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Willis Towers Watson P.L.C. said Friday that its second-quarter revenue rose 7.6% to $1.95 billion, its second earnings report since its $18 billion January merger of Willis Group Holdings P.L.C. and Towers Watson & Co.
Net income fell 34.5% compared to the pro forma prior-year quarter to $76 million due to what CEO John Haley described in a Friday conference call as “seasonal weakness” related to Paris-based broker Gras Savoye & Cie. and London-based Miller Insurance Services L.L.P., which had strong-first-quarter renewals following Willis’ acquisition last year.
Mr. Haley said portions of the insurance brokerage’s consulting and administrative businesses also had weaker performances in the second quarter, suggesting that business during the quarter traditionally is slower.
“We’re pleased with our performance this quarter in a business environment that has had some challenges,” Mr. Haley said during the analyst conference call. Those challenges included slowing merger activity and a decline in risk consulting projects.
All commissions and fees totaled $1.89 billion, up 6.7% from a year earlier, Mr. Haley said.
The human capital and benefits segment reported commissions and fees of $760 million, up 1.3% over the same period last year, due in large part to the Gras Savoye business.
The corporate risk and broking segment had commissions and fees of $623 million, up 7.3% from a year ago and driven by Gras Savoye.
The investment, risk and reinsurance segment reported a 5.3% increase to $355 million, driven largely by the acquisition of Miller Insurance Services.
For the quarter, the exchange solutions segment had commissions and fees of $154 million, an increase of 46.7%, Willis Towers Watson said in its earnings release.
For the year to date, Willis reported that total revenue increased 9.4% to $4.18 billion, but net income fell 15.3% to $321 million. Willis said six-month commissions and fees totaled $4.12 billion, a 10.1% increase on a pro forma basis compared with a year earlier.
For the first six months of the year, human capital and benefits rose 14.6% to 1.71 billion, corporate risk and broking rose 14.3% to $1.26 billion, investment risk and reinsurance increased 4.8% to $830 million, and exchange solutions jumped 49.5% to 317 million.
In an investor note issued prior to the conference call, Elyse Greenspan, New York-based vice president at Wells Fargo Securities, said she had concerns about “the heavy integration associated with combining two large corporations together (Willis and Towers Watson), and that the combined company will not see all of the revenue synergies that they have pointed to.”
Mr. Haley appeared to anticipate the concern.
“We still have work to do across the portfolio. Many of the actions and key initiatives underway may not immediately impact our results, but are fundamental to our long-term success,” Mr. Haley said in a statement, addition that he becomes “more confident each quarter that we’ll achieve our merger-related goals.”
For all of 2016, Willis Towers Watson expects revenue growth of about 7%, Willis said in its statement.
Compensation fell for three of the top five highest paid insurance broker executives in 2015.