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Top Insurance Broker, No. 3: Willis Towers Watson PLC



Mediation revenue 2021: USD 8.83 billion
Percentage increase: 3.2%

Willis Towers Watson PLC underwent a challenging year in 2021 which saw the exchange shift and regrouped as an independent broker, change its leading position and largely leave the reinsurance brokerage business, after its proposed merger with Aon PLC was suspended.

The $ 30 billion deal with Aon, announced in 2020, was suspended in July 2021, largely due to antitrust issues from US regulators.

The longtime CEO John Haley, who had planned to retire after the merger, resigned and was replaced by Carl Hess. The brokerage also appointed Andrew Krasner as CFO.

Willis, which had previously agreed to sell its reinsurance business to Arthur J. Gallagher & Co. To reassure European regulators, it sold its $ 3.25 billion increase in operations ̵

1; possibly rising to $ 4 billion – and announced a reorganization of its global leadership.

Willis also announced a plan to become a company with revenues of $ 10 billion, improve its profit margin, reduce costs by $ 300 million by the end of 2024 and continue share repurchases.

Willis reported $ 8.83 billion in brokerage revenue in 2021, an increase of 3.2% over the previous year, and maintained its position as the world’s third largest brokerage house. It has said that they expect to deliver a medium-term revenue increase this year.

With Mr. Hess at the helm of Willis since January 1, a new set of board members has been appointed to its board, including former Lloyd’s of London boss Inga Beale and Michael Hammond, who previously held various leading roles at Lockton Cos. LLC. These changes were part of a multi-year succession planning process in place before the agreement with Aon was announced, Willis said.

“It is a much more committed board, which is good because we have a lot to do. We need that commitment to make sure the management is on the right track and doing what it said it would do, ”said Mr. Hess.

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

Employment has been a priority. Willis lost a steady stream of staff following the announcement of the Aon deal but has since held several high-profile positions, including Michael Chang, formerly at Sompo International Holdings Ltd., as head of corporate risk and brokerage for North America, and former Aon chief. Hugo Wegbrans as global head of broker and broker strategy.

The loss of talent around the proposed merger challenged Willis from a revenue perspective and led to disappointing results relative to his peers, says Elyse Greenspan, CEO of stock analysis, insurance, at Wells Fargo Securities LLC in New York.

“They’ve been working on re-hiring, but it takes time trying to hire people until they can reach their full revenue potential,” Greenspan said.

Willis reported organic revenue growth of 6% in 2021. During the first quarter of this year, its organic revenue growth continued to lag behind its peers’ results, reaching 2% overall, while its risk and brokerage business saw no growth.

The conflict between Russia and Ukraine brought an unexpected headwind, with Willis hitting a $ 138 million hit in the first quarter related to its decision to transfer ownership of its Russian operations to local business management.

Although Willis has lagged behind its colleagues in growth in recent quarters, this reflects what happened in 2020 and the first half of 2021, not the steps it has taken since the deal was broken, said Mr. Hess.

“Given the quality of people we have and we have taken in, I am confident that the revenue will follow,” he said. Across the entire brokerage portfolio, there is plenty of room for growth in areas such as natural resources, construction and bail, “to name three,” he said.

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

Although Willis may have some momentum to report in the fourth quarter of this year, “we will not see it until January, February next year,” he said.

“Everything is on the table depending on how the results develop, and if the risk and brokerage business does not start to improve, there is clearly a potential break-up scenario,” said Peters.


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