KKR, Plumeri Set to Profit from Willis’ Share Sale

June 11, 2001

Willis Group Holdings released a prospectus in connection with its public share offering giving compensation figures for CEO Joseph Plumeri, who took over management of the world’s third largest insurance broker last October.

Plumeri’s five year contract provides for an annual base salary of $1 million, an equal amount in guaranteed bonuses, and further incentive bonuses, plus stock options for 5.16 million Willis’ shares at around $2.80 per share.

Willis expects to sell between 20 and 23 million shares later this year, at $10 to $12, valuing the company at around $1.6 billion. While management buyout firm Kohlberg Kravis Roberts stake will be reduced from 74 to 64 percent following the public offering, it still stands to make a good profit on its investment should it decide to sell its interest, which many analysts anticipate.

The remainder of Willis’ shares are held by AXA, Royal & Sun Alliance, Chubb, Hartford, Travelers and Tokio Fire & Marine. While neither KKR nor any of the insurers have indicated plans to sell, if Willis shares do well it might become tempting.

As insurance rates harden brokers’ profits should increase as well, but Willis, with approximately 7 percent of the worldwide market for commercial insurance, still has a long way to go to catch up with Marsh, Inc. and Aon, who together control around 57 percent. Plumeri’s compensation indicates the confidence Willis’ owners have in his ability to narrow the gap.

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