Willis decision to end pay freeze will cost $100m as profits are up 4%
Willis's decision to end its pay freeze will cost the global broker $100m in salaries and benefits this year.
The megabroker will fund the ending of the pay freeze through a global review of operations in the first quarter. The review will result in annualized savings of around $90m to $100m in 2012.
It comes as Willis made a net profit of $455m for the full year of 2010, up 4% on the $438m it made in 2009.
Commissions and fees were up 3% to $3.30bn from $3.21bn, while both investment income and other income fell, resulting in total revenues of $3.34bn inn 2010 versus $3.26bn in 2009.
The company attributed the lower investment income, at $38m in 2010 compared with $50m in 2009, to lower interest rates.
Organic growth in commissions and fees was 4% in 2010 compared with 2009.
Thisreflected net new business won of 6%, partially offset by a 2% fall due to declining premium rates and other market factors.
“We had a great 2010, with another year of strong organic growth and operating margin expansion,” said Willis chief executive Joe Plumeri in a statement.
However, he added: “While these were great results, we know we can do better.”
Plumeri said he expected Willis to continue growing its top line in 2011, while generating modest growth in adjusted operating margin and earnings.
“We believe that theactions we are taking this year should allow us to significantly accelerate operating margin and earnings growth in 2012 and beyond.”
To fund the higher salaries and the investment, the broker will undertake a review of all businesses to “better align its resources with its growth strategies”.
The review will be completed in the first quarter this year. Willis expects to incur pre-tax charges of between $110m and $130m related to the review, which will primarily be recorded in the first quarter.
Willis is also currently reviewing its debt profile and may try to take advantage of attractive financing rates to reduce the cost and extend the maturity profile of its debt.