Top insurance brokers: Willis Group Holdings P.L.C.Posted On: Jul. 20, 2014 12:00 AM CST
In the year since taking the reins as its CEO, Dominic Casserley said Willis Group Holdings P.L.C.'s positive performance is a return to form for the broker.
“I think what we saw in 2013 was sort of a return to normality more than anything else,” Mr. Casserley said.
Willis' brokerage revenue grew 5.1% in 2013 over the previous year to $3.63 billion, placing it at No. 3 in Business Insurance's 2014 rankings of the world's largest commercial insurance brokers.
In particular, the company's largest operating segment, Willis North America Inc., grew in the past 18 months following a disappointing 2012, reporting 4.9% organic growth in 2013. Meanwhile, client retention rose to 92%, the highest rate since 2010.
Overall, analysts said that while Willis has met the organic growth objectives outlined in the long-term strategic plan it rolled out in July 2013, the company has yet to achieve the profit margin growth goals it set for itself under the plan.
“The business performance hasn't been quite up to the pace that I think some investors would have liked, but it's been OK,” said Paul Newsome, managing director of equity research at financial adviser Sandler O'Neill & Partners L.P. in Chicago.
“They've done a pretty good job of managing a fairly challenging business environment overall, including softening insurance rates and a global economy that's not been terribly strong.”
“I think the key performance driver in the North America segment was stability in the business,” said Todd Jones, who succeeded Victor Krauze as CEO of Willis North America in July 2013. Aside from attracting and retaining talent, “it also was reflected in better client retentions and new-business wins; and when you can achieve all of those things, it drives better performance in the overall portfolio.”
Mr. Jones said he expects the North America unit to continue performing at a high level, particularly after reconfiguring its regions earlier this year and focusing on California.
Looking ahead, analysts said Willis' efforts in 2013 and early 2014 to establish its human capital practices as top-tier providers of employee benefits brokerage and consulting services worldwide should position both the company's North America and international segments for decent revenue growth in the coming years.
“It makes perfect sense,” said Mark Hughes, a Nashville, Tennessee-based director at SunTrust Robinson Humphrey Inc. “They think there's going to be much greater demand for value-added expertise in the human capital area.”
Indeed, two of Willis' most significant acquisitions in the first half of 2014 were benefits service providers: Hong Kong-based Charles Monat Associates Ltd., a life insurance adviser to high-net worth clients; and Max Mat-thiessen A.B., a Stockholm-based employee benefits adviser in which Willis purchased a 75% controlling stake.
Additionally, it launched its global human capital and benefits practice in January, combining all of Willis' pension and retirement planning, health care and group life consulting services outside the U.S. and Canada.
“Our focus on human capital and benefits globally is generally what I like to call "modern benefits,'” Mr. Casserley said. “We're focusing on defined contribution and personal savings markets on the retirement side and on health care provision, which is a constantly evolving market with huge demand.”
Willis also recently signaled a renewed focus in paring down its operating costs. Mr. Casserley said the company is in the early stages of implementing the multiyear program announced in April to reduce operating expenses by about $420 million through 2017, and $300 million annually starting in 2018.
Mr. Casserley said the savings will be realized largely through relocating about 3,500 support roles from “high-cost” locations such as New York and London to Willis' lower-cost locations, including its regional offices in Nashville and Ipswich, England.
The savings, he said, “will be used to reduce our operating costs significantly and create capacity for investment into front-office capabilities, including our sales force, enhanced analytics and other areas of innovation.”
Willis said some support staff reductions also are likely, but has not specified how many positions may be lost.
“Because this is a multiyear initiative, I think clients can assume that they're not going to see much of a difference in their service experience with Willis,” Mr. Hughes said.
“It might be improved, in that it allows the company to keep committing resources without necessarily demanding near-term margin results,” he added.