Willis Group Holdings plc ( WSH ) reported
fourth-quarter 2012 adjusted net income from continuing operations
of 45 cents per share, surpassing the Zacks Consensus Estimate by a
penny. Results were in line with the year-ago earnings.GALLAGHER ARTHU (AJG): Free Stock Analysis
ReportAON PLC (AON): Free Stock Analysis ReportMARSH &MCLENNAN (MMC): Free Stock Analysis
ReportWILLIS GP HLDGS (WSH): Free Stock Analysis
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Including goodwill impairment charge of $2.62 per share, write-off
of unamortized cash retention awards of 79 cents, 2012 cash bonus
accrual of $1 per share, insurance recovery of 2 cents, loss on
disposal of operations of 1 cent, deferred tax valuation allowance
of 64 cents and dilutive impact of potentially issuable shares of 6
cents, Willis Group incurred a loss of $4.65 per share, compared
with an income of 14 cents in the prior-year quarter.
Total revenue in the quarter increased 6.3% year over year to $871
million due to higher commissions and fees.
Commissions and fees improved 7% year over year to $867 million in
Investment income plummeted 100% year over year to $4 million,
attributable to lower net yields on cash and cash
Total expense shot up 123% year over year to $1.6 billion,
primarily due to an increase in salaries and benefits, and goodwill
In the quarter under review, adjusted operating income was $166
million, up 8.5% year over year. Operating margin expanded 40 basis
points to 19.1%.
Quarterly Segment Update
Global: Organic growth in commissions and fees was 11.6% in the
quarter, while reported growth was 11.3%.
Organic growth was primarily driven by better results across all
lines of business.
Operating margin was 19.7%, expanding 340 basis points year over
North America: Commissions and fees, on an organic basis, grew 5%,
while on a reported basis grew 4.7%.
Operating margin in the quarter contracted 250 basis points to
International: On an organic basis, commissions and fees increased
7.4% year over year, while on a reported basis, it increased 6.4%.
Latin America reported strong double-digit growth, while Europe and
UK reported mid-single digit growth. Asia recorded low single-digit
Operating margin was 23.6%, contracting 270 basis points.
Full year Highlights
Adjusted net income from continuing operations of $2.58 per share
were in line with the Zacks Consensus Estimate. Earnings declined
5.8% over 2011.
Including goodwill impairment charge of $2.60 per share, write-off
of unamortized cash retention awards of 78 cents, 2012 cash bonus
accrual of 99 cents, insurance recovery of 3 cents, loss on
disposal of operations of 2 cents, India JV settlement of 6 cents,
write-off of uncollectible accounts receivable balance and legal
fees of 5 cents, deferred tax valuation allowance of 64 cents and
the dilutive impact of potentially issuable shares of 6 cents,
Willis Group incurred a loss of $2.58 per share, compared with an
income of $1.15 in 2011.
Cost Savings Initiative
Management is reviewing the organizational design and expects to
reduce headcount. The review will be completed in the first
quarter of 2013. As a result Willis Group expects to incur a
pre-tax charge of about $35 million to $45 million in the first
quarter of 2013.
Nevertheless, beginning in the second quarter, the company expects
to realize cost savings, primarily through headcount reduction, of
approximately $20 million to $25 million in 2013. Moreover, it
expects annualized cost savings of approximately $25 million to $30
Willis exited 2012 with cash and cash equivalents of $500 million,
up 14.7% year over year.
Long-term debt slid 0.7% to $2.3 billion from 2011 end.
Cash flow from operating activities in 2012 was $524 million, up
In Feb 2013, the board of directors approved a 3.7% increase in
the quarterly cash dividend. Willis will pay the increased dividend
of 28 cents on Apr 15, 2013 to shareholders of record as on Mar 29,
2013. The annualized dividend comes to $1.12 per share.
Performance of other insurance brokers
Marsh & McLennan Companies, Inc . ( MMC ) reported its
fourth-quarter 2012 operating earnings of 52 cents per share, in
line with the Zacks Consensus Estimate.
However, the results were slightly higher than the year-ago
quarter's earnings of 46 cents per share.
Arthur J Gallagher & Co . ( AJG ) reported earnings
of 39 cents in the fourth quarter, a penny above the Zacks
Consensus Estimate and up 11% year over year.
Aon plc (AON ) posted earnings
of $1.27 per share, exceeding the Zacks Consensus Estimate by 1.6%
and the year-ago earnings by 31%.
Willis Group currently carries a Zacks Rank #3 (Hold).