The head of Willis Group Holdings brokerage said the insurance business is under attack from "terrorist" industry participants who engage in irrational pricing and personnel raids to poach talent.
Joe Plumeri, Willis chairman and chief executive officer, made his remarks during the company's analyst's conference call reporting on second-quarter results.
Willis reported net income increased by 24 percent, or $23 million, for the second quarter of 2005, going from $96 million, or 57 cents a share, to $119 million, or 72 cents a share. Revenues rose less than 3 percent, or $17 million, going from $532 million to $549 million.
Mr. Plumeri criticized competition within the business that is practicing "real crazy" pricing for short-term gain.
"It is very important, in these uncertain times, to protect the franchise we have," he said, "and protect the interests of this company long-term.
"What is happening out there is that we have a way of life, a way of life that has to do with working hard, being accountable and being very professional," Mr. Plumeri continued. "There are some people out there who represent insurance terrorists.
"They are doing things that we believe are a little bit irrational, and we are not going to change our way of life because we are building something for the long term," he stated.
He did not single out any firms by name but said these practices involve "new and old" brokerage institutions alike. These brokers are doing a lot of recruiting and trying to hold onto business, he said, by spending a lot of money and making short-term decisions that undercut long-term growth.
He called this a "very unusual year" for the insurance brokerage industry, as it deals with the loss of contingent commissions and looks for ways to replace the lost revenue.
Most brokers agreed to forego such fees after revelations of instances where they served as kickbacks for rigging bids with insurers.
He said that as the year goes on, the commission situation should become clearer. He added that by next year he expects insurers to "see relief" from mounting legal costs that have come about because of the contingency fee scandal.
Willis reported that for the first half of the year net income was down 22 percent, or $53 million, from $244 million, or $1.44 a share, to $191 million, or $1.14 a share for 2005. Revenues were up 2 percent, or $21 million, going from $1.20 billion to $1.22 billion.
The firm also announced that it increased its common share buyback from $300 million to $500 million. It also plans to pay a quarterly cash dividend of 21.5 cents a share on Oct. 14 to shareholders of record as of Sept. 30.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.