The appointment of McKinsey &Co principal Dominic Casserley as CEO elect of Willis Corp has deflated speculation that the business might be sold on the exit of long-time chief Joe Plumeri, analysts said.
Eight months after The Insurance Insider revealed that Plumeri's contract would not be renewed in 2013, the global broker surprised the market by passing over Willis Global boss Steve Hearn to anoint management consultant Casserley as the former Citibank executive's successor.
There has been a significant amount of talk around a Willis sale as the culmination of Plumeri's tenure, with its big three rivals Aon and Marsh & McLennan and US financial services group Wells Fargo thought of as possible acquirers. Click to enlarge
Stifel Nicolaus analyst Meyer Shields told The Insurance Insider that he thought those speculators who had been hoping for a deal will be disappointed by Casserley's appointment, as it is a signal that the firm sees its future as an independent.
"There's been a lot of noise. I think it's less likely [a sale] in general. I don't think you'd bring in a McKinsey guy, I think you'd bring in an investment banker-type to run the company if you were going to put it up for sale."
KBW analyst Cliff Gallant also referred to the speculation and agreed that a sale "didn't seem likely now".
Shields also argued that the decision to bring someone in from turnaround specialists McKinsey may be an admission that some changes need to be made in the future.
"I do believe Willis has made some mistakes and needs to sort them out. And I think this a way of acknowledging it."
Shields said that the obvious comparison points were Aon bringing in a McKinsey consultant when it was struggling towards the end of the Ryan era and MMC's forthcoming seamless transition that is an endorsement of the status quo.
"Willis is implicitly acknowledging that they're more like Aon circa 2004 than they are Marsh 2012."
Gallant also said that Willis "needs some underlying improvement" and that it had "missed numbers too much in the last year".
He said that investors were fairly favourable to Casserley as a McKinseyite who would be well placed to look at the issues that had caused the underperformance.
"The obvious comparison is Greg Case and that worked well, so maybe it will work well here," Gallant said.
Investors will "give him the benefit of the doubt," but he is an unknown quantity, the analyst added.
He noted that he hadn't yet talked to anyone who really knows Casserley. "It's hard to get excited because you don't know what you're getting."
And just as it is a slight concern for investors that they do not know Casserley, it is also something of a concern that he does not know the industry.
"It's probably a little bit of a negative," Shields explained. "It's not that hard a business to learn; he can learn it fairly quickly. I'd say it's not a devastating blemish but all other things being equal you'd want someone who does understand the ins and outs of brokerage."
Nevertheless, Gallant is clear that the Willis board has made the right decision in opting to go with a new CEO. Investors had decided that something needed to be done, he explained.
"I think it's time for Joe to go," he said. "In the last couple of years, particularly for the last couple of years, particularly post the [$2.1bn] acquisition of HRH it's been disappointing. I think it's time for someone else."
Shields was more equivocal. "Some investors will miss Joe, others won't," he said.
But he said that Plumeri's strengths, like his ability to generate a sales culture and his personality, were widely recognised, although other aspects of the package were less positive.
Plumeri's role in turning around a stagnant company is universally acknowledged (see share price graph). In his 12-year reign, the valuation of the business leapt from circa $1bn to over $6bn and, following the New York IPO in 2001, Willis's share price climbed 170 percent.
After he hands the CEO position over to Casserley in January, Plumeri will continue as non-executive chairman until his contract ends in July on his 70th birthday.
At that point it is not clear what the indefatigable Plumeri will choose to do, although one Willis source said that there was still another big chapter in his story to be written.
One thing that he has made clear is that he will not sell down his substantial holding, which stands at 3.3 million shares worth $75mn.
"There's no industry that I know better than this one and no business that I know better than this one," Plumeri told The Insurance Insider. "If people expect me to take the money and run they've got another thing coming."