Willis Group Reports First Quarter 2008 Results
New York, NY, April 30, 2008 – Willis Group Holdings Limited (NYSE: WSH), the global insurance broker, today reported results for the quarter ended March 31, 2008.
“We delivered good organic revenue growth in each business segment driven by our robust sales culture, despite the soft insurance market conditions,” said Joe Plumeri, Chairman and Chief Executive Officer. “We continue to execute the Shaping our Future strategy to deliver top line growth while maintaining expense discipline.”
Financial Results
Reported net income for the quarter ended March 31, 2008 was $166 million, or $1.16 per diluted share, compared with $169 million, or $1.10 per diluted share, a year ago. The results for the first quarter 2008 were significantly impacted by charges totaling $33 million for severance and other costs. As previously announced, the Company expects to incur charges currently estimated at approximately $65 to $85 million in 2008, resulting in cost savings currently estimated at approximately $25 to $35 million in 2008, rising in 2009.
Excluding these charges, which are reviewed in detail later in this release, adjusted earnings per diluted share increased 20 percent to $1.32 in the first quarter 2008 from $1.10 a year ago. The impact of foreign currency translation increased first quarter 2008 earnings per diluted share by $0.08 compared with the first quarter 2007.
Total reported revenues for the quarter ended March 31, 2008 were $795 million compared with $739 million for the same period last year, an increase of 8 percent. The effect of foreign currency translation increased reported revenues by 5 percent.
Organic growth in commissions and fees was 3 percent in the first quarter 2008 compared with first quarter 2007. This reflected net new business won of 4 percent, partly offset by a negative 1 percent impact from declining premium rates tempered by other market factors, such as higher commission rates, higher insured values and changes in limits and exposures. There was improvement in retention across all business segments versus the full year 2007.
The International business segment contributed 5 percent organic growth in commissions and fees in the first quarter 2008 compared with the same period in 2007. There was continued strength in Europe, especially Spain and Denmark, and in Latin America, as well as our emerging market countries in Eastern Europe and Asia. North America organic growth in commissions and fees was 3 percent in the first quarter 2008 compared to the same period in 2007, with good growth through most retail regions.
The Global segment, which comprises Global Specialties and Reinsurance, contributed 2 percent organic growth in commissions and fees in the first quarter 2008 compared with first quarter 2007. Global Specialties had positive organic growth in commissions and fees across many specialty businesses. Reinsurance reported modest positive organic growth in commissions and fees, especially International.
Reported operating margin was 28.3 percent for the quarter ended March 31, 2008 compared with 32.2 percent for the same period last year. Excluding the charge, adjusted operating margin was 32.5 percent for the quarter ended March 31, 2008 compared with 32.2 percent a year ago. The margin continued to benefit from the execution of our Shaping our Future initiatives, cost savings from the 2006 Shaping our Future charge, good expense control and lower pension expense.
The Company had an effective underlying tax rate of 29.5 percent in the quarter ended March 31, 2008, excluding the tax effects of the disposal of the London headquarters and share-based compensation.
Capital
The Company continues to proactively manage capital through its dividend policy, buyback authorization and acquisition strategy.
The Board of Directors declared a regular quarterly cash dividend on the Company’s common stock of $0.26 per share, an annual rate of $1.04 per share. The dividend is payable on July 14, 2008 to shareholders of record on June 30, 2008.
For the quarter ended March 31, 2008, a total of 2.3 million shares were repurchased for $75 million in the open market at an average price of $33.12 under the existing $1 billion share buyback authorization.
On January 2, 2008, the Company purchased a further 4 percent of Gras Savoye & Cie for approximately $30 million, increasing its ownership to 42 percent.
As at March 31, 2008, cash and cash equivalents totaled $195 million, total debt was $1.4 billion
and total stockholders’ equity was $1.4 billion.
Outlook
The Shaping our Future strategy is a series of initiatives designed to deliver profitable growth, and as previously reported, the Company has decided to invest in further key hires and initiatives in 2008 and 2009. As previously announced, the Company is conducting a thorough review of all businesses to identify additional opportunities to rationalize its expense base to help fund a portion of these anticipated investments. In first quarter 2008, the Company incurred a pre–tax charge of $33 million in connection with this expense review for severance and other costs, including property and systems rationalizations.
The Company also anticipates that it will incur additional pre-tax charges in the remainder of 2008 and currently estimates total 2008 charges related to the expense review to be in the range of approximately $65 million to $85 million. The Company currently anticipates that these charges will lead to cost savings in the range of $25 million to $35 million in 2008, rising in 2009. These savings are in addition to the anticipated annualized net benefit from the 2006 Shaping our Future charges currently estimated to be approximately $30 million in 2008 and $45 million by 2009.
Excluding these charges, the Company continues to expect an adjusted operating margin of approximately 24 percent in 2008, as underlying business growth and cost savings are reinvested. The Company continues to expect adjusted operating margins to expand in 2009 and 2010 to reach its previously stated goal of 28 percent or more. The Company continues to expect to deliver adjusted earnings per diluted share in the range of $2.85-$2.95 in 2008, $3.30-$3.40 in 2009, and $4.00-$4.10 in 2010. These figures include minimal accretion from share buybacks in 2008 with $0.30 by 2010.
“We are executing Shaping our Future with tangible results,” said Mr. Plumeri. “We will continue to invest in the business to drive profitable growth and remain confident in our outlook for 2008.”
Conference Call and Web Cast
A conference call to discuss first quarter 2008 results will be held on Thursday, May 1, 2008, at 8:00 AM Eastern Time. To participate in the live teleconference, please dial (888) 566-5771 (domestic) or +1 (210) 839-8503 (international) with a pass code of “Willis”. The live audio web cast (which will be listen-only) may be accessed at www.willis.com. This call will be available by replay starting at approximately 10:00 AM Eastern Time, and through May 29, 2008 at 11:00 PM Eastern Time, by calling (866) 421-3814 (domestic) or + 1 (203) 369-0805 (international) with no pass code, or by accessing the website.
Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Including our Associates, we have over 300 offices in some 100 countries, with a global team of approximately 16,000 employees serving clients in some 190 countries. Additional information on Willis may be found on its web site: www.willis.com.