Global insurance broker Willis Group Holdings Limited reported a strong first quarter 2006, posting total revenues of $671 million, compared with $669 million for the same period last year. Willis said “the effect of foreign currency translation decreased reported revenues by 5 percent and net disposal of operations reduced reported revenues by 1 percent.” Net income for the quarter was $140 million, or $0.88 per diluted share, compared with $67 million, or $0.41 per diluted share in Q1 2005.
Commenting on the results, Chairman and CEO Joe Plumeri noted: “Last year we made disciplined decisions for the long-term best interest of our Company, including investments in talent, processes and technology. We are pleased that the first quarter 2006, with 6 percent organic revenue growth and improved earnings, reflects the early results of these investments.”
Other highlights noted in the report include the following:
– Organic growth in commissions and fees excluding total market remuneration was 6 percent in the first quarter 2006, comprised of approximately 6 percent in net new business and a negligible impact from insurance premium rates and other market factors. Willis noted that although it continues to “see rates moderating, the impact is varied geographically and according to product line.
– Adjusted net income was $0.88 for the first quarter of 2006 compared to $0.82 for the same period last year, an increase of 7 percent. The impact of foreign currency translation reduced first quarter 2006 net income by $0.03 per diluted share compared with first quarter 2005.
– Salaries and benefits expense for the quarter ended March 31, 2006 was $348 million, or 51.9 percent of total revenues, compared with $365 million, or 54.6 percent of total revenues in the comparable period last year, excluding first quarter 2005 severance costs. The improvement in this compensation ratio was helped by both increased revenue contribution from recent hires and the benefit in the first quarter 2006 of a more even quarterly recognition of incentive compensation than in 2005.
– Other expenses for the first quarter of 2006 were $105 million, or 15.6 percent of total revenues, compared to $96 million, or 14.3 percent in the comparable period last year, excluding first quarter 2005 costs related to regulatory settlements and other provisions.
– Reported (and adjusted) operating margin was 30.4 percent for the quarter ended March 31, 2006, compared with a 13.0 percent reported margin and 29.1 percent adjusted operating margin for the same period last year.
Commenting on its outlook for the remainder of 2006, Willis said: “For the full year 2006, the Company anticipates continued growth in organic commissions and fees. The net impact of the accounting changes for stock options and pension on salaries and benefits and operating income in 2006 is not expected to be significant. For the full year 2006, the Company expects salaries and benefits expense as a percentage of total revenues to be less than 59 percent and expects modest operating margin expansion. This outlook assumes a more selective approach toward recruiting opportunities in an environment which remains highly competitive.”
In conclusion, Plumeri added, “As we move into the next chapter at Willis we are committed to generating sustainable profitable growth by increasing value to our clients and delivering that value efficiently. From our already strong platform, we expect to expand our market share and continue to enhance our top line and bottom line. We anticipate that we will see significant benefits from this strategy in 2007.”
A conference call to discuss first quarter 2006 results will be held May 4, 2006 at 8:00 a.m. Eastern Time. To participate in the live teleconference, please dial (800) 857-6553 (US) or (773) 756-0108 (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 a.m., Eastern Time, and ending May 18, 2006. To access the audio replay, please dial (866) 442-1775 (US), or (203) 369-1075 (International), or by accessing the Company’s Website. Further details of the Q1 financial report can also be obtained on the Website.