida are steadily rising.

"Loss estimates are going up significantly," Newsome said, pointing to damage caused by the storm not just along the Gulf Coast but in the Northeast as well. The total size of loss will, in part, be impacted by price increases that are expected because of a shortage of materials and labor in the areas that have been hardest hit.

"It comes also at a time when inflation itself is on the rise, so that makes it worse," Newsome said.

United Insurance Holdings Corp. said this week it expects $27 million in pretax catastrophe losses for the third quarter through Aug. 31. The estimated losses include claims from Tropical Storm Elsa and Hurricane Ida.

United Insurance shares landed a spot among the biggest losers of the week, with its stock dropping 15.36%.

Also losing big this week were United Fire Group Inc., Kemper Corp. and James River Group Holdings Ltd. Their shares dropped 10.17%, 5.55% and 5.21%, respectively.

American International Group Inc. saw its stock edge up and down in the same week it announced that President and CEO Peter Zaffino will also serve as chairman of the board of directors, effective Jan. 1, 2022. Former CEO Brian Duperreault, now executive chairman, will retire from the board at the end of this year.

AIG's stock lost 1.09% for the week.