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McKinsey's Dominic Casserley to succeed Joe Plumeri as Willis CEO

Changes expected as Casserley succeeds Plumeri

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McKinsey's Dominic Casserley to succeed Joe Plumeri as Willis CEO

The decision by Willis Group Holdings P.L.C. to name a McKinsey & Co. management consultant as its new CEO may signal substantial cultural and strategic changes at the London-based insurance brokerage, analysts say.

Last week's appointment of Dominic Casserley, a senior partner at New York-based McKinsey, also may indicate that Willis' board of directors believes the brokerage needs a different perspective as it emerges from a period of disappointing financial results, they say.

For his part, Mr. Casserley views prioritizing Willis' worldwide resources as a key challenge when he takes over from Joe Plumeri as CEO on Jan. 7, 2013.

While Mr. Casserley is an outsider to Willis and the brokerage industry, his transition may be aided by Steve Hearn, chairman and CEO of Willis Global, who was named deputy CEO of the parent company last week.

Analysts said Mr. Casserley's arrival could lead to significant changes at Willis.

“My guess is that the board feels as though a different culture would be best for the future,” said Tom Mitchell, an analyst at New York-based Miller Tabak & Co. L.L.C. “I don't think it's a repudiation of Joe Plumeri's work, but there is a sense that the board decided they needed something different going forward.”

Mr. Casserley, 54, joined McKinsey in 1983 and has worked out of the firm's London office since 2000. He is the second McKinsey partner to leave the firm to head a major insurance brokerage in recent years. In 2005, Aon Corp. hired former McKinsey partner Gregory C. Case as president and CEO.

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In light of Mr. Case's move to Aon when that brokerage was struggling, analysts said Willis' choice of Mr. Casserley appears at least to be an acknowledgement that there are challenges the brokerage needs to address.

“I think it reflects some recognition of problems that might go a little bit deeper than the one-off items that have been cited in recent (analyst) conference calls,” said Meyer Shields, a Baltimore-based analyst for Stifel Nicolaus & Co.

While Willis' revenue growth has been steady under Mr. Plumeri, its profitability has varied, particularly in the past year, analysts said.

In 2011, the brokerage's profit fell by more than 50% to $219 million, due largely to several nonrecurring expenses. The brokerage recorded a 179.8% gain in profit for the first half of 2012, rising to $333 million. In addition, Willis' share price has fallen slightly over the past year, compared with a 31.6% gain for Business Insurance's Insurance Brokers index and a 16.9% gain for the S&P 500 index.

“Simply speaking, Willis wasn't investing in its long-term future to the extent that it should, and a lot of the company's efforts recently have been very much focused on cost cutting, on reducing expenses and protecting margins,” Mr. Shields said. “Obviously, that's important for shareholders, but it has to be balanced.”

Whatever changes Mr. Casserley brings, analysts say it is unlikely the brokerage will experience the same level of integration of risk consulting services witnessed at Aon under Mr. Case's leadership.

“Willis still has more of a focus on small to medium-sized clients and, while I think that base of business probably does want their insurance broker to have a risk analytics capability and to be able to do everything and anything in the most sophisticated way possible, it also wants to make sure that they get the personal attention they feel they need,” said Mr. Mitchell of Miller Tabak.

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In his 12-year tenure as Willis' leader, Mr. Plumeri — who brought a zeal for dealmaking and sales to what was seen as a staid, London-market broker — took Willis back into public ownership and led it through a tumultuous period when former New York Attorney General Elliot Spitzer investigated the insurance brokerage industry.

Under his leadership, Willis recorded 98.6% growth in total revenues from 2002 through 2011.

In October 2008, Mr. Plumeri also negotiated the purchase of Hilb Rogal & Hobbs Co., which greatly added to Willis' revenue, but saddled the company with a sizable debt, due in large part to the credit market collapse just days after the deal was finalized.

Mr. Plumeri will stay on as nonexecutive chairman of Willis' board for the rest of his contract, which expires in July 2013.

Speaking to Business Insurance last week during a conference call with Messrs. Plumeri and Hearn, Mr. Casserley said one issue he will need to address immediately is the careful prioritization of Willis' expansion into foreign marketplaces, particularly in emerging markets such as China, Latin America and Africa.

“The world is a more complicated, more globalized and, to some extent, riskier place,” Mr. Casserley said. “It's a world of opportunity, and it's a question where we place our bets and where do we focus our resources.”

Citing reinsurance industry developments as inspiration, Mr. Hearn said he looks forward to implementing a greater emphasis on analytics, predictive modeling and other technology advances he said would make Willis' brokers more effective in their ability to identify and manage their clients' risks.

“We're big enough to have all the toys and tools necessary to exploit that opportunity, but we're small enough to be able to capitalize on that, far more so than our larger competitors,” Mr. Hearn said.

Mr. Plumeri said he was excited to “pass the baton, especially when that baton is being taken by a couple of gentlemen that I have great respect for and who I think will take the company to the next level.”

“I couldn't feel better about this transition and about the choices that have been made, and I look forward to watching this company continue to grow,” he said.