Marsh and Willis not following Aon on pay cuts
MMC chief Glaser says salary cuts are a ‘blunt instrument’ with ‘lasting implications’
The chief executives of Willis Towers Watson and Marsh & McLennan Companies (MMC) have downplayed the prospect of following Aon in cutting staff salaries in the wake of the Covid-19 pandemic.
Dan Glaser, MMC’s chief executive, said pay cuts were “not necessary”, while Willis Towers Watson’s chief executive, John Haley, said the firm “was hoping to avoid [salary reductions]”.
Earlier this week Aon announced nearly three-quarters of its employees would see their salaries cut by 20% as the company takes steps to address the impact of Covid-19 on its business.
The move came as insurance firms fear a significant contraction in the global economy in the coming months or more will hit their revenues as demand for insurance products declines through lower exposures and businesses going bust.
Haley said Willis Towers Watson had taken a “strong” approach to managing its expenses, cutting its discretionary spending “to the bone” to protect cashflow. “If we can do those successfully, that will probably be sufficient,” he told analysts.
But Haley admitted there was a lot of uncertainty regarding the spread of the disease and the subsequent economic damage. As such, cutting salaries could not be ruled out. “While there are certainly circumstances where we would contemplate that, we are hoping to avoid them,” he said.
Glaser said salary reduction was “survival mode stuff”, adding it was a “blunt tool” that can have “lasting implications”.
He told analysts MMC had “many levers” to address expenses and the company had already taken steps to preserve liquidity.
“We want to preserve flexibility and optionality for as long as we can,” he said.
Earlier MMC reported 5% underlying growth in its risk and insurance division in the first quarter of the year on the back of growth at its Marsh and Guy Carpenter businesses.
Marsh’s revenue in the first quarter was $2.1bn, an increase of 5% on an underlying basis, supported by growth in the US and Canada and its international businesses, which saw strong growth in the Asia-Pacific region. Guy Carpenter’s revenue increased 7% on an underlying basis to $827m.
Meanwhile, Willis Towers Watson’s corporate risk and broking arm booked revenue of $739m in the quarter, representing 4% organic growth. The firm’s investment, risk and reinsurance segment reported first-quarter revenues of $615m, with organic growth of 5%.
This was driven by organic growth in its North America and western Europe divisions.