Willis Bucks Organic Growth Loss Trend

Willis Group Holdings Limited third-quarter net income dropped 25 percent on a tax gain and other expenditures, but unlike competing brokers it reported new business growth.

The London-based brokerage said net income dropped $22 million to $67 million, a drop of 10 cents a share to 46 cents. Revenues rose 6 percent, or $31 million, to $574 million compared to the same period last year.

The firm said the results were impacted by a $91 million net of tax gain on the sale of the firm's London headquarters and expenditures related to its restructuring.

For the first nine months of this year, ending Sept. 30, net income has increased 4 percent, or $13 million, to $314 million over last year. Earnings per share increased 23 cents to $2.12. Revenues rose 7 percent, or $132 million, to $1.94 billion.

During an investment analyst's discussion, Joe Plumeri, chairman and chief executive officer, said the firm was very pleased with “the great results” that he said underscore the firm's strategic initiatives, which have built a model for growth through the soft market.

Willis' organic growth was helped by 6 percent growth in new business and 7 percent organic growth in its international division.

Mr. Plumeri said the firm continues to control costs and employee head counts, making sure the firm does not keep people who are not performing while awarding people who do perform.

In answer to a question about acquisitions, Mr. Plumeri said Willis' main interest is organic growth, but the firm would entertain any opportunities to make acquisitions that might present themselves.

Mr. Plumeri was asked if Willis could be subject to accusations of steering accounts and fixing prices, which have been leveled against reinsurance broker Guy Carpenter, which is being sued by Connecticut's attorney general. He said the situation has been reviewed and that “there is nothing like that in what we do.”

David Small with Bear Stearn's said in an analysts' note that Willis' earnings per share surpassed the consensus estimate of 40 cents a share and Bear Stearn's estimate of 45 cents a share.

Mr. Small called the firm's organic growth respectable with the international segment producing impressive results. The firm continues to show margin expansion, and that, he said, means the company “can drop a high percentage of organic growth to the bottom line.”

Willis also announced that it is paying a quarterly dividend of 25 cent a share payable on Jan. 14 to shareholders of record as of Dec. 31.