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Plumeri’s $82mn share sale

Willis chairman and chief executive Joe Plumeri will sell 2,350,000 shares of the company’s common stock beginning in June, the broker announced last week.

As at noon on 9 May, 2005, Willis shares were trading at $35.24 so, barring any significant changes in their value, Plumeri’s sale could net him in the region of $82,814,000.

Willis said the plan was “in accordance with guidelines specified by Rule 10b5-1 under the Securities Exchange Act of 1934”, adding that after the sale Plumeri would continue to hold approximately 2.4mn shares and options of Willis stock.

The announcement follows the broker’s Q1 results statement on 27 April, in which it said it had witnessed a fall in net income from $148mn, or $0.87 per diluted share, for Q1 a year ago, to just $72mn, or $0.43 per diluted share for the first quarter of 2005.

As reported in Insider Week No 171, it added that the drop was partly the result of its agreement with the New York attorney general Eliot Spitzer, the New York Department of Insurance and the Minnesota attorney general to settle investigations into working practices for $51mn, as well as related legal and administrative expenses of $9mn.

It also said it had set up a $20mn provision fund designed to settle future claims relating to the same investigations.

Another factor in the decline in profitability was the abandonment of contingent commissions in the light of the Spitzer-led investigations. Because of this, total volume and profit-based contingent commissions relating to 2004 arrangements outside the United States came in at just $3mn against a total of $21mn a year previously.

In a statement Willis noted: “The decline in volume and profit-based contingent commissions reduced organic revenue growth by 3 percent. Other market remuneration declined to $3mn in the quarter compared with $22mn for first quarter 2004. We continue to work with the insurance markets to restructure the existing relationships and anticipate recovering a portion of these fees over time. The decline in other market remuneration reduced organic revenue growth by 3 percent.”

Because of this decline in profitability and the dismantling of its old business model, Willis said it had continued “to review its expense base” with the resulting loss of 500 non-“client-facing” jobs as of 31 March. Severance costs were in the region of $28mn, it added.

But in an analysts’ conference call, Plumeri said the broker had recruited around 100 producers from other companies since October.

He described the first quarter as a “metamorphosis”, adding: “We've gone from one world to another.”

Later in the week it also emerged that the Chinese authorities had withdrawn Willis’ licence to do business in the province of Guangdong – allegedly after regulators had been obstructed from making an inspection of the company offices.

The licence was announced with much fanfare in August 2004 after Willis purchased a 50 percent share in Shanghai Pudong Insurance Brokers Ltd.

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