On Jul 3, we issued update research report on
Willis Group Holdings plc
Willis Group envisions operational efficiencies through an
operational improvement program invests in new growth avenues and
strengthens its client services. These would save $5 million in
2014, $45 million in 2015, $135 million in 2016, $235 million in
2017 and $300 million annually thereafter in costs for the company.
Willis Group had undertaken a cost-savings initiative earlier to
enhance its profitability. Under this initiative, management
reviewed the organizational design and reduced headcount. Willis
Group expects to realize an annual cost savings of $25-$30 million.
Continuous efforts on part of the company to control costs are
expected to help it enhance margin expansion, going forward.
Organic growth in commissions and fees, a major component of Willis
Group' revenues, continues to aid its results. The insurance broker
also travels the inorganic route to fortify its operational
results. It will acquire a 75% equity interest in Max Matthiessen
for $205 million to strengthen its Swedish presence. It acquired
specialist broker Charles Monat Limited in May tis year following
regulatory approvals from the Monetary Authority of Singapore.
These acquisitions will help the company write more business, going
forward, thereby driving the top line.
Willis Group has been strengthening its balance sheet by increasing
cash balance and lowering debt levels. The debt cap ratio has also
been improving over years. The company also increased its dividend
at a 5-year CAGR of 2.9%. Its dividend yield betters the industry
average. The company intends to buy back $200 million shares in
2014 and is left with $755 million under the current authorization.
However, the low interest rate environment continues to weigh on
the company's investment results, though its forward hedging
program comes as a respite.
With respect to earnings performance, the company missed the Zacks
Consensus Estimate in three of last four quarters with an average
negative surprise of 4.6%. Estimates witnessed downward revisions
over the last 60 days with the Zacks Consensus Estimate losing a
penny each for 2014 and 2015. The same is currently pegged at $2.65
for 2014 and $2.92 for 2015. Nonetheless, the expected long-term
growth rate for the stock is 9.1%.
Willis Group presently carries a Zacks Rank #3 (Hold).
Other stocks to consider
Better-ranked insurance brokers include
Blue Capital Reinsurance Holdings Ltd
Erie Indemnity Company
). While Cninsure sports a Zacks Rank #1 (Strong Buy), Blue Capital
Reinsurance and Erie Indemnity carry a Zacks Rank #2 (Buy).
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WILLIS GP HLDGS (WSH): Free Stock Analysis
ERIE INDEMNITY (ERIE): Free Stock Analysis
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