NU Online News Service, May 5, 10:57 a.m. EST
Insurance broker Willis Group Holdings reported first quarter net income dropped 80 percent primarily related to its operational review and repurchase of debt.
The broker reported first quarter net income, compared to the same period in 2010, fell $169 million to $42 million. However, revenues grew 4 percent, or $36 million, to more than $1 billion.
The firm reported a charge of $97 million related to its operational review, the bulk of that related to compensation expenses. The review is expected to result in annual savings of $65 million to $75 million this year and $95 million to $105 million annually by next year. The total charge for this review will be approximately $130 million for the year.
Willis also reported a $171 million charge related to the repurchase and redemption of senior notes and write-off of unamortized debt issuance costs. Earnings were also impacted by foreign currency translation.
"The quarter was great, but it was also simple," Joe Plumeri, chairman and chief executive officer of Willis says during a conference call today. "It was a matter of executing on fundamentals and executing on the things that we said we were going to do."
Willis reported organic growth of 4 percent, primarily on the strength of its international business, which grew by 6 percent. Global business organic growth grew by 8 percent while North America declined 1 percent.
Plumeri notes that net new business was up 5 percent for the firm and credited the firm's performance with a high retention rate of 93 percent.
He says Willis still faces challenges from the soft market and that substantial capacity remains in the market. While there are indications that rates are not declining as severely as in the past "there is not much evidence of a turn" in market, he adds.
Earnings in its North America business is showing signs of improvement as retention of business grew from 92 percent to 94 percent, Plumeri says. Earnings in that sector were also impacted by the loss of contingent commissions from its acquired business, Hilb, Rogal and Hobbs.
Willis does not take contingent commissions, and HRH did. The contingents are being moved into the firm's model of enhanced commissions and fees.
Plumeri and Group President Grahame Millwater spent a portion of today's call discussing the Willis Cause that Millwater described as an initiative to differentiate itself in the insurance broker sector.
The chief executive says the company will aim to increase its analytical capabilities and expand it to all segments of its business; pursue all available avenues to deliver the best price, terms and conditions to clients; drive client service and efficiency globally; and finally, get claims paid quickly "because paying the claim is what our clients want, fundamentally."
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