London-based broker, Jardine Lloyd Thompson Group plc, announced that it expects pre-tax profits and “exceptional items” for 2004 to be around £92 million ($175 million); or £100 million ($189.5 million) before tax, exceptional items and goodwill amortization. Analysts had been expecting profits of about £113 million ($214 million).
At the same time JLT’s Board of Directors announced that it has “accepted the resignation of its Chief Executive, Steve McGill.” It noted that he “leaves the business with immediate effect,” and that JLT Chairman Ken Carter “has agreed to become Executive Chairman of the Group for a period of up to two years, by the end of which time the Group will appoint a new Chief Executive.” The Board also appointed Geoffrey Howe, an independent Non-Executive Director, as Joint Deputy Chairman alongside Rodney Leach with immediate effect.
The announcement noted: “The trading environment in the second half of 2004 to date has been difficult, particularly within Risk Solutions, a significant part of the Group’s Risk & Insurance business. The insurance market has softened at a faster rate than had been anticipated earlier in the year. This, coupled with the full year impact of lower reinsurance revenues in the UK and USA, and the continued weakness of the US dollar, has had a significant impact on revenues within the Risk and Insurance group. The Employee Benefits business of the Group continues to trade in line with expectations. The Board anticipates paying an unchanged final dividend for the year.”
The bulletin did not comment on any possible link between JLT’s reduced profit forecast and McGill’s departure. Nor did it make any reference to the ongoing investigations of the insurance industry being conducted by New York Attorney General and others in the U.S. JLT has had no involvement in any of the investigations.
Commenting on the announcement, Carter stated only: “Although December remains an important month for revenue generation, the Board is now of the view that the Group profit before tax will be lower than current market expectations and we have therefore moved to update the market accordingly. The Board has accepted the resignation of Steve McGill and would like to thank him for his hard work and considerable achievements and wish him well for the future.”
From U.K. press reports, it appeared that most of the insurance community was surprised by the announcement. While some analysts expressed concern that JLT’s assessment of the financial situation in the industry may indicate that the downward trend in the pricing cycle has accelerated, others remained skeptical, noting that from their experience there doesn’t appear to be any significant erosion in rates.
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