Commissions and fees drive Willis' third-quarter gain

Willis Group Holdings P.L.C. reported a notable increase in third-quarter profit as the broker’s “operational improvement program” helped it save $33 million in costs for the period.

Willis reported third-quarter revenue climbed to $846 million, up 4.2% from last year’s third quarter. Meanwhile, the brokerage had net income of $117 million for the quarter ended Sept. 30 compared with a loss of $7 million for the same quarter in 2014.

Much of Willis’ third-quarter revenue growth was attributed to commissions and fees, which increased 4% year-over-year to $841 million, Willis said Tuesday in a statement.

The brokerage said restructuring efforts, which cost $24 million during the quarter, helped boost its financial performance for the recent period and has saved $63 million in costs during the first nine months of the year.

“This was the fourth consecutive quarter of year-over-year improvement in operating margin on both an underlying and organic basis, demonstrating that our initiatives, including the operational improvement program, are gaining traction,” Willis Group CEO Dominic Casserley said in a statement.

The company said it believes its pending acquisition of French broker Gras Savoye & Cie. and its proposed merger with New York-based Towers Watson & Co. “will accelerate our strategy and create further value for all shareholders.”

“The biggest opportunity for (Willis) is with the (Towers Watson) merger,” Cliff Gallant, a San Francisco-based analyst at Nomura Securities International Ltd., said in an investor note. “Both companies have good businesses with what we view are tangible opportunities in cost savings and taxes.”

Combining the businesses would improve revenue and allow Willis and Towers Watson to “leverage their existing franchises,” he said. But even if the deal were to break up, “we continue to see upside in (Willis) as the operational improvement program continues to be executed.”

For the first nine months of 2015, Willis reported $2.86 billion in revenue, up slightly from a year ago, and $397 million in net income, up nearly 39% from the same period last year.