Willis seeks return to its UK roots

Bid to diversify shareholder base with more British institutions

Willis, the New York-listed insurance broker founded in London 185 years ago, is going back to its roots.

The group has swapped its hard-charging Italian-American chief executive for a softly spoken, Cambridge-educated Englishman, Dominic Casserley. He is now seeking to diversify Willis’s shareholder base to include more UK institutions.

“This company has a British heritage, a great big building in the centre of the City – so we think it’s only appropriate that UK investors would be interested in the stock,” he says.

Willis was listed on the London Stock Exchange before KKR, the private equity group, took it private in 1998. Three years later, the company was listed in New York and since then the shares have been publicly traded only in the US.

Willis is domiciled in Dublin, partly for tax reasons. Newton Investment Management of the UK is among the broker’s 20 largest shareholders. Still, 90 per cent of the shares are held by American investors.

“I want to make sure we don’t fail to attract the broad base of investors globally because we’ve focused on only one market,” says Mr Casserley.

His push for new investors will also take in institutions in continental Europe and Asia.

Mr Casserley is speaking shortly after addressing investors at the group’s UK headquarters, a Norman Foster-designed skyscraper in the heart of London’s insurance district.

His predecessor Joe Plumeri – a former banker who was one of the best known characters in insurance broking and was at the helm of Willis for 12 years – tended to confine such formal presentations to investors to the US.

The new chief executive – a one-time aide to Ronald Reagan, the former US president, and a Conservative party donor – has taken up the reins this year at a sensitive time for insurance brokers, which act as go-betweens for prospective insurance buyers and underwriters.

The industry has been shaken up in recent months by a deal Willis’s larger rival Aon has struck with Berkshire Hathaway. Aon has begun to automatically allocate a chunk of the business it writes at the Lloyd’s market with Warren Buffett’s insurance group.

Willis is planning to set up a similar “passive” scheme, under which insurers automatically follow the underwriting decisions taken by their rivals.

Some officials at Lloyd’s are concerned about the risk of a possible lack of oversight and the pressure it might put on the underwriters that do the work of assessing risks.

Mr Casserley, a former management consultant, says he recognises some of the concerns. But he adds: “Frankly we’re doing it in response to our clients.”

The prospect of lower premiums – a result of more capital being supplied to the industry – is only one advantage for policyholders, he says. “It also makes their lives simpler.”

At present, he says, “the underwriters expect the client to come to London – sit in front of them, explain your case. Clients have to deal with a whole long list [of insurers]”.

Under the new arrangement, “you’re going to take off that last layer [of insurers], which can be lots of lots of little people I’ve got to talk to and present to”.

A focus on clients is a recurring theme for the ex-McKinseyite, who left the consultancy after a career spanning three decades.

Willis, which employs 17,500 people in 90 countries, sells coverage to companies that want to protect themselves against risks ranging from computer hacking to political upheaval.

But the group recently rebranded itself as a “risk adviser” as well as an insurance broker – a title that implies trusted partner rather than wheeler-dealing middle man.

“This is symbolic about how we think about the world,” he says.

“People used to think of insurance brokerage as business that was done at the 19th hole. But that’s not the way the world works any more. It’s become a very analytical. They [clients] want consultative-type activities.”

Yet insurance broking is a competitive business and Willis rather fell out of favour on Wall Street since making a $2.1bn acquisition just weeks before Lehman Brothers collapsed five years ago.

People used to think of insurance brokerage as business that was done at the 19th hole. But that’s not the way the world works any more

Dominic Casserley, Willis chief executive

Not only was the sum Willis paid for rival broker Hilb Rogal & Hobbs too high, but the subsequent integration also proved problematic.

Many HRH brokers so disliked being part of Willis that they left – and given that insurance brokerage is largely a people business, they took their clients with them.

Mr Casserley estimates that the debacle cost Willis “a couple of percentage points of revenue growth, at the group level, for two or three years” – a sum that runs into hundreds of millions of dollars.

“It was a drag on our business – on top of the recession.”

Yet the North America business is beginning to turn a corner. After six consecutive quarters of falling sales, turnover held firm in the third quarter of 2012 and has risen in the three subsequent quarters.

Still, Willis forecasts that the share of sales that the North America division contributes to the group will fall from almost half last year to less than two-fifths by 2017.

The new chief executive has set his sights on emerging markets such as Brazil and China, hoping to increase by about two-thirds the proportion of group sales garnered in such territories from 17 per cent to 28 per cent over the period.

It is a far cry from Willis’s Georgian origins as a marine hull broker at London’s seaport.

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