Why Zacks? Learn to Be a Better Investor.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating indiv idual securities.
If you wish to go to ZacksTrade, click
OK. If you do not, click Cancel.
Back to top
Willis Beats EPS, Misses Top Line
Willis Group Holdings plc reported second-quarter 2012 adjusted net income from continuing operations of 59 per share, beating the Zacks Consensus Estimate by a penny. Results were 3% lower than 61 cents earned in the year-ago quarter. Adjusted net income from continuing operations was $104 million, down 3% year over year.
Lower expenses in the quarter largely aided the outperformance.
Adjusting for insurance recovery of $3 million or 2 cents, the company reported net income of $107 million or 61 cents per share, a substantial improvement from $84 million or 48 cents in the year-ago quarter. The year-ago quarter recorded 2011 Operational Review charges of $12 million or 7 cents and FSA regulatory settlement charge of $11 million or 6 cents. Operational Performance
Total revenue in the quarter decreased 2.2% year over year to $842 million due to lower commissions and fees and lower investment income. Also, revenues lagged the Zacks Consensus Estimate of $870 million.
Commissions and fees went down 1.7% year over year to $837 million in the quarter, as foreign currency translation had a negative impact on it.
Investment income also declined 37.5% from the year-ago quarter to $5 million, attributable to lower net yields on cash and cash equivalents.
Total expense decreased 5.9% year over year to $663 million, primarily due to a decline in salaries and benefits and lower operating expense.
In the quarter under review, adjusted operating income was $174 million, down 6% year over year. Operating margin contracted 80 basis points to 20.7%. Segment Update Global: Organic growth in commissions and fees was 7% in the quarter, while reported growth was 5%.
Organic growth was primarily driven by high double-digit increase in Reinsurance business, which benefited from new business growth and improved rate environment.
Operating margin was 48.1%, expanding 80 basis points year over year. North America: Commissions and fees declined 3% year over year on an organic basis while it slipped 4% on a reported basis. Soft performance at the Loan Protector business led to poor numbers.
Operating margin in the quarter contracted 340 basis points. International: Commissions and fees increased 2% year over year on an organic basis, while on a reported basis, it declined 6%. Asia and Latin America reported high single-digit growth while Continental Europe grew in the low single-digits. The UK business declined in the mid single-digits.
Operating margin contracted 510 basis points to 16.4%. Financial Update
The cash and cash equivalent balance at quarter end stood at $407 million, down 6.4% from 2011 end.
Long-term debt increased 1.8% to $2.4 billion from 2011 end. Dividends and Share Buybacks
Willis spent $37 million to buyback 1.04 million shares in the quarter. Willis expects to repurchase shares worth almost $100 million in 2012.
The company’s Board authorized a dividend of 27 cents to the shareholders of record at September 28, payable on October 15. Zacks Rank
We retain Neutral recommendation on Willis Group. The quantitative Zacks #3 Rank (short-term Hold rating) for the company indicates no clear directional pressure on the stock over the near term. Marsh & McLennan Companies Inc. ( MMC - Analyst Report) , which competes with Willis Group, also shares a Zacks #3 Rank and is scheduled to release its second quarter results on August 7, before the bell.