Willis Group Holdings plc
) reported second-quarter 2012 adjusted net income from continuing
operations of 59 per share, beating the Zacks Consensus Estimate by
a penny. Results were 3% lower than 61 cents earned in the year-ago
quarter. Adjusted net income from continuing operations was $104
million, down 3% year over year.
Lower expenses in the quarter largely aided the outperformance.
Adjusting for insurance recovery of $3 million or 2 cents, the
company reported net income of $107 million or 61 cents per share,
a substantial improvement from $84 million or 48 cents in the
year-ago quarter. The year-ago quarter recorded 2011 Operational
Review charges of $12 million or 7 cents and FSA regulatory
settlement charge of $11 million or 6 cents.
Total revenue in the quarter decreased 2.2% year over year to $842
million due to lower commissions and fees and lower
investment income. Also, revenues lagged the Zacks Consensus
Estimate of $870 million.
Commissions and fees went down 1.7% year over year to $837 million
in the quarter, as foreign currency translation had a negative
impact on it.
Investment income also declined 37.5% from the year-ago quarter to
$5 million, attributable to lower net yields on cash and cash
Total expense decreased 5.9% year over year to $663 million,
primarily due to a decline in salaries and benefits and lower
In the quarter under review, adjusted operating income was $174
million, down 6% year over year. Operating margin contracted 80
basis points to 20.7%.
: Organic growth in commissions and fees was 7% in the quarter,
while reported growth was 5%.
Organic growth was primarily driven by high double-digit increase
in Reinsurance business, which benefited from new business growth
and improved rate environment.
Operating margin was 48.1%, expanding 80 basis points year over
: Commissions and fees declined 3% year over year on an organic
basis while it slipped 4% on a reported basis. Soft performance at
the Loan Protector business led to poor numbers.
Operating margin in the quarter contracted 340 basis points.
: Commissions and fees increased 2% year over year on an organic
basis, while on a reported basis, it declined 6%. Asia and Latin
America reported high single-digit growth while Continental Europe
grew in the low single-digits. The UK business declined in the mid
Operating margin contracted 510 basis points to 16.4%.
The cash and cash equivalent balance at quarter end stood at $407
million, down 6.4% from 2011 end.
Long-term debt increased 1.8% to $2.4 billion from 2011 end.
Dividends and Share Buybacks
Willis spent $37 million to buyback 1.04 million shares in the
quarter. Willis expects to repurchase shares worth almost $100
million in 2012.
The company's Board authorized a dividend of 27 cents to the
shareholders of record at September 28, payable on October 15.
We retain Neutral recommendation on Willis Group. The quantitative
Zacks #3 Rank (short-term Hold rating) for the company indicates no
clear directional pressure on the stock over the near term.
Marsh & McLennan Companies Inc.
), which competes with Willis Group, also shares a Zacks #3 Rank
and is scheduled to release its second quarter results on August 7,
before the bell.
MARSH &MCLENNAN (MMC): Free Stock Analysis
WILLIS GP HLDGS (WSH): Free Stock Analysis
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