London-headquartered brokerage Willis Group Holdings reported first quarter net income dropped by 2 percent, but overall organic growth grew 3 percent despite soft market pressures.
Willis said net income was down $3 million to $166 million, which translated into net income per share of $1.16. Revenues grew 8 percent, or $56 million, to $795 million.
The quarter was impacted by $33 million in severance and other costs, covering the elimination of 150 positions that were or are in the process of being eliminated, the brokerage reported.
Adjusted operating earnings per share, which excludes these charges, stood at $1.32 a share, up from $1.10 last year, Willis reported. The results beat street estimates of $1.17.
David Small, an analyst with Bear Stearns, said in a note that the results were driven by higher after-tax operating margin on higher revenue growth, including strong organic growth; a lower than expected tax rate, and a lower share count after Willis bought back 2.3 million shares in the quarter.
During an analyst's conference call today, Joe Plumeri, chairman and chief executive officer for Willis said "the market remained soft, but we continued to grow the top line while maintaining strict cost discipline."
Willis' organic growth was across all lines of its business segment with international business leading the way at 5 percent, followed by North America at 3 percent and global at 2 percent.
Mr. Plumeri credited the results with high retention rates above 90 percent in all segments of the business, while at the same time growing new business.
When asked about why the broker lost some accounts, Mr. Plumeri explained that the primary reason for the loss was that the firm walked away from accounts with fee structures that were not economically feasible.
Don Bailey, CEO of Willis North America, noted that there is a lot of fee compression going on in the marketplace, and while each account is examined on a case by case basis, the broker will walk away from accounts "that don't make economic sense."
Rates are seeing declines across the globe, as high as 40 percent in North America, said Mr. Plumeri, but the broker has managed to grow its book by doubling its business opportunities in Latin America, parts of Europe, China, Singapore, Poland and Russia.
Grahame Millwater, Willis president, said the company is bringing in new hires for specialty segments and is managing the headcount influx by releasing people who are poor performers and in redundant roles. He added that the company is differentiating itself from the competition in one major way by not outsourcing critical functions.
Mr. Plumeri said he anticipates continued revenue growth through the rest of the year for all segments of the company and that the firm is interested in making acquisitions that will be advantageous to Willis.
Willis also announced today that the Chairman and CEO of Bear Stearns Asset Management, Jeffrey B. Lane, was named to the board of directors and would be a member of the compensation committee.
The firm also declared a quarterly cash dividend of 26-cents a share payable on July 14 to shareholders of record as of June 30.
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