Willis reveals $446m loss and 200 job cuts

Global broker Willis made a net loss after tax of $446m (£285m) in 2012, compared with a 2011 profit of $204m.

The company also revealed plans to cut around 200 full-time jobs following a review conducted by the broker’s new management team, led by recently installed  chief executive Dominic Casserley.

Casserley took over from previous chief executive Joe Plumeri at the beginning of this year.

One-off charges

Willis’s results were hit by a series of one-off expenses taken in the fourth quarter. These included a $492m charge related to a goodwill write-down in its North American division; a $200m write-off of unamortised cash retention awards; $252m related to the accrual of 2012 cash bonuses; and a $113m tax charge to establish a deferred tax asset valuation allowance.

Willis said the valuation allowance is related to its North America segment and is directly associated with the goodwill write-down and cash retention charges.

Willis announced on 19 December that it was expecting to reach to its fourth quarter results.

Stripping out exceptional charges from both years, Willis would have made a $454m profit in 2012, down 5.8% on the $482m it would have made in 2011.

‘Paving the way’

Despite the charges’ effect on Willis’s results, Casserley insisted they would benefit the broker in the future.

He said: “In the fourth quarter, Willis undertook a series of steps to pave the way forward for our company and our shareholders. Those actions are reflected in our reported results.

“With these actions behind us, and a quarter that resulted in significantly improved revenue growth in our segments, particularly the turnaround in Willis North America, we are encouraged by what lies ahead.”

Casserley also praised the $524m of cash flow Willis generated during 2012, which was an $85m improvement over 2011.

Revenue growth

Despite the hit to profits, Willis grew revenues in 2012. Total revenues were up by just under 1% to $3.48bn (2011: $3.45bn), while commissions and fees increased 1.3% to $3.46bn (2011: $3.41bn).

Stripping out a 1.8% reduction caused by currency movements, organic commissions and fees growth was 3.1%. This puts Willis behind rivals Marsh, Aon and Arthur J Gallagher.

Job cuts

The 200 job cuts will cost Willis between $35m and $45m in the first quarter of 2013. Willis said that the cuts would deliver cost savings of between $20m and $25m in 2013, beginning in the second quarter, and thereafter annual savings of between $25m and $30m.