Wednesday: A bad, bad year for Willis

Let’s not beat around the bush: it’s been a bad, bad year for Willis, culminating in today’s results, which show profits dropped nearly 50% in 2011 to $219m (£139m). To put it into perspective, that’s the same income Willis was earning in 2002.

Let’s not forget also, that in 2011, the company’s annus horribilis, Willis was hit by a £6.9m FSA fine, the departure of UK chief executive Brendan McManus and revelations that directors’ pay increased 23% during a two-year wage freeze period.

At a time of deep economic malaise, staff need to be inspired. And what do we hear from Willis boss Joe Plumeri today? More talk of cuts and a $100m share buyback.

After carrying out a rather expensive operational review of $180m (which went $20m over budget), Willis reckons it can save $135m cost savings annually.

Then there’s the $100m share buyback, which looks like a sop to shareholders and an attempt to project strength. Is this really the best use of the company’s capital?

In summary, Willis looks like a company that is cutting to the bone while prostrating itself, at all costs, on the altar of shareholder value.

What is the company’s vision beyond the next quarterly statement?

Plumeri says today the annual $135m cost savings will be in invested in “growth initiatives”, but that’s all we hear.

If Willis has a real long-term strategy and plans to invest in the future, it’s not banging the drum loud enough, and Insurance Times certainly hasn’t heard it.

The danger for Willis is that it ends up being overtaken by savvy rivals cleverly investing in their businesses.

Aon stole a march on its competitors by ploughing millions and millions into its database, Global Risk Insight Platform, which seems to be revolutionising the risk landscape. Others, such as Willis, are playing catch-up and have only just released their models.

Then there’s JLT, which last year zoomed past Willis to take second place in Insurance Times Top 50. It’s backed by a gigantic Asian operating conglomerate, Jardine Matheson, one of the largest companies in the world, which has a long-term strategic interest in the firm’s success.

Perhaps Plumeri should look at the once great General Motors. After years and years of share buybacks, lavish remuneration and lack of a long-term vision, it was overtaken by more competitive Japanese car-making rivals. Following a bankruptcy and restructuring, it still owes $27bn to its sugar daddy, the US government.

I’m not saying Willis will end up anywhere near a GM, but the lessons are out there. The winners will surely be those who position themselves best in a rapidly changing world.