Willis raises fees and profits

Willis announced Q2 commission and fee income up from $772m last year to $789m, claiming organic growth of 4% and a 16% growth in new business – 6% net growth in new business. Premiums fell 2, it said.

Joe Plumeri, chairman and chief executive officer said: “Our second quarter results continue to reflect the strength of our geographic diversity and our relentless focus on building the business. This result was in the face of a continued soft insurance market and challenging economic conditions.”

Q2 financial highlights $m (2009 in brackets)

• Commissions and fees 789 (772m)
• Investment income 10m (12m)
• Total revenues 799m (784m)
• Operating Income 169m (165m)
• Net Income 91m (91m)
• Net Income attributable to Willis Group Holdings 89m (87m)

Foreign currency

Willis said foreign currency movements favourably impacted earnings by $0.03 per diluted share compared with the second quarter of 2009. It also made as a pre-tax gain of $12 million, or $0.04 per diluted share, on the curtailment of the US pension plan in the second quarter of 2009.

Total reported revenues for the quarter ended June 30, 2010 were $799 Foreign currency movements unfavourably impacted reported commissions and fees by 2%. Investment income was $10m, down from $12m, principally due to lower interest rates.

New business

Net new business growth of 6% reflected strong new business generation of 16% and solid client retention. Partially offsetting net new business growth was a 2% negative impact from declining premium rates and other market factors.

The North America segment reported a 2% decline in commissions and fees. Organic commissions and fees declined 1% compared with an 8% decline in the same period a year ago.

North America generated new business growth in the teens, with improved client retention, and also benefited from positive growth in the employee benefits practice.

“The segment continues to be impacted by headwinds from soft insurance market conditions and ongoing weakness in the US economy,” Willis said. Operating margin was 20.5% (22.3%).

International

The International business segment reported 6% growth in commissions and fees and contributed 8% organic growth in commissions and fees. Growth was recorded across all regions, with double- digit expansion in Latin America, Asia and Eastern Europe.

The UK and Ireland retail market recorded modestly positive growth after several negative quarters. Operating margin was 23.5%.

Reinsurance

The Global segment - Reinsurance, Global Specialties, Faber & Dumas, and Willis Capital Markets & Advisory divisions - reported 4% growth in commissions and fees and 7% organic growth in commissions and fees. Willis Capital Markets & Advisory was the primary driver of organic growth in the second quarter as a result of increased capital market activity. Reinsurance and Global Specialties also contributed positive growth in commissions and fees.

“Reinsurance continues to generate strong new business despite market softness, while the Global Specialties practices, especially Financial and Executive Risks and Energy, were significant contributors to organic growth in the second quarter,” Willis said. Operating margin was 31.8%.

Half-year results

For the half-year reported net income from continuing operations was $293m ($279m). Total reported revenues were $1,771m ($1,714m). Foreign currency movements increased reported revenues by 1 percent.

Organic growth in commissions and fees was 4%. This growth reflected net new business won of 6% partially offset by a negative 2% impact from declining premium rates and other market factors.

Reported operating margin was 26.5% for the six months ended June 30, 2010 compared with 25.6% for the same period last year.

“I am pleased with the progress we have made in growing our business through the first six months of 2010. While the external environment is still challenging, we are up to the challenge. We continue to manage the business to maximize the opportunity for success in any environment, growing and investing in our business, while keeping a sharp focus on expense management,” Plumeri said.