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Willis Group Holdings plc reported first-quarter 2012 adjusted net income from continuing operations of $1.32 per share, beating the Zacks Consensus Estimate by 6 cents. Results were 2.3% higher than $1.29 earned in the year-ago quarter. Adjusted net income from continuing operations was $233 million, up 4% from $224 million in the prior-year quarter.

The improvement resulted from improved top line coupled with lower expenses.

Adjusting for write-off of uncollectible accounts receivable balance and legal fees of $8 million or 4 cents a share, the company reported net income of $225 or $1.28 per share, a substantial improvement from $35 million or 20 cents in the year-ago quarter.

Operational Performance

Total revenue in the quarter inched up 0.6% year over year to $1.01 billion. The improvement came on the back of a slight increase in commissions and fees. Revenues, however, lagged the Zacks Consensus Estimate of $1.03 billion.

Commissions and fees crept up 0.6% year over year in the quarter, based on higher numbers at the Global and International segments.

Investment income for Willis in the quarter declined 37% from the year-ago quarter to $5 million, on the back of lower net yields on cash and cash equivalents.

Total expense decreased 9.4% year over year to $696 million, primarily due to a decline in salaries and benefits.

In the quarter under review, adjusted operating income was $330 million, down 1% year over year. Operating margin contracted 40 basis points to 32.6%.

Segment Update

Global: Organic growth in commissions and fees was 5% in the quarter, while reported growth was 4%.

Organic growth was primarily driven by high single-digit increase in Reinsurance business, which benefited from new business growth and improved rate environment.

Operating margin was 48.1%, contracting 80 basis points year over year.

North America: Commissions and fees declined 2% year over year on an organic basis while it slipped 3% on a reported basis. Soft performance of Loan Protector business affected organic growth.

Operating margin in the quarter expanded 110 basis points.

International: Commissions and fees increased 4% year over year on an organic basis with on a reported basis, it grew 1%. Eastern Europe and Latin America grew by double digits while Asia reported high single-digit growth. In Europe, the continental business grew in the low single-digits while the UK business declined in the mid single-digits.

Operating margin contracted 210 basis points to 27.7%.

Financial Update    

The cash and cash equivalent balance at quarter end stood at $464 million, up approximately 6.4% from 2011 end.

Long-term debt increased 3.4% to $2.43 billion from 2011 end.

Dividends and Share Buybacks

The company’s board authorized a dividend of 27 cents to the shareholders of record at June 30, payable on July 13. This dividend represents an increase of 3.8%

Willis expects to repurchase shares worth up to $100 million in 2012. As such, the company spent $21 million to buyback 0.6 million shares in the first quarter.

Zacks Rank

The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term.

Headquartered in London, the United Kingdom, Willis Group Holdings plc and its subsidiaries provide a broad range of insurance brokerage, reinsurance and risk management consulting services to its worldwide clients, both directly and through its associates. Marsh & McLennan Companies Inc. , which competes with Willis Group, is scheduled to release its first quarter results on May 1, before the bell.

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