JLT to cut jobs as commission ban hits profits

Bala Viswanathan, JLT
Bala Viswanathan, JLT

JLT Employee Benefits is planning to reduce its headcount in response to falling revenues resulting from the ending of commission and uncertainty over ‘government-led changes to the occupational pensions market’.

Results published today show revenues within the firm’s UK & Ireland employee benefits business fell by 9 per cent in the year to December 2015 as a result of ‘the specific challenges it faced in the year’.

Reported revenues in the UK and Irish business for 2015 were £167.4m. Trading profits were £12.8 million, with the trading margin falling from 20 per cent to 8 per cent for the year.

JLT says it is now implementing plans to reorganise the business with a flatter structure that is better able to respond to today’s dynamic marketplace, while continuing to invest in technology and the client proposition.

This restructuring will result in a reduction in headcount as certain layers within the business are removed. JLT anticipates this will deliver ongoing annualised savings in the range of £14m, for a one-off cost of £12m. It expects savings in 2016 to be in the region of £9m of the estimated annual savings.

A statement from JLT says:” This disappointing performance reflects the challenges that we highlighted at the time of our 2015 interim results and in our Q3 Interim Management Statement.

Firstly, a significant slowdown in project work and new business due to the uncertainty created by government-led changes to the UK occupational pensions market.

“Secondly, the structural impact of the Retail Distribution Review on our commission revenue, where we saw insurers opportunistically choosing to end commission payments in advance of the expected deadline of 2016. We booked our last tranche of commissions-related revenues in 2015. This amounted to £5 million, which will not be repeated in 2016.

“Given the above, we gave guidance in November 2015 that we anticipated that full year revenues in the UK Employee Benefits business would reduce by a mid to high single digit percentage, when compared to 2014, and that trading profit would be in the low to mid-teens, and this has indeed been the outcome for the year.

“Despite the challenges of 2015, our UK Employee Benefits business has a strong offering and an attractive range of capabilities in a market that continues to need and value our services. We are taking steps to improve this business’s profitability and return it to year-on-year revenue growth.”