Willis Group Holdings Plc
) reported first-quarter 2013 adjusted net income of $1.46 per
share, surpassing the Zacks Consensus Estimate of $1.31 per
share. Results also exceeded the year-ago net income by 10.6%.
Including 22 cents charge on account of expense reduction
initiative, Willis Group reported net income of $1.24 per share,
down 3.1% year over year.
Quarterly Operational Update
Total revenue in the quarter was $1.1 billion, up 3.8% year over
year due to higher commissions and fees (up 4.1% year over year).
Results were in line with the Zacks Consensus Estimate.
Investment income declined 20% year over year to $4 million in
the reported quarter.
Total expense shot up 9.8% year over year to $764 million mainly
due to higher salaries and benefits (up 12.3% year over year),
and depreciation expense (up 36.8% year over year).
In the quarter under review, adjusted operating income was $333
million, up 0.9% year over year. Operating margin declined 90
basis points to 31.7% in the first quarter of 2013.
Quarterly Segment Update
Organic growth in commissions and fees was 4.1% in the quarter,
while reported growth was 3.5%.
Growth was driven by better results in Willis Re, which resulted
in high-single digit growth in the quarter.
Operating margin was 44.5% in the quarter compared to 48.1% in
the year-ago quarter.
Commissions and fees, on an organic basis grew 4.3%, while on a
reported basis grew 4.9%.
The improvement came on the back of better performances across
most of Willis North America's geographic regions, particularly
the Human Capital Business.
Operating margin was 24.4% in the first quarter compared to 23.5%
in the year-ago quarter.
Commissions and fees increased 3.8% both on an organic basis as
well as reported basis. Results were driven by mid-single digit
growth in Eastern Europe and Australasia, low single-digit growth
in U.K., double-digit growth in Latin America and Asia.
Operating margin was 28.5% in the quarter compared to 27.7% in
the year-ago quarter.
Cost Savings Initiative
Willis Group recorded a $46 million pretax charge during the
reported quarter related to the previously announced assessment
of the company's organizational design.
Management eliminated 207 positions. Another action taken by
Willis Group was the rationalization of property and systems.
Willis Group expects to realize cost savings through the above
actions, of approximately $20 million in 2013, effective the
second quarter of 2013. The company is also expected to realize
an annual cost savings of $25-$30 million.
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WILLIS GP HLDGS (WSH): Free Stock Analysis
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In Apr 2013, the board approved quarterly cash dividend of 28
cents per share, representing a year-over-year hike of 3.7%.
Willis will pay the dividend on Jul 15, 2013 to shareholders of
record as on Jun 28, 2013. The annualized dividend comes to $1.12
Willis exited the quarter with cash and cash equivalents of $531
million, up 6.2% from 2012 end level.
Total debt increased 2.1% from to $2.39 billion at Mar 31, 2013
from $2.34 billion at Dec 31, 2012.
Debt-to-capital ratio of the company improved 180 basis points to
55.9% in the quarter.
Performance of Other Insurance Brokers
) reported first quarter 2013 adjusted operating earnings of
$1.11 per share in line with the Zacks Consensus Estimate.
Results exceeded the year-ago earnings of 98 cents by 13%.
Marsh & McLennan Cos. Inc.
) reported its first-quarter 2013 operating earnings of 73 cents
per share, comfortably surpassing the Zacks Consensus Estimate of
70 cents and the year-ago quarter earnings of 63 cents per share.
Brown & Brown Inc.
) reported first quarter 2013 earnings of 41 cents per share
exceeding the Zacks Consensus Estimate of 39 cents per share and
year-ago earnings of 34 cents per share.
Willis Group currently carries a Zacks Rank #3 (Hold).