Dominic Casserley, Willis Group Chief Executive Officer, commented, "We are pleased with our underlying performance with underlying net income up 21% compared to last year. We are also pleased with our organic performance, having achieved 200 basis points of positive spread. We have achieved this despite the well anticipated headwinds we faced in this quarter from timing issues and uneven market conditions."
Casserley continued, "The progress of our Operational Improvement Program continues to exceed our expectations and additional savings have been identified. We expect USD 80 million of savings from the Program this year and about USD 150 million in 2016. We are increasing the total post-Program annual savings target from USD 300 million to USD 325 million, and have provided a thorough update on the strong progress of the Program in this earnings release."
Casserley concluded, "While the outlook for insurance rates across many segments of our business is not helpful, we are well positioned in the marketplace for continued growth. We continue to believe that we will generate mid-single digit organic growth for the year and given our solid expense management performance to date, we are now increasing our 2015 expectations for positive spread between organic commissions and fees and expense growth from 130 basis points to 200 basis points. This provides an excellent earnings platform for our proposed merger with Towers Watson."
Second Quarter 2015 Financial Results
Willis Group reported net income of USD 70 million, or USD 0.38 per diluted share, in the second quarter of 2015 compared to net income of USD 47 million, or USD 0.26 per diluted share, in the prior year quarter. Items that affected second quarter 2015 net income included: restructuring costs related to the Operational Improvement Program of USD 0.15 per diluted share; M&A transaction-related expenses of USD 0.06 per diluted share; a gain on disposal of operations of USD 0.02 per diluted share; and USD 0.01 per diluted share from the devaluation of the Venezuelan currency. Items affecting the second quarter of 2014 are shown in Note 6 of the Supplemental Financial Information attached to this press release.
Underlying diluted earnings per share, which excludes the items noted above, were USD 0.58 per diluted share in the second quarter of 2015, compared to USD 0.48 per diluted share in the second quarter of 2014. The 21% improvement was primarily driven by mid-single digit growth in underlying revenues, lower expenses from cost management initiatives and the Operational Improvement Program, and a reduced tax rate compared to the prior year period.
Second quarter 2015 total reported commissions and fees of USD 917 million were down 1.3% from USD 930 million in the second quarter of 2014, impacted by USD 59 million from unfavorable foreign currency movements. Total commissions and fees were favorably impacted by a USD 33 million period-over-period net increase from acquisitions and disposals completed during the past twelve months.
Underlying commissions and fees, which exclude the impact from foreign currency movements, grew 5.3%.
Organic commissions and fees, which exclude both the impact of foreign currency movements and the net impact of acquisitions and disposals, grew 1.6%, led by solid growth in Willis International and modest growth in Willis North America, partially offset by modest declines in Willis GB and Willis CWR. Read the full story
Willis Group Reports Second Quarter 2015 Results