Q1 revenues up 5%. Reinsurance sector sees strong growth

Broker giant Willis reported Q1 revenues up 5% to $972m with organic growth at 3%. But it warned premiums rates fell 2%, its US business shrank and the UK and Ireland were weak. Net Income rose 6% to $204m.

Q1 financial highlights (2009 in brackets)

  • Total reported revenues $972m ($930m)
  • Total commissions and fees $963 ($915m)
  • Investment income $9m ($13m)
  • Net income from continuing operations $204m ($192m)

Joe Plumeri, chairman and chief executive officer, said: “We delivered another solid quarter of financial results, supported by positive organic growth in each segment of our business.

“Combined with our continued focus on cost control, we expanded our adjusted operating margin by over 200 basis points. I am pleased with our performance in the quarter as we continue to face a challenging environment, with rates still soft and economic pressures persisting in a number of countries in which we operate.”

North America

The North America segment reported 3% decline in commissions and fees and 1% growth in organic commissions and fees in the first quarter of 2010 compared with the same period of 2009.

Included in North America reported commissions and fees were legacy HRH contingent commissions of $8m in the first quarter of 2010 compared with $20m in the first quarter of 2009. North America continues to generate strong new business, with steady client and producer retention.

The North America segment continued to benefit from specialist industry expertise, with strong results from the healthcare, financial institutions, personal lines and real estate/hospitality businesses.

North America’s results also continue to reflect headwinds from the soft insurance market conditions and ongoing weakness in the US economy.

As a result of organic growth in commissions and fees and ongoing cost management, operating margin expanded 60 basis points to 25.5% in the first quarter of 2010 compared with Q1 2009

International

The International business segment reported 12% growth in commissions and fees and 3% organic growth in commissions and fees in the first quarter of 2010 compared with the same period of 2009.

Strong growth in the emerging economies of Latin America, Asia and Eastern Europe, was partially offset by slowing growth in some developed European economies and continued weakness in the UK and Ireland retail market.

Excluding the UK and Ireland, the International business segment organic growth was 5%. Strong new business more than offset the soft rate environment and weakness in the UK and Ireland market. Operating margin was 33.9% compared with 34.9% in the first quarter of 2009.

Reinsurance strong

The Global segment, made up of the Reinsurance, Global Specialties, Faber & Dumas, and Willis Capital Markets & Advisory divisions, reported 9% growth in commissions and fees and 7% organic growth in commissions and fees.

Growth was primarily driven by the Reinsurance division, with strong organic growth in commissions and fees, especially in North America. Solid net new business in this division more than offset the softness in reinsurance rates.

Global Specialties contributed positive organic growth in commissions and fees, led by financial and executive risks and marine. Operating margin was a seasonally high 45.5%, in line with the first quarter of 2009.

Plumeri said: “As we move through 2010, we will continue to reinforce our sales and revenue culture, maintain disciplined expense management to fund growth and work to further strengthen our balance sheet.

“Even as we face continued challenges from economic and rate headwinds, I believe these efforts position us well for continued success.”