"2009 was a momentous year." said Joe Plumeri, Chairman and Chief Executive Officer, Willis Group Holdings. “We began in the midst of integrating our transformational HRH acquisition, facing a difficult global economy and soft insurance market. We responded with 2 percent organic growth in commissions and fees, disciplined expense management, successful merger integration, completion of the Gras Savoye transaction and a much stronger balance sheet.”
Highlights of the quarter ended December 31, 2009 include:
* Reported earnings per diluted share from continuing operations of $0.47; adjusted earnings per diluted share from continuing operations of $0.47
* 4 percent reported growth in commissions and fees compared with fourth quarter of 2008
* 2 percent organic growth in commissions and fees compared with fourth quarter of 2008
* North America segment organic growth in commissions and fees of 1 percent, sequential improvement from third quarter of 2009
* North America segment operating margin expansion of 670 basis points over year ago period; integration of HRH substantially completed
* Completed the reorganization of the capital of Gras Savoye
Fourth Quarter 2009 Financial Results
Reported net income from continuing operations for the fourth quarter of 2009 was $79 million, or $0.47 per diluted share, compared with $61 million, or $0.37 per diluted share, in the same period a year ago. Reported net income for the fourth quarters of 2009 and 2008 was affected by certain items which are reviewed in detail in this release, including the acquisition of Hilb Rogal & Hobbs Company (HRH).
Excluding these items, adjusted earnings per diluted share from continuing operations were $0.47 in the fourth quarter of 2009 compared with $0.36 in the fourth quarter of 2008. Foreign currency movements had a negative $0.03 impact on earnings per diluted share in the fourth quarter of 2009.
Total reported revenues for the fourth quarter of 2009 were $824 million compared with $792 million for the same period of 2008, an increase of 4 percent. Foreign currency movements increased reported revenues by 3 percent compared with the year ago period.
Organic growth in commissions and fees was 2 percent in the fourth quarter of 2009 compared with the fourth quarter of 2008. This growth reflected net new business won of 7 percent, partially offset by a negative 5 percent impact from declining premium rates and other market factors. Continued strong client retention levels and momentum from Shaping our Future growth initiatives, such as Global Placement and Client Profitability, also contributed to organic growth in commissions and fees.
The North America segment reported 1 percent growth in organic commissions and fees in the fourth quarter of 2009 compared with the same period of 2008, and improved sequentially from the third quarter of 2009. With the integration of HRH substantially complete, a renewed focus on top line growth generated a significant increase in the amount of new business in the fourth quarter compared to a year ago. The segment results also continue to reflect headwinds from the soft insurance market conditions and ongoing weakness in the US economy. As a result of top line growth, merger synergies and other cost savings, operating margin expanded 670 basis points to 25.6 percent in the fourth quarter of 2009 compared to the prior year period.
The International business segment recorded 3 percent organic growth in commissions and fees in the fourth quarter of 2009 compared with the same period of 2008. This growth came from strong new business and continued traction from Shaping our Future growth initiatives, which more than offset the soft rate environment and weakness in the UK and Ireland retail market. Outside of the UK and Ireland, the International business segment organic growth was 7 percent, primarily driven by strong growth in the Latin America and Asia regions. Operating margin remained high at 31.3 percent, although lower than the fourth quarter of 2008 partially due to the impact of foreign exchange and the weakness in the UK and Ireland retail market. For the year ended December 31, 2009, operating margin remained strong at 26.5 percent.
The Global segment, which comprises the Global Specialties, Faber & Dumas and Reinsurance divisions, recorded 1 percent organic growth in commissions and fees in the fourth quarter of 2009 compared with the fourth quarter of 2008. Growth was primarily driven by the Reinsurance and Global Specialties divisions, led by continued strong performance in North America reinsurance, marine, aerospace and financial and executive risks specialties. Operating margin was expanded 50 basis points to 12.2 percent in a seasonally light quarter, compared with the fourth quarter of 2008.
Reported operating margin was 21.0 percent for the fourth quarter of 2009 compared with 17.0 percent for the same period of 2008. Excluding certain items, which are reviewed in detail in this release, adjusted operating margin was 21.1 percent for the fourth quarter of 2009 compared with 16.8 percent for the prior year period. The improvement in the adjusted operating margin reflected solid organic growth in commissions and fees, merger integration and other expense savings and favorable year on year foreign currency movement.
Full Year 2009 Financial Results
Reported net income from continuing operations for 2009 was $436 million, or $2.58 per diluted share, compared with $302 million, or $2.04 per diluted share, in 2008. Reported net income for the 2009 and 2008 years was affected by certain items which are reviewed in detail in this release, including the acquisition of HRH and 2008 expense review charges for severance and other costs.
Excluding these items, adjusted earnings per diluted share from continuing operations were $2.67 for 2009 compared with $2.55 in 2008, an increase of 5 percent. In addition, adjusted earnings from continuing operations for 2009 included a $27 million, or $0.16 per diluted share, tax credit resulting from changes to UK tax law on repatriation of unremitted earnings of our foreign subsidiaries (described below). Excluding this item, adjusted earnings per diluted share from continuing operations in 2009 would have been $2.51. Foreign currency movements reduced earnings per diluted share by $0.17 in 2009.
Total reported revenues for 2009 were $3.3 billion compared with $2.8 billion for 2008, an increase of 15 percent. The increase was primarily due to the HRH acquisition, while the effect of foreign currency translation decreased reported revenues by 4 percent.
Organic growth in commissions and fees was 2 percent in 2009 compared with 2008. This growth reflected net new business won of 5 percent, offset by a negative 3 percent impact from declining premium rates and other market factors.
Reported operating margin was 21.3 percent for 2009 compared with 17.8 percent for 2008. Excluding certain items, which are reviewed in detail in this release, adjusted operating margin was 21.8 percent for 2009 compared with 21.2 percent for 2008. The improvement in the adjusted operating margin reflected solid organic growth in commissions and fees, expense savings and favorable year on year foreign currency movement, partially offset by lower investment income, higher pension expense and increased intangible amortization.