Willis Group Holdings Plc
) reported second-quarter 2013 adjusted net income of 59 cents
per share, surpassing the Zacks Consensus Estimate of 57 cents
per share by 3.5%. Results were flat with the year-ago level.
Quarterly Operational Update
Willis Group's total revenue in the quarter was $890 million, up
5.7% year over year due to higher commissions and fees. Results
exceeded the Zacks Consensus Estimate of $878 million by 1.4%.
Investment income of Willis Group declined 40% year over year to
$3 million in the reported quarter.
Total expense at Willis Group shot up 8.4% year over year
to $719 million mainly due to higher salaries and benefits (up
5.8% year over year), and other operating expense (up 20.1% year
In the quarter under review, adjusted operating income of Willis
Group was $171 million, down 1.7% year over year. Operating
margin declined 150 basis points to 19.2% in the second quarter
of 2013. The downfall was attributable to higher salary and
benefits, and other operating expenses, and net unfavorable
foreign exchange movements. However, higher commissions and fees
limited the downfall.
Quarterly Segment Update
: Organic growth in commissions and fees was 10.3% in the
quarter, while reported growth was 8.2%.
The improvement was driven by better results at Willis Re and
Global Security. While the former grew in the mid-teens, the
latter witnessed growth in mid-single digit.
Operating margin was 34.6%, improving 140 basis points year over
: Commissions and fees, on an organic basis grew 5.5%, while on a
reported basis grew 6.1%.
The improvement came on the back of better performances across
most of Willis North America's geographic regions.
Operating margin was 17% in the second quarter, expanding 180
basis points year over year.
: Commissions and fees increased 2.6% on an organic basis and
2.5% on a reported basis. Results were driven by low single-digit
increase in Western Europe, low double-digit increase in Eastern
Europe, mid-single digit increase in Asia and high teens increase
in Latin America. These were partially mitigated by low-single
digit decline in UK and mid-single digit decline in Australasia.
Operating margin of 10.8% in the quarter contracted 560 basis
points year over year.
In Jul 2013, the board of directors of Willis Group approved
quarterly cash dividend of 28 cents per share. Willis will pay
the dividend on Oct 15, 2013 to shareholders of record as on Sep
30, 2013. The annualized dividend comes to $1.12 per share.
Willis Group exited the quarter with cash and cash equivalents of
$503 million, up 0.6% from 2012 end level.
Total debt of Wills Group inched down 0.4% to $2.34 billion at
Jun 30, 2013 from $2.35 billion at Dec 31, 2012. Recently, Willis
Group completed an amendment and extension to 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 by $300 million to $800 million.
This term loan is also now scheduled to mature in Jul 2018.
Performance of Other Insurance Brokers
Brown & Brown Inc.
) reported second quarter 2013 earnings of 36 cents per share,
surpassing the Zacks Consensus Estimate of 35 cents per share by
2.9%. Results also exceeded the year-ago earnings of 29 cents by
Validus Holdings, Ltd.
) are scheduled to release the second-quarter earnings results
today. The Zacks Consensus Estimate for the quarter is of
eHealth, Inc. is pegged at 68 cents, while the same for Validus
Holdings is pegged at 91 cents.
Willis Group currently carries a Zacks Rank #4 (Sell).
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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