Willis Reports First Quarter Profit Dip

May 1, 2008

Willis Group Holdings Ltd. reported a drop in net income for the first quarter, but said revenues from commissions and fees grew.

Net income for the third largest insurance broker was $166 million, or $1.16 a share, down from $169 million or $1.10 a share in the first quarter last eyar.

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, according to the company. 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.

Willis said the first quarter showed improved 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 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.

The results for the first quarter 2008 were affected by charges totaling $33 million for severance and other costs.

Reported operating margin was 28.3 percent for the quarter compared with 32.2 percent for the same period last year.

“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.”

Under the company’s “Shaping our Future” strategy, it has decided to invest in further key hires and initiatives in 2008 and 2009. The company said it is also 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.”

Source: Willis

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