Willis Group Holdings plc
) reported third-quarter 2013 adjusted net income of 19 cents per
share, missing the Zacks Consensus Estimate of 20 cents by a
penny. The results also lagged 13.6% from the prior-year quarter
Including the impact of fees related to debt extinguishment of 1
cent per share and loss on debt extinguishment of 33 cents per
share, the company reported net loss of 15 cents per share
compared to net income of 15 cents per share earned in the
Increase in expenses dragged the bottom line, accounting for the
company's soft performance.
Willis Group's total revenues in the quarter were $795 million,
up 5.4% year over year due to higher commissions and fees.
Results exceeded the Zacks Consensus Estimate of $788 million.
Total commissions and fees reported by Willis Group were $791
million, up 5.6% year over year. The growth was driven by solid
contributions from all the three segments. Unfavorable foreign
currency translations were partially offset.
Willis Group's investment income of $4 million was flat with the
year-ago quarter level.
Total expenses at Willis Group shot up nearly 5.3% year over year
to $720, reflecting higher salaries and benefits (up 7.8% year
In the quarter under review, adjusted operating income of Willis
Group was $76 million, down 7.3% year over year. Adjusted
operating margin declined 130 basis points (bps) to 9.6%. The
downfall was attributable to higher salary and benefits. However,
higher commissions and fees limited the downfall.
Quarterly Segment Update
Both reported and organic growth in commissions and fees was 6.4%
in the quarter.
The improvement was driven by better results at Willis Re and
Specialty Reinsurance which reported growth in high single digits
and mid teens respectively. Specialty Reinsurance in turn grew
due to new business.
Operating margin was 14.3%, deteriorating 780 bps year over year.
Commissions and fees grew 3.9% on an organic basis and 4.1% on a
The improvement came on the back of better performances across
most of Willis North America's geographic regions.
Operating margin was 17.3% in the reported quarter, expanding 60
bps year over year.
Commissions and fees increased 7.8% on an organic basis and 7.0%
on a reported basis. Results were driven by low double-digit
increase in Eastern Europe, high-double digit increase in Asia,
low double-digit increase in Australasia and mid-teens increase
in Latin America. These were however, partially mitigated by
mid-single digit decline in the U.K.
Operating margin of negative 4.2% in the quarter improved 30 bps
year over year.
The board of directors of Willis Group approved quarterly cash
dividend of 28 cents per share. Willis Group will pay the
dividend on Jan 15, 2014 to shareholders of record as on Dec 31,
2013. The annualized dividend comes to $1.12 per share.
Willis Group exited the quarter with cash and cash equivalents of
$623 million, up 24.6% from the 2012-end level.
Total long term debt decreased nearly 1% to $2.31 billion as on
Sep 30, 2013 from $2.34 billion as on Dec 31, 2012.
Recently, Willis Group completed an amendment and extension of
its existing senior unsecured credit facility. The $300 million
5-year term loan is now scheduled to mature in Jul 2018. The $500
million revolving credit facility was increased to $800 million.
This term loan is also scheduled to mature in Jul 2018.
Performance of Other Insurance Brokers
Brown & Brown Inc.
) reported operating net income of 40 cents per share for the
third quarter of 2013, which missed the Zacks Consensus Estimate
by a penny but improved 14.7% over the year-ago quarter.
Validus Holdings Ltd.
) reported its third-quarter 2013 adjusted net operating income
of $1.50 per share, significantly surpassing the Zacks Consensus
Estimate of $1.29 per share. The results however, fell 13.8% year
) reported third-quarter 2013 net income of 1 cent per share,
missing the Zacks Consensus Estimate by a penny. Results were in
line with the year-ago quarter.
Willis Group presently holds a Zacks Rank #3 (Hold).
BROWN & BROWN (BRO): Free Stock Analysis
EHEALTH INC (EHTH): Free Stock Analysis
VALIDUS HOLDING (VR): Free Stock Analysis
WILLIS GP HLDGS (WSH): Free Stock Analysis
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