Willis CEO says some undermine industry with 'real crazy' price practices
The head of Willis Group Holdings said the insurance business is under attack from "terrorists" in the industry 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 conference call to discuss second-quarter results with analysts.
Willis reported that net income increased 24 percent for the second quarter of 2005–from $96 million (57 cents a share) to $119 million (72 cents a share). Revenues rose about 3 percent to $549 million.
However, Mr. Plumeri criticized competition within the business, charging that certain players are practicing "real crazy" pricing for short-term gain.
"It is very important, in these uncertain times, to protect the franchise we have and protect the interests of this company long-term," he said. "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."
"There are some people out there who represent insurance terrorists," he continued. "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 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 by spending a lot of money and making short-term decisions that undercut long-term growth, he charged.
He called this a "very unusual year" for insurance brokers, as the industry deals with the loss of contingency commissions following regulatory probes into fee abuse and bid-rigging allegations, and looks for ways to replace the lost fee revenue.
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 ($1.44 a share) to $191 million ($1.14 a share) for 2005. Revenues were up 2 percent to $1.22 billion.
The firm also announced that it increased its common share buyback from $300 million to $500 million. It plans to pay a quarterly cash dividend of 21.5 cents a share on Oct. 14 to shareholders of record as of Sept. 30.
Quotebox, with Plumeri mug:
"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."
Joe Plumeri, Chairman & CEO
Willis Group Holdings
Infographic:
Flag: The Skinny
Head: Key Numbers For Willis
o Revenue–up about 3 percent for the second quarter and 2 percent for the first half.
o Net income–up 24 percent for the second quarter but down 22 percent for the first half.
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