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Willis Towers Watson merger costs hit earnings

Willis Towers Watson merger costs hit earnings

Willis Towers Watson P.L.C. on Wednesday reported fourth-quarter results for Willis Group Holdings P.L.C. and Towers Watson & Co., which merged Jan. 5 to form the new insurance brokerage and consulting firm.

Fourth-quarter revenue at Willis rose 1.7% to $974 million with organic growth of 3.0%, Willis Towers Watson said in its earnings statement after the close of financial markets Tuesday.

The brokerage, however, swung to a fourth quarter net loss of $24 million, compared with a profit of $76 million in the year-ago period, as integration costs took their toll on the bottom line. Fourth-quarter expenses for Willis Group jumped 18.7%, to $972 million, including $48 million of merger and acquisition related expenses, the statement said.

The brokerage's domestic unit, Willis North America Inc., saw fourth-quarter organic growth of 1.9% as strength in the construction, surety, real estate and hospitality and life sciences businesses was partially offset by moderation in telecommunications and mining, the statement said. Willis International Ltd., meanwhile, saw organic growth of 9.0% as all major regions grew in the quarter, according to the statement.

“We couldn't be more pleased with international business in 2015,” Dominic Casserley, deputy CEO and president of Willis Towers Watson, said on a Wednesday morning call with analysts. “The business turned in excellent growth and profitability despite facing significant challenges in key geographies.”

For the full year 2015, the brokerage's revenue increased 0.7% to $3.83 billion, with organic growth of 2.8%. Full-year net income rose 3.0% to $373 million, while expenses grew 7.8% to $3.40 billion.

CEO John Halley was optimistic about the combined company's benefits stature.

“Merging the Towers Watson technology and products with the Willis and Gras Savoye distribution networks has given us an immediate strength and presence in the benefits space,” said Mr. Halley on the call.

Willis Towers Watson also reported results for Towers Watson & Co., whose fiscal year ended on June 30, 2015.

Revenue for the three months ended Dec. 31, 2015, was down 0.1% to $919.4 million.

Net income for the quarter was $11.2 million, compared with $110.1 million in the year-ago period. The current quarter results include approximately $81 million of transaction and integration costs, the statement said.

Revenue for the six months ended Dec. 31 was up 0.6% to $1.78 billion, but net income dropped 29.8% to $134.6 million.

In a note to investors Wednesday morning, Cliff Gallant, managing director at San Francisco-based Nomura Securities International Inc., called the results “messy” but said guidance was viewed as “favorable,” adding, however, that “Willis touted achievements but skeptics will hardly be quieted with a plethora of 'adjustments.'”

In all, though, Mr. Gallant was upbeat: “If the company can deliver upon the impetus for the deal — better growth — we view the upside as even more significant.”