Insurance companies aren’t the only ones who made money last year. Brokers seem to be doing pretty good too, as the earnings announcement from the world’s third largest insurance broker, Willis Group Holdings Limited, showed.
Willis reported net operating income of $419 million for 2002, compared to $161 million in 2001. Total revenues for the year reached $1.735 billion. Operating earnings in the fourth quarter were $197 million, and net income was $118 million. Excluding extraordinary items the company earned $0.49 a share, compared with $0.30 in 2001, and declared its first ever quarterly dividend payment of 12.5 cents a share.
“Organic revenue growth, excluding the effects of foreign exchange, acquisitions and disposals, was 19% for the quarter ended December 31, 2002,” said the announcement. “Operating margin, or operating income excluding non-cash compensation for performance-based stock options and gain or loss on disposal of operations to total revenues, rose to 31% in the fourth quarter 2002 compared to 26% a year ago. EBITDA margin, or revenues less general and administrative expenses (excluding non-cash compensation) to total revenues, rose to 33% for the fourth quarter 2002, from 30% last year.”
“For the year ended December 31, 2002, operating cash earnings rose 84% to $271 million, or $1.62 per diluted share, compared to $147 million, or $0.99 per diluted share, a year ago,” the report continued. “Total reported revenues rose 22 percent, while “organic revenue growth was 18% for the year ended December 31, 2002.”
Chairman and CEO Joe Plumeri stated: “Our results in 2002 further validated our model as a global broker specializing in providing risk management services. We are focused on our core brokerage business, where we can be responsive, creative problem solvers for our clients. Growing within this framework, while maintaining disciplined expense management and a strong balance sheet has enabled us to deliver 12 consecutive quarters of record operating results.”
“It has been less than two years since the Company’s initial public offering,” Plumeri noted. “During that time, we have seen steady improvement in operating performance. We have financial flexibility supported by a strong balance sheet and cash flow, and believe the initiation of a cash dividend at this time is an appropriate return to our shareholders.”
Commenting on the current insurance marketplace, Plumeri indicated Willis anticipates “that insurance premium rates will continue to rise at least through 2003,” although “the rate of increase varies by line and geography.” He added that the company continues “to see greater risk awareness and demand for our risk management services, including alternative risk transfer solutions.”
“This Company is managed for growth and, in this current environment, intends to grow operating cash earnings per share by 25% or better in 2003 over the $1.62 reported for the year ended December 31, 2002. Beyond 2003, the Company expects to grow operating cash earnings per share by 15% or better each year, in all market environments,” Plumeri concluded.
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