2021 brokerage revenue: $8.83B
Percent increase: 3.2%

Willis Towers Watson PLC endured a challenging year in 2021 that saw it shift gears and regroup as an independent brokerage, change its senior leadership and largely exit the reinsurance brokerage business, after its proposed merger with Aon PLC was called off. 

The $30 billion deal with Aon, which was announced in 2020, was scuttled in July 2021 largely due to antitrust concerns from U.S. regulators.

Longtime CEO John Haley, who had planned to retire after the merger, stepped down and was replaced by Carl Hess. The brokerage also appointed Andrew Krasner chief financial officer. 

Willis, which had previously agreed to sell its reinsurance business to Arthur J. Gallagher & Co. to placate European regulators, went through with the sale of the business for the increased price of $3.25 billion — possibly rising to $4 billion — and announced a reorganization of its global leadership.

Willis also announced a plan to become a $10 billion revenue company, improve its profit margin, cut costs by $300 million by the end of 2024 and pursue share buybacks. 

Willis reported $8.83 billion in brokerage revenue in 2021, a 3.2% increase over the prior year, and retained its position as the world’s third-largest brokerage. It has said it expects to deliver mid-single-digit revenue growth this year. 

With Mr. Hess at the helm of Willis since Jan. 1, a fresh set of directors has been appointed to its board, including former Lloyd’s of London CEO Inga Beale and Michael Hammond, who previously served in various senior roles at Lockton Cos. LLC. These changes were part of a multiyear succession planning process in place before the deal with Aon was announced, Willis said. 

“It’s a far more engaged board, which is good because we have a lot to do. We need that engagement to make sure that management is on the right track and doing what it said it was going to do,” Mr. Hess said.

Last year’s divestitures of its reinsurance business and of its London-based wholesale unit Miller Insurance Services LLP have enabled Willis to focus on “what we are as a broking business and what we do well,” Mr. Hess said.

Hiring has been a priority. Willis lost a steady stream of staff after the Aon deal was announced but has since made several high-profile hires, including Michael Chang, formerly with Sompo International Holdings Ltd., as head of corporate risk and broking for North America, and former Aon executive Hugo Wegbrans as global head of broking and broking strategy.

The loss of talent around the proposed merger challenged Willis from a revenue perspective and led to disappointing results relative to its peers, said Elyse Greenspan, managing director, equity research, insurance, at Wells Fargo Securities LLC in New York.

“They’ve worked on rehiring, but it does take time when you are trying to hire folks until they can get to their full revenue potential,” Ms. Greenspan said.

Willis reported organic revenue growth of 6% in 2021. In the first quarter of this year, its organic revenue growth continued to lag its peers’ performance, coming in at 2% overall, while its risk and broking business saw no growth.

The Russia-Ukraine conflict presented an unexpected headwind, with Willis taking a $138 million hit in the first quarter related to its decision to transfer ownership of its Russian operations to the businesses’ local management. 

While Willis has trailed its peers in growth over the past few quarters, this reflects what happened during 2020 and the first half of 2021, not the steps it has taken since the deal’s break, Mr. Hess said. 

“Given the quality of people we have and we’ve been bringing in, I’m confident the revenue will follow,” he said. Across the broking portfolio there is plenty of room for growth in areas such as natural resources, construction and surety, “to name three,” he said.

The challenge for Willis is that the second and third quarters are seasonally the weakest quarters, said C. Gregory Peters, managing director-equity research, at St. Petersburg, Florida-based Raymond James & Associates Inc.

While Willis may have some momentum to report in the fourth quarter of this year, “we won’t see that until January, February of next year,” he said.

“Everything is on the table depending on how results develop, and, if the risk and broking business doesn’t begin to show improvement, clearly there is a potential breakup scenario,” Mr. Peters said.