Willis reports net income in Q3 2012 down over same quarter last year

The modest organic growth recorded by Willis Group Holdings plc in the third quarter of 2012 was below the level hoped for, but still encouraging, notes the global insurance broker.

Reported net income from continuing operations for 2012 Q3 was $26 million, or $0.15 per diluted share, compared to $60 million, or $0.34 per diluted share, during the same period in 2011, Willis notes in a statement.

Among other things, reported net income was influenced by an $11 million charge as part of a settlement with a former joint venture partner in India and the related $1 million loss on disposal of the India operations. As for 2011 Q3, reported net income was reduced by a $15 million charge flowing from the 2011 operational review.

“While we aimed to do better, the 5% organic growth for International — aided by an impressive turnaround for our U.K. business and the flat results for North America — are both well-improved from the prior quarter,” says Joe Plumeri, the company’s chairman and CEO.

Contributing to 3% organic growth in commissions and fees in its Global Segment was mid-single digit growth in Global Specialties, driven by Energy, Financial Solutions and Financial and Executive Risks, all up high-single digits; Reinsurance being down low-single digits; and new business growth in Reinsurance being in high-single digits.

“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 says of results for 2012 Q3.

He cites several one-off items throughout the group that were unlikely to be repeated in 2012, as well as items outside of operational control. These include $5 million from a reinsurance profitability initiative, $5 million from the release of funds related to potential legal liabilities, and declines in investment income.

Investment income decreased from $7 million in 2011 Q3 to $4 million in the same quarter this year, primarily because of declining net yields on cash and cash equivalents.

“Taken together, it’s important to highlight that all of these items had a significant impact on earnings in the third quarter of 2011 and created an uneven comparison from this quarter to the prior year,” Plumeri adds.

Willis is of the view that “negative comparables are now largely receded,” he says, adding the streamlined company “is no longer working against the tide.”

For the North America Segment, the Human Capital business was down mid-single digits primarily as a result of the impact on comparatives from the previously disclosed fraudulent revenues recorded in the third quarter of 2011; construction business was up slightly due to improved results in both recurring and project business; new business grew low-double digits; and rates improved slightly relative to the comparable prior year period (but this improvement was offset by a reduction in exposure units).

For the first nine months ending Sept. 30, 2012, reported net income from continuing operations for Willis was $358 million, or $2.03 per diluted share. This compares to $179 million, or $1.02 per diluted share, for the first three quarters of 2011.