Willis Group Holdings plc, the global insurance broker, today reported results for the quarter and year ended December 31, 2011, and announced its intention to buy back up to $100 million in shares and increased its quarterly cash dividend by 3.8% to $0.27 per share, or $1.08 annually.
Highlights of the quarter ended December 31, 2011 include:
- Reported earnings per diluted share from continuing operations of $0.22; adjusted earnings per diluted share from continuing operations of $0.46;
- Reported and organic commissions and fees declined 1% compared with the fourth quarter of 2010;
- Reported operating margin of 12.8%; adjusted operating margin of 18.9%;
- 2011 operational review completed;
- Senior credit facility (bank term loan and revolving credit facilities) refinanced, generating interest savings and improved financial flexibility.
Highlights of the year ended December 31, 2011 include:
- Reported earnings per diluted share from continuing operations of $1.24; adjusted earnings per diluted share from continuing operations of $2.75;
- 4% reported growth in commissions and fees compared with 2010;
- 2% organic growth in commissions and fees compared with 2010;
- Reported operating margin of 17.1%; adjusted operating margin of 22.5%;
- 2011 operational review charge of $180 million and savings of approximately $80 million, expected annualized savings of approximately $135 million.
“I’m enormously proud of the work that our management team and all of our associates did to serve our clients and shareholders over the last year, a year in which difficult economic conditions prevailed in many of the geographies in which we operate and in the sectors we serve. While the fourth quarter and, indeed, the full year of 2011 included many achievements for which Willis can be proud, our measure of organic growth demonstrates the challenges that our business endured in the final months of the year and shows where we must improve in 2012,” said Joe Plumeri, Chairman and Chief Executive Officer, Willis Group Holdings.
Mr. Plumeri offered additional commentary about Willis’ business segments and other aspects of the Company’s performance: “Our Global segment achieved strong organic growth, driven by our reinsurance and global specialties businesses. Growth in our International segment was moderated primarily due to the performance of our UK and Ireland retail business which saw its commissions and fees decline by double digits. Our North America segment was once again hampered by declining Loan Protector business results and the effects of a lingering soft economy in the U.S. In addition, the segment was impacted in the quarter by declining retention rates, primarily related to lost legacy HRH business. And finally, our performance was affected by declines in our Associates’ business - Gras Savoye, and some timing issues in Willis Capital Markets & Advisory.”
Reviewing the year as a whole and looking forward to 2012, Mr. Plumeri added the following: “We’re obviously not satisfied with results that show low organic growth and declining adjusted operating margins, especially given the peerless record we’ve established in prior years for such measures. To re-establish that momentum, we’ve made many hard-edged decisions in 2011 as we initiated and completed a far-reaching operational review. A year ago, we told investors that we would review all of our businesses to better align our resources with our growth strategies, and that’s exactly what we did. That review is expected to save us, prospectively, approximately $135 million annually, and we’ll use those savings to continue to invest in growth initiatives that position Willis to compete and win in the months and years ahead. I have no doubt that, in 2012, our businesses that performed well last year will remain strong, and those businesses that must strengthen will do so.”
Fourth Quarter 2011 Financial Results
Reported net income from continuing operations for the quarter ended December 31, 2011 was $39 million, or $0.22 per diluted share, compared with $98 million, or $0.57 per diluted share, in the same period a year ago. Reported net income from continuing operations in 2011 was negatively impacted by a $50 million (or $0.20 per diluted share) charge related to the 2011 operational review, and other items, as detailed later in the release.
Adjusted net income (which excludes the impact of the 2011 operational review and other items as described later in the release) from continuing operations for the quarter ended December 31, 2011 was $81 million, or $0.46 per diluted share, compared with $98 million, or $0.57 per diluted share, in the same period a year ago. Foreign currency movements increased earnings by $0.05 per diluted share in the fourth quarter of 2011 compared with the fourth quarter of 2010.
Total reported revenues for the quarter ended December 31, 2011 were $825 million compared with $833 million for the same period last year, a decrease of 1%. Total commissions and fees were $816 million in the fourth quarter of 2011, down from $823 million in the prior year quarter. Investment income was $8 million in the fourth quarter of 2011, compared to $9 million in thefourth quarter of 2010. Reported commissions and fees were not impacted by foreign currency movements in the fourth quarter of 2011 compared with the fourth quarter of 2010.
Organic commissions and fees declined 1% in the fourth quarter of 2011 compared with the fourth quarter of 2010. Continuing on the trend established earlier in the year, Loan Protector (a non-core business within the North America segment) had a significant negative impact on organic growth in the fourth quarter of 2011. Excluding the impact of Loan Protector, organic commissions and fees grew 1%. Modest net new business growth was offset by a slight decrease in client retention. Rates during the quarter were essentially flat while other market factors such as exposure levels declined slightly.