Marine, energy, construction and reinsurance all up

Willis reports good Q1 results hit by currency rates and US premium cuts.

Highlights include (2008 Q1 in brackets)

  • 19% growth in commissions and fees
  • 2% organic growth in commissions and fees; international and global segments each with 5% growth
  • Operating margin of 29.5%; adjusted operating margin of 29.8%
  • Interim bridge facility reduced to $103m
  • Net income from continuing operations $192m ($166m)
  • Net income was affected by the acquisition of Hilb Rogal & Hobbs (HRH), certain other non-operating items and foreign currency translation.
  • Revenues of $930m ($795m) up 17%, primarily due to the HRH acquisition.
  • The effect of foreign currency decreased reported revenues by 12%.
  • 7% more business won but 5% cut in premium rates/higher commission paid led to 2% organic growth compared with 2008 Q1
  • International business had 5% organic growth in commissions and fees compared with 2008 Q1
  • North America reported a 5% decline compared with 2008 Q1
  • The operating margin in North America expanded to 24.9%
  • Global specialties and reinsurance, recorded 5% organic growth in commissions and fees compared with 2008 Q1
  • Especially strong growth in marine, energy and construction
  • Reinsurance benefited from strong net new business and stabilising rates
  • Operating margin was 29.5% (28.3%)
  • Excluding certain items, adjusted operating margin was 29.8% (32.5%)
  • Salaries and benefits were $480m ($411m), or 51.6% (51.7 %)
  • Other operating expenses were $138m ($149m), or 14.8% (18.7%)

“We continue to deliver solid financial results in the face of global economic and financial headwinds, despite an ongoing soft insurance market,” said Joe Plumeri, chairman and chief executive. “Our revenue growth reflects the strength of our geographic and business line diversity and our earnings and operating margin demonstrate our ability to manage the expense base through these difficult times.

“We remain focused on top line growth while relentlessly managing costs through our Right Sizing Willis initiative and the integration of HRH,” Plumeri added. “We have overcome various headwinds to our adjusted operating margin, including lower investment income, higher pension expense, dilution from the HRH acquisition, higher severance expense and unfavorable foreign currency impact in the quarter. These factors combined had an unfavorable impact of over 900 basis points, yet we were still able to deliver an adjusted operating margin of close to 30% in the first quarter of 2009.”