Willis Group Holdings' current results are "subpar" after turbulent events in recent years such as its HRH acquisition, leadership changes, employee turnover and even the financial crisis, but new management's "steady hand" should allow the company to "return to top form," according to a recent analysis.
Nomura analysts Cliff Gallant and Mathew Rohrmann upgraded the broker to "buy" from "neutral," stating in their comment, "As a company with over 100 years of history (founded in 1828 by Henry Willis), a full breadth of product and a true global presence, we expect that Willis will be around, at least in some form, for a long time to come. That means Willis will experience the ups and downs of any long-enduring entity.
"Today, we'd characterize the company as in the lull between highs and lows."
The analysts say Willis is bigger, more global and better positioned than it's ever been, but has suffered some "after a period of extended turbulence."
But the brokerage is not in "crisis mode" or in need of any further major shakeups, according to the analysis. To the contrary, the new management, under CEO Dominic Casserley, brings a calm, stable approach that the analysts say might be just what the company needs at this time. The analysis says, "The executive office is no longer a pulpit for rallies but for cool-headed calculations."
Casserley was appointed CEO in January 2013 after nearly 30 years at consulting firm McKinsey and Company.
Nomura says the backgrounds of Casserley, CFO John Greene and COO and Technology Director David Shalders are reflective of "in-the-trench operators who know how to watch costs, maximize technology and improve efficiency."
Nomura's Gallant, speaking to PC360, indicates there is a time and place for the differing management styles of Casserley, who he calls "very soft-spoken and cool-headed," and his predecessor Joe Plumeri.
Gallant says Plumeri, on conference calls and when addressing employees, was "very emotional" and tried to rally people. "I think that's sort of his leadership style," Gallant says. "I remember way back in the day when he was [chairman and CEO of Primerica Financial Services], getting people excited about selling life insurance. He was great at it."
And when Plumeri took Willis public in 2001, Gallant says his charisma and excitement was good for the company seen for a while as an underdog to competitors Aon and Marsh.
"But I think by all accounts the HRH acquisition was a big stumbling block for the company, and they lost all of those employees, and the company hasn't done so well in recent years," Gallant says.
For the Willis of today, Gallant suggests, "I think someone with Casserley's background as a consultant—someone who might understand the back office and how operations and technology work together—might be more fitting at this point."
The Nomura analysis contrasts the two management approaches as "green visors, not rally caps."
Gallant and Rohrmann say that, with the steadier approach, "the operations are regaining their normal comfortable stride," adding, "Supported with some financial tweaking, controlled cost measures, and repositioning in key markets, we expect the company may not be far (one-to-two years) from regaining top form."
Nomura says it expects 2014 will be "a year of investing, as the company continues to hire and the new CFO comes on board," but that earnings-per-share growth will accelerate by 2016. The analysis also says Willis is "well positioned to produce organic revenue growth in the mid- to high-single-digit range through 2016."
The analysis points out some risks Willis faces as well: "Despite longevity and reputation, much of Willis' franchise rests with its individual producers. In a highly competitive marketplace—and we expect it to get even more competitive in coming years—the risk of losing key people and their books of business will be high."
But Nomura adds the new management is promising stability and internal investment that creates "the right environment to promote employee retention and productivity."
Willis declined to comment on the contents of the Nomura analysis.
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