Willis profits halve as commissions drop in Q3

Willis Group Holdings plc’s profits more than halved during the third quarter of 2012 as commissions and fees dropped 1%.

The global broker reported net income of $26m (£16.27m) or 15 cents (9p) per share in the third quarter compared to $60m or 34 cents per share during the same period last year.

Profits were hit by an $11m settlement charge with former joint venture partner Bhaichand Amoluk in India and a $1m loss on the disposal of its India operations.

Meanwhile, commissions and fees edged down to $749m for the quarter from $753m in Q3 2011.

Investment income was down at $4m from $7m over the same period, primarily due to declining net yields on cash and cash equivalents, while total revenues were also lower at $754m versus $760m a year earlier.

But the firm was boosted by 2% organic growth in commissions and fees.

Willis Group chairman and chief executive Joe Plumeri said: “Our organic growth this quarter of 2%, which includes strong performances in a number of areas, offers encouraging signs that Willis is moving past a range of issues that have affected our comparable results quarter-over-quarter.

“While we aimed to do better, the 5% organic growth for international – aided by an impressive turnaround for our UK business and the flat results for North America – are both well improved from the prior quarter.

“The organic growth of 3% for Willis Global, while demonstrating excellent performance in many areas, also highlights some of the comparables that dragged on our results broadly across Willis this quarter.”

Plumeri, who steps down from his role in January 2013, said the firm benefited from a number of one-off items on its balance sheet last year that it was unlikely to repeat in 2012, including $5m from a reinsurance profitability scheme, $5m from a funds release related to potential legal liabilities and $3m of revenues related to fraudulent activity in Chicago.

Willis also deferred some of its expected revenues for the third quarter into the fourth quarter and beyond, including a number of its capital markets and advisory unit deals.

“During 12 years of growth and shareholder return during my tenure, we’ve enjoyed periods when we got the breaks and others, like the last few quarters, when we’ve recorded positive results even against the overhang from sizable non-recurring items,” Plumeri said.

“As we compete vigorously to retain business, win new accounts and minimise our costs during my final quarter as CEO, we believe that these negative comparables are now largely receded. I am very confident that a few months from now, when Dominic Casserley and Steve Hearn take over, they’ll steer a strong and streamlined company that is no longer working against the tide.”

Salaries and benefits increased 3% to $502m in the third quarter of 2012 from $489m in Q3 2011.

Willis bought back 1.16 million shares for approximately $42m during the third quarter as it completed its $100m 2012 repurchase programme.

The board of directors declared a regular quarterly cash dividend of 27 cents per share payable on 15 January 2013 to shareholders of record at 31 December 2012.