Willis saw strong organic growth in Q2 2014 that beat analysts'expectations, but that was more than offset by increased expenses,resulting in what analysts at Nomura called a “messy miss” for thebroker.

Willis reports total Q2 revenue growth of $935 million, or 5.1%growth over Q2 2013. Organic growth was 4.5%, ahead of Nomura's2.7% estimate and Sterne Agee's 4% estimate.

But expenses climbed 8.9% to $787 million in the quarter. Willissays the increase was primarily driven by investment in new hiressince the end of Q2 2013. “The resulting business performancereduced second-quarter earnings by approximately $0.04 per dilutedshare compared to the same period last year,” Willis says.

earnings were also reduced by “non-operating items” such asadverse foreign-currency movements, non-cash tax adjustments and acharge related to Willis' Operational ImprovementProgram.

All told, net income in the quarter was $47 million, down from$105 million in 2013's second quarter.

CEO Dominic Casserley says in a statement, “A number of non-cashand non-operating items significantly reduced our reported earningsthis quarter, but that should not detract from the performance ofour business.”

He adds, “Willis grew revenues strongly in many of itsbusinesses and even saw modest growth in reinsurance where themarket faces significant rate pressure. This is a testament to ourdiversified strength across geographies, sectors and business linesand reflects the cumulative investments for growth we have made,including in the second half of last year, in revenue-producingtalent and client-service and risk-management capabilities.”

Nomura analysts Clifford Gallant and Mathew Rohrmann expresseddisappointment in Willis' underlying operating margin of 16.1%, andalso listed “lots of noise” as a drawback to the Q2 results. Theanalysts explain, “Tax adjustments, foreign-exchange and currencyadjustments and the beginning of costs associated with theoperational efficiency effort.”

However, they list the organic growth as a plus and say expensecomparisons should ease.

Sterne Agee analyst Dan Farrell concurred, noting that while thestock reaction “will be weak, we do think year-ago expensecomparisons begin to ease going forward.”