Willis First Quarter Net Up 16 %

NU Online News Service, April 30, 1:42 p.m. EDT

The Willis Group Holdings Ltd. brokerage said first quarter net income increased 15.7 percent to $192 million, which management attributed to stringent cost controls and the diversity of its operations.

The London-based firm said the $192 million net from continuing operations translated to $1.15 per share compared with $166 million or $1.16 per share for the period last year.

The firm said first quarter net income was "significantly affected by the acquisition of Hilb Rogal & Hobbs Company (HRH), certain other non-operating items and foreign currency translation."

"We remain focused on top-line growth while relentlessly managing costs through our 'Right-Sizing' Willis initiative and the integration of HRH," said a statement from Joe Plumeri, Willis chairman and chief executive officer.

"We have overcome various headwinds to our adjusted operating margin, including lower investment income, higher pension expense, dilution from the HRH acquisition, higher severance expense and unfavorable foreign currency impact in the quarter," he added. "These factors combined had an unfavorable impact of over 900 basis points, yet we were still able to deliver an adjusted operating margin of close to 30 percent in the first quarter of 2009."

Willis said organic revenue from commissions and fees rose 2 percent, including net new business won of 7 percent--offset by a negative-5 percent impact from declining premium rates and other market factors.

The firm reported that its International and Global segments each had 5 percent growth in commissions and fees. Latin America, Asia and Europe performed strongly--especially Spain, Denmark and Russia, Willis said.

In the Global segment, Global Specialties had a positive organic growth in commissions and fees across many lines, with particularly strong growth in marine, energy and construction, while its reinsurance sales benefited from strong net new business as well as a stabilizing rate environment to drive strong organic growth, Willis said.

The brokerage said it managed strong client retention levels and momentum from the "Shaping our Future" strategy, which also contributed to organic revenue growth.

Willis said its operating margin was 29.5 percent, compared with 28.3 percent in the same quarter last year.

Willis, which has large operations in New York as well as London, said its North America segment had a 5 percent first quarter decline in organic commissions and fees compared with 2008, reflecting soft insurance market conditions, the ongoing focus on the integration of HRH, as well as increased weakness in the U.S. economy.

Willis said the economic downturn has especially impacted its U.S. construction and financial institutions practices.

The operating margin in North America expanded to 24.9 percent in the first quarter of 2009 as a result of HRH integration synergies and management of the cost base, according to Willis.