Willis Group Holdings plc reported net income of $246 million or $1.35 per diluted share in the first quarter of 2014, compared to net income of $219 million, or $1.24 per diluted share, in Q1, 2013. The report noted, however that the figure was “negatively impacted by foreign currency movements of $0.03 per diluted share. Adjusted net income was $257 million, or $1.46 per diluted share, in the first quarter of 2013.
Group CEO Dominic Casserley commented: “We began 2014 with another quarter of solid mid-single digit revenue growth and positive contributions from each of our segments. Willis International and Willis North America both performed strongly. Willis Global grew modestly, with a strong contribution from its reinsurance business partially offset by its UK retail and specialty insurance businesses.
“Adjusted operating income matched the prior year, as we continued to invest in higher growth regions such as emerging markets, businesses such as Global Wealth Solutions in Asia, and client service improvements such as our Connecting Willis initiative.”
He also reiterated the Group’s long-term strategy, as outlined in a 2013 Investor Conference calls, “for continued investment to drive organic growth, a spread between revenues and expenses on average of 70 basis points or more, and resulting in improved cash flow generation,” he said.
“We remain confident about and committed to that plan. Further, as we continue to invest to grow revenues, we also have an opportunity to take more action on expenses. Today we are launching a multi-year operational improvement program designed to further strengthen our client service capabilities and to deliver expected cumulative cost savings of approximately $420 million through 2017 and annual cost savings of approximately $300 million starting in 2018.”
First quarter results, however, apparently fell below some analysts’ expectations. An article, published by Bloomberg, which follows, noted that “profit excluding certain items was $1.36 a share, missing the $1.40 average estimate of 16 analysts surveyed by Bloomberg.
The earnings report recognized the necessity of further controlling costs, notably by relocating 3500 employees and eliminating some jobs. The report said the restructuring would “allow Willis to continue to strengthen its client service, realize operational efficiencies, and invest in new capabilities for growth.
“Starting in the second quarter of 2014, the program is expected to be complete by the end of 2017. The program is expected to deliver cumulative cost savings of approximately $420 million through 2017 and annual cost savings of approximately $300 million starting in 2018. The estimated phasing of cost savings is: approximately $5 million in 2014, approximately $45 million in 2015, approximately $135 million in 2016 and approximately $235 million in 2017. The estimated cost savings are before any potential reinvestment. However, the Company expects the majority of savings to be reflected in earnings. To achieve these savings, the Company expects to incur cumulative charges amounting to approximately $410 million through the end of 2017.
“Total charges, actual savings and timing may vary positively or negatively from these estimates due to changes in the scope, underlying assumptions or execution risk of the restructuring plan throughout its duration,” it concluded.
Source: Willis Group Holdings
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