Insurance broker Willis Group Holdings plc (WSH) on Wednesday reported a 30% increase in profit for the fourth quarter from last year on higher revenues that were aided by acquisitions and new businesses. The company reported 4% growth in commissions and fees for the quarter.
Willis' net income from continuing operations for the fourth quarter increased to $79 million or $0.47 per share from $61 million or $0.37 per share in the year-ago period. The results for both the quarters were affected by certain items, including the acquisition of Hilb Royal & Hobbs Co., or HRH.
Excluding certain items, adjusted earnings per share from continuing operations for the latest quarter were $0.47, up 31% from $0.36 in the same period last year. Foreign currency movements had a negative $0.03 impact on earnings in the latest quarter.
On average, twelve analysts polled by Thomson Reuters expected the company to report earnings of $0.48 per share for the quarter. Analysts' estimates typically exclude one-time items.
Willis' total revenues for the fourth quarter increased 4% to $824 million from $792 million in the year-ago period. Foreign currency movements increased reported revenues by 3% compared with a year ago. Analysts had a consenus revenue estimate of $807.52 million for the quarter.
Willis reported 4% growth in commissions and fees to $809 million from $775 million in the year-ago period, reflecting new business won, partially offset by declining premium rates and other market factors.
Organic growth in commissions and fees was 2% in the latest quarter, reflecting new business won of 7%, partially offset by a negative 5% impact from declining premium rates and other market factors. Continued strong client retention levels and momentum from initiatives such as Global Placement and Client Profitability also contributed to organic growth in commissions and fees.
The company's investment income for the quarter decreased to $15 million from $17 million in the previous-year quarter.
Operating income for the quarter increased 28% to $173 million from $135 million in the year-ago period.
Reported operating margin for the quarter increased to 21.0% from 17.0% in the same period last year.
Excluding certain items, adjusted operating margin was 21.1%, up from 16.8% 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.
For fiscal year 2010, the company's reported net income from continuing operations surged to $436 million or $2.58 per share from $302 million or $2.04 per share in the prior year. The results for both the years were affected by certain items, including the acquisition of HRH and 2008 expense review charges for severance and other costs.
Excluding items, adjusted earnings per share from continuing operations increased 5% to $2.67 from $2.55 a year ago. Analysts expected the company to report earnings of $2.66 per share for the year.
Total reported revenues for the year increased 15% to $3.26 billion from $2.83 billion last year, primarily due to the HRH acquisition, while the effect of foreign currency translation decreased reported revenues by 4%. Analysts expected revenues of $3.25 billion for the year.
As of December 31, 2009, the company's cash and cash equivalents totaled $191 million, and total debt was $2.4 billion. Total debt was reduced by approximately $230 million in the fourth quarter, primarily due to proceeds received on the completion of the Gras Savoye transaction.
During the fourth quarter, the company announced the completion of a leveraged transaction with the original family shareholders of Gras Savoye & Cie, and Astorg partners, a private equity fund, to reorganize the capital of Gras Savoye. With the closing of the transaction, Willis now owns a 31.8% stake in the new holding company and has 33.3% of the voting rights on the new holding company board. At the end of the fourth quarter, Willis moved its business to Ireland from Bermuda. The company said that subject to the approval by the Irish High Court of a capital reduction procedure to create distributable reserves, its board of directors has authorized a quarterly cash dividend on the company's ordinary shares of $0.26 per share, or an annual rate of $1.04 per share. The dividend is expected to be payable on April 16, 2010 to shareholders of record on March 31, 2010.
Earlier on Wednesday, Wills Group said that Stephen Wood, the company's Global Group Financial Controller, has been appointed as interim Chief Financial Officer. The appointment is effective with the February 19, 2010 departure of Patrick Regan, who is leaving the company to become CFO of Aviva plc (AV).
Regan's planned departure was previously announced on October 23, 2009. In his interim role, Wood will report to Willis Chairman and CEO Joseph Plumeri, and will continue to be based in London.
WSH closed Wednesday's regular trading session at $27.42, up $0.46 or 1.71% on a volume of 1.29 million shares. In the past 52 weeks, the stock has been trading in a range of $18.52-$28.67.
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