Willis hit by exchange rate

Willis has announced that its fourth-quarter net income fell about 35% to $62m (£43m) hurt by declines in foreign currency and integration costs from a recent acquisition.

The company said its acquisition last October of Hilb Rogal & Hobbs (HRH) had had an impact but that the strengthening dollar against the pound had hurt the most cutting revenue by 9% and earnings per share by $0.26.

Revenue rose about 25%to $799m, largely due to the HRH acquisition.

“Despite unprecedented economic turmoil, Willis closed the year with strong results. Fourth quarter organic revenue growth of 6 percent was our highest over the past two years,” said Joe Plumeri, chairman and chief executive. “Our acquisition of HRH is proving to be a financial and strategic win with high client and producer retention and early delivery of synergies.”

Fourth Quarter 2008 Financial Results

• Net income $62m compared with $95m - significantly affected by the acquisition of Hilb Rogal & Hobbs Company (HRH), foreign currency translation and certain other non-operating items.
• The acquisition of HRH was completed on October 1, 2008, and its results of operations have been included in reported results from that day forward, including revenues of $182m and operating expenses of $141m.
• The results for the fourth quarter 2008 were impacted by HRH integration costs totalling $4m and other non-operating items.
• The results for the fourth quarter 2008 were also significantly impacted by foreign currency translation, which reduced earnings per diluted share by $0.26 compared with the fourth quarter 2007, primarily the result of the significant strengthening of the US dollar relative to the British pound. The majority of the impact of foreign currency translation was the result of the quarterly retranslation of the UK pension plan ($0.18 per diluted share).
• Total reported revenues for the quarter ended December 31, 2008 were $799m compared with $639m for the same period last year, an increase of 25%, primarily due to the HRH acquisition. The effect of foreign currency decreased reported revenues by 9 percent.
• Organic growth in commissions and fees was 6%. This reflected net new business won of 9% offset by a negative 3% impact from declining premium rates tempered by other market factors, such as higher commission rates, higher insured values and changes in limits and exposures.
• Reported operating margin was 17.0% for the quarter ended December 31, 2008 compared with 23.6% for the same period last year.

Full Year 2008 Financial Results

Net income $303m down from $409 million,

• Pre-tax charges totaling $92 million for the 2008 expense review, HRH integration costs, and foreign currency translation.
• Revenues were $2.834bn up from $2.578bn for the same period last year, an increase of 10%, primarily reflecting the HRH acquisition.
• The effect of foreign currency translation increased reported revenues by 1% for the full year 2008 compared with 2007.
• Organic growth in commissions and fees was 4%
• Reported operating margin was 17.8% compared with 24.0%