Tags: Willis | restructure | growth | WSH

Willis Group to Restructure for Growth

By    |   Monday, 10 Oct 2011 03:01 PM

In the first half of 2011 Willis Group Holdings (WSH) announced plans to restructure that will have a significant short-term negative impact on the bottom line. But it also promises a goal of increased growth and expanded margins in the future. Whether these changes are effective will probably not show until well into 2012.

Willis Group is an insurance brokerage and advisory business with a global focus. The company's business is divided into three sectors: The Global segment covers reinsurance, London insurance wholesale and capital markets, and advisory. The North American segment sells insurance products in the United States, Canada, and Mexico. International segment sales cover the rest of the globe, including Europe, Latin America, and Asia.

For the first half, the company reported revenues of $1.87 billion, up 5.5 per cent from $1.77 billion in sales in the first half of 2010. However, 3 percent of the gain in sales was due to positive currency exchange results.

Adjusted earnings per share for the half year were $1.89, up from $1.80. Again, positive currency results accounted for 5 cents of the increase. Actual earnings per share for the first half was 68 cents, due to the one-time cost of an operational review initiated in the first quarter of 2010.

Operational review

Early in 2011, the Willis Group management instituted that operational review to cut costs and motivate employees at the same time. The review consisted of two parts. One part appears to be reduction in the workforce resulting in buyout costs of $115 million, or 46 cents per share, in the first half of the year.

The review also reinstated a salary review and increases for retained employees, plus reinstated the company’s 401(k) matching funds. The total cost of the review initiatives is expected to be approximately $130 million, resulting in ongoing savings of up to $80 million in 2011 and $100 million in 2012. Since Willis Group earned about $450 million in 2010, this level of savings would have a significant impact on the bottom line.

The ratings from Wall Street analysts on Willis Group Holdings tend to favor neutral or hold. The most recent rating was from the Citigroup analysts, who downgraded WSH to hold from buy.

The company reports next on Nov. 2.

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In the first half of 2011 Willis Group Holdings (WSH) announced plans to restructure that will have a significant short-term negative impact on the bottom line. But it also promises a goal of increased growth and expanded margins in the future. Whether these changes are...
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2011-01-10
Monday, 10 Oct 2011 03:01 PM
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