British Reserve? Forget That

With American drive, Joe Plumeri aims to make Willis the top insurance broker

Joseph J. Plumeri's Wall Street career is marked by hard work, brash salesmanship -- and a little luck. As a law student seeking part-time work in 1968, Plumeri stumbled into Sanford I. "Sandy" Weill's upstart brokerage, Carter, Berlind, Potoma & Weill -- mistaking it for a law firm. Hired as a gofer, Plumeri retired 32 years later as chief executive of Weill's insurance unit, Primerica Financial Services (C ).

Five months later, a vacationing Plumeri ran into buyout specialist Henry R. Kravis of Kohlberg Kravis Roberts & Co. in Paris. Kravis needed a CEO to run insurance broker Willis Group Holdings Ltd. (WSH ), then a recent investment. Plumeri was his man. "I always felt like I was working for somebody else -- it wasn't mine," says Plumeri, whose favorite song is Frank Sinatra's My Way. "Now it's me."

Sure enough, the 61-year-old Plumeri is doing things his way as CEO and chairman. He has taken a long-languishing 175-year-old British firm and injected a strong dose of American get-up-and-go. Shifting the braintrust to New York from London since he took over in October, 2000, he has poached nearly 1,000 staffers from rivals, mainly Marsh Inc. (MMC ) and Aon Corp. (AOC ). He rewards hard work with stock options, and now 75% of employees own some stock. He also ordered 33,500 Willis lapel pins (mandatory attire) and made them "bold and obtrusive, so people could tell Willis was back on the map." Says analyst Cliff Gallant of Keefe, Bruyette & Woods Inc.: "They are attracting entrepreneurial people who like the idea of building something."

Although the Willis ship is riding high, there's a storm brewing that could rock it and the industry. New York Attorney General Eliot Spitzer's office says it's pursuing "a vigorous investigation" of Marsh, Aon, Willis, and a handful of other brokers. Sources say charges -- maybe even criminal -- will be filed as early as next month. The probe is looking at whether brokers have a conflict of interest when they funnel more business to the insurer who pays them the highest commissions, rather than the one with the best rates. Neither Marsh nor Aon would comment.

For his part, Plumeri says he's cooperating with Spitzer but he doesn't expect Willis will be harmed. The company generates only a fraction of its revenue from the commissions under scrutiny. J.P. Morgan Chase & Co.'s (JPM ) David S. Sheusi says that even if such commissions are banned, Willis' earnings would fall only 4%. Wall Street expects 2004 profits of $2.75 a share, vs. $2.28 last year.

Willis is still a distant third in global insurance brokerage, but that just fires up Plumeri's competitive juices. "If I didn't want to be No. 1, what the hell would I be doing here?" says the son of a working-class Trenton (N.J.) family and the firm's first non-Brit CEO. New York-based Marsh controls 31% of the worldwide market for brokering deals between insurance companies and corporations that need coverage. Chicago's Aon holds another 23%. Willis has just 7%, but that's up 1 percentage point in just the past year -- and every point gain in market share is worth about $230 million in revenue. "It's a very competitive business, but there is vast room for people to succeed and grow," says J. Patrick Gallagher Jr., CEO of No. 4 broker Arthur J. Gallagher & Co. (AJG ), based outside Chicago. "It's all about the brainpower you bring to the fight."


Plumeri has a simple strategy for winning market share. First, he'll keep making acquisitions and taking stakes in other firms on top of the more than 20 deals he has done so far. He has the money to do it because Willis' cash flow could top $350 million this year and $575 next year, according to Prudential Equity Group LLC (PRU ) analyst Jay H. Gelb. The next step -- revving up the sales force -- is Plumeri's forte. At Primerica he was famous for his boisterous, motivational speeches to his sales crew. His workforce of 150,000 boosted earnings from $180 million in 1995 to $550 million in 2000, when he retired. "I love people to say. 'He made me do things I never thought I could do,"' Plumeri says.

Most important, he tore up Willis' organizational chart and assigned each broker to a company rather than to a product to knit closer relationships with customers. That persuaded consumer-products company Alberto-Culver Co. (ACV ) to switch its business from Aon to Willis. "It's more productive to deal with one person" rather than a different broker for each kind of policy, says Gary P. Schmidt, Alberto-Culver's general counsel.

By some measures, Willis already outperforms its rivals. Last year, the company's revenues grew 20%, to $2.1 billion, and second-quarter results showed the 18th consecutive quarter of growth in operating earnings. Willis' stock price has soared 118% since KKR took the firm public in June, 2001, turning the firm's $305 million investment into a $2.6 billion bonanza. KKR still owns a 5.5% stake and has two board seats. "KKR and Joe revitalized the company," says Gallant. "Brokerage is a sales business; you need that kind of energy."

Enthusiasm alone, however, won't help Willis when the cyclical insurance market -- which has enjoyed four years of rising premiums -- begins to soften, as many analysts predict. That will eat into earnings, but Plumeri plans to offset that with more fee-based advisory work.

Plumeri, who calls himself "nobody's idea of a typical CEO," says his peers often regret not having enough fun or taking risks. His own lament is not "building monuments to the things I believe in." So he commissioned a statue of his father, a businessman who in 1994 returned minor-league baseball to New Jersey's capital after 44 years. It sits in front of the 6,400-seat Samuel J. Plumeri Sr. Field. Plumeri's Jr.'s regrets, it seems, are too few to mention.

By Mara Der Hovanesian in New York

    Before it's here, it's on the Bloomberg Terminal.