Best insurance stock today - Zacks estimates Willis Group Holdings EPS : Willis Group Holdings plc (WSH - Analyst Report) reported fourth-quarter 2012 adjusted net income from continuing operations of 45 cents per share , surpassing the Zacks Consensus Estimate by a penny. Results were in line with the year-ago earnings.
Including goodwill impairment charge of $2.62 per share , write-off of unamortized cash retention awards of 79 cents , 2012 cash bonus accrual of $1 per share , insurance recovery of 2 cents , loss on disposal of operations of 1 cent , deferred tax valuation allowance of 64 cents and dilutive impact of potentially issuable shares of 6 cents , Willis Group incurred a loss of $4.65 per share , compared with an income of 14 cents in the prior-year quarter.
Operational Performance
Total revenue in the quarter increased 6.3% year over year to $871 million due to higher commissions and fees. Commissions and fees improved 7% year over year to $867 million in the quarter.
Investment income plummeted 100% year over year to $4 million , attributable to lower net yields on cash and cash equivalents.
Total expense shot up 123% year over year to $1.6 billion , primarily due to an increase in salaries and benefits , and goodwill impairment charge.
In the quarter under review , adjusted operating income was $166 million , up 8.5% year over year. Operating margin expanded 40 basis points to 19.1%.
Quarterly Segment Update
Global: Organic growth in commissions and fees was 11.6% in the quarter , while reported growth was 11.3%. Organic growth was primarily driven by better results across all lines of business.
Operating margin was 19.7% , expanding 340 basis points year over year.
North America: Commissions and fees , on an organic basis , grew 5% , while on a reported basis grew 4.7%.
Operating margin in the quarter contracted 250 basis points to 17.2%.
International: On an organic basis , commissions and fees increased 7.4% year over year , while on a reported basis , it increased 6.4%. Latin America reported strong double-digit growth , while Europe and UK reported mid-single digit growth. Asia recorded low single-digit growth.
Operating margin was 23.6% , contracting 270 basis points.
Full year Highlights
Adjusted net income from continuing operations of $2.58 per share were in line with the Zacks Consensus Estimate. Earnings declined 5.8% over 2011.
Including goodwill impairment charge of $2.60 per share , write-off of unamortized cash retention awards of 78 cents , 2012 cash bonus accrual of 99 cents , insurance recovery of 3 cents , loss on disposal of operations of 2 cents , India JV settlement of 6 cents , write-off of uncollectible accounts receivable balance and legal fees of 5 cents , deferred tax valuation allowance of 64 cents and the dilutive impact of potentially issuable shares of 6 cents , Willis Group incurred a loss of $2.58 per share , compared with an income of $1.15 in 2011.
Cost Savings Initiative
Management is reviewing the organizational design and expects to reduce headcount. The review will be completed in the first quarter of 2013. As a result Willis Group expects to incur a pre-tax charge of about $35 million to $45 million in the first quarter of 2013.
Nevertheless , beginning in the second quarter , the company expects to realize cost savings , primarily through headcount reduction , of approximately $20 million to $25 million in 2013. Moreover , it expects annualized cost savings of approximately $25 million to $30 million.
Financial Update
Willis exited 2012 with cash and cash equivalents of $500 million , up 14.7% year over year.
Long-term debt slid 0.7% to $2.3 billion from 2011 end.
Cash flow from operating activities in 2012 was $524 million , up 19.4%.
Dividend Update
In Feb 2013 , the board of directors approved a 3.7% increase in the quarterly cash dividend. Willis will pay the increased dividend of 28 cents on Apr 15 , 2013 to shareholders of record as on Mar 29 , 2013. The annualized dividend comes to $1.12 per share.
Performance of other insurance brokers
Marsh & McLennan Companies , Inc. (MMC - Analyst Report) reported its fourth-quarter 2012 operating earnings of 52 cents per share , in line with the Zacks Consensus Estimate.
However , the results were slightly higher than the year-ago quarter’s earnings of 46 cents per share.
Arthur J Gallagher & Co. (AJG - Snapshot Report) reported earnings of 39 cents in the fourth quarter , a penny above the Zacks Consensus Estimate and up 11% year over year.
Aon plc (AON - Snapshot Report) posted earnings of $1.27 per share , exceeding the Zacks Consensus Estimate by 1.6% and the year-ago earnings by 31%.
Zacks Rank
Willis Group currently carries a Zacks Rank #3 (Hold)