Willis Group Holdings, the global insurance broker, reported disappointing but expected Q4 results that coincided with the end of Joe Plumeri’s 12 year tenure as CEO and the appointment of Dominic Casserley to his role.
The broker incurred significant charges during Q4 related to goodwill impairment in North America and a change in the company’s cash retention awards programme.
Additionally, Willis set up a valuation allowance against its deferred tax asset, which also had a notable negative impact on reported results.
Willis Group reported a net loss from continuing operations of $804 million, for the quarter ending 31 December 2012, compared with reported net income of $24 million in the same period a year ago.
The quarter’s results were negatively affected by charges of $492 million related to the goodwill impairment in North America; $200 million related to the write-off of unamortised cash retention awards; $252 million related to the accrual of 2012 cash bonuses; and a $113 million tax charge to establish a deferred tax asset valuation allowance.
The valuation allowance is related to the North America segment and is directly associated with the recording of the goodwill impairment and cash retention charges.
Reported net income in Q4 2011 was reduced by a $50 million charge related to the 2011 operational review and $22 million related to the write-off of uncollectable accounts receivable.
However, total commissions and fees for Willis Group were $867 million in the Q4 2012, up 7 percent from $810 million year-on-year. The effect from foreign currency movements amounted to negative 0.5 percent year-on-year. Excluding this foreign exchange impact, organic commissions and fees increased 7.5 percent in the fourth quarter of 2012.
Investment income for Willis Group declined to $4 million in the fourth quarter of 2012, from $8 million in the fourth quarter of 2011 due to lower net yields on cash and cash equivalents.
“In the fourth quarter, Willis undertook a series of steps to pave the way forward for our company and our shareholders. Those actions are reflected in our reported results,” said Dominic Casserley, CEO of Willis Group Holdings.
“With these actions behind us, and a quarter that resulted in significantly improved revenue growth in our segments, particularly the turnaround in Willis North America, we are encouraged by what lies ahead. We are laying a strong foundation at Willis, defined by the service we offer our clients and the manner in which we run our business, exemplified by the $524 million of cash flow we generated in 2012, an improvement of $85 million over the previous year.”
