NU Online News Service, Feb. 10, 1:12 p.m. EST
Willis Group Holdings said its fourth quarter net income rose 20 percent based on new business and strong retentions, but its chief executive said modest growth is not acceptable and the firm is pushing a plan aimed at strengthening growth in the future.
The London-headquartered insurance brokerage said net income for the 2010 fourth quarter compared to the previous year increased $17 million to $103 million. Earnings per share rose 10 cents to 57 cents a share. Revenues grew by 1 percent, or $11 million, to $835 million.
For the year, net income grew 2 percent, or $11 million, to $470 million. Earnings per share were up 7 cents to $2.66 a share. Revenues increased 2 percent, or $76 million, to $3.3 billion.
Chairman and Chief Executive Officer Joe Plumeri said during a conference call with analysts that "2010 was a great year for Willis and we finished strong."
He noted that the firm experienced significant new business growth and strong organic growth of 4 percent, with both its International and Global segments producing organic growth of 6 percent while North America was flat.
Given the current soft market conditions, he was upbeat about North America's results, and noted that the firm's specialty business also did well in the quarter.
Seeking to "aggressively grow" the business, Mr. Plumeri announced that the company would be seeking to reward its top producers while removing non-performers. He also said the company will go through new restructuring aimed at supporting growth tapping into the potential of its diverse locations. He indicated that would mean a "full operational review."
To further promote growth, Willis said it expects to see an increase of approximately $100 million in salaries and benefits in 2011. The increase will include:
• Amortization of cash retention payments to key employees.
• Reinstatement of salary reviews for all employees after two years of no increases.
• Reinstatement of a 401K match for North American employees.
Related to this review, the firm expects to take a pre-tax charge of approximately $110 million to $130 million that will primarily be recorded in the first quarter of this year.
Willis said that its operational review will result in cost savings of approximately $65 million to $80 million in 2011, reaching annualized savings of approximately $90 million to $100 million in 2012.
During a question and answer period with analysts, Mr. Plumeri noted that there is no certainty when the market and economy will make significant improvement, and Willis was not waiting for a market turn to improve its margins.
"We are not satisfied with moderately growing," said Mr. Plumeri.
"If the market turns, bless us all, but we are going to do the things [we need to do] to significantly grow this business," he added later.
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