On Feb 26, 2013, we upgraded
Willis Group Holdings plc
) to Neutral from Underperform due to its solid performance in
the fourth quarter. Moreover, management is reviewing the
organizational design to drive cost savings for this Zacks Rank
#3 (Hold) insurance broker.
Why the Upgrade?
Willis Group posted adjusted net income from continuing
operations of 45 cents per share, surpassing the Zacks Consensus
Estimate by a penny.
The company generated organic growth in commissions and fees of
7.5% in the fourth quarter, the highest growth rate since the
third quarter of 2006, with contribution from all the segments.
Further, Willis Group, to enhance its profitability, is
undertaking a cost savings initiative. Management is reviewing
the organizational design and expects to reduce headcount. It
expects to realize cost savings of $20 million to $25 million in
2013 and annualized cost savings of approximately $25 million to
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.
GALLAGHER ARTHU (AJG): Free Stock Analysis
BROWN & BROWN (BRO): Free Stock Analysis
MARSH &MCLENNAN (MMC): Free Stock Analysis
WILLIS GP HLDGS (WSH): Free Stock Analysis
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Moreover, Willis Group has consistently tried to enhance
shareholder value via dividend increase as well as share
buybacks. It already exhausted its $100 million buyback program
in 2012 and recently hiked dividend by 3.7%. The company's
dividend yield is 3.05%, ahead of the industry yield of 1.64% and
Marsh & McLennan Companies Inc.
) yield of 2.55%.
The Zacks Consensus Estimate for 2013 is currently pegged at
$2.66 per share, up 3% year over year.
Other Stocks to Consider
Among other insurance brokers,
Brown & Brown Inc
Arthur J Gallagher & Co
) carry a Zacks Rank #2 (Buy), and appear impressive.