On Dec 24, 2015, we issued an updated research report on global insurance broker Willis Group Holdings Public Limited Company WSH.
Willis Group provides a wide range of services that include insurance brokerage, reinsurance as well as consultation in risk management to its clients worldwide.
The insurer has been successfully enhancing its shareholder value via increased dividends and stock buybacks. To date, the company has spent $82 million on buying back 1.7 million shares. Backed by a solid financial position, the company is expected to continue returning more to its shareholders, thereby retaining investor confidence and attracting potential investors to the stock.
Strategic mergers and acquisitions have strengthened Willis Group’s inorganic growth portfolio and aided its geographic expansion. In the third quarter of 2015, the company successfully closed the PMI Health Group acquisition, which should bolster its health care advisory business in the U.K. The company is also on track to merge with Towers Watson TW. The merger, which is slated to close early next year, will leverage Willis Group’s presence in the $10 billion-plus U.S. property and casualty corporate market. The company would also gain $100–$125 million in cost savings to be fully realized within three years of closing the deal.
Supported by its operational strength, the company expects mid-single digit organic revenue growth in 2015. In October, the company introduced a revolutionary tool – The Dynamic Casualty Forecast Tool – to help risk managers project the risks of third-party motor across Europe. This new tool will be substantially value accretive to the company’s growing operational portfolio.
The company’s Operational Improvement Program, which was announced in Apr 2014, is also yielding results. Willis Group now expects annualized cost savings of $325 million by the end of 2017. A lower level of costs will boost earnings, result in operational efficiencies, and enable the company to invest in new growth avenues.
Nevertheless, an increase in operating expenses and exposure to a low interest rate environment that is leading to a decline in investment income are some headwinds faced by the company. Overall results have been affected by lower-than-expected earnings accretion from the acquisitions by the company. Stiff competition in the industry, premium rates, and geographically diversified operations might also weigh on the overall performance of the company.
Zacks Rank and Stocks to Consider
Currently Willis Group carries a Zacks Rank #3 (Hold). A couple of better-ranked stocks are Validus Holdings, Ltd. VR and Blue Capital Holdings Ltd. BCRH. Each of these insurance brokerage companies hold a Zacks Rank #2 (Buy).
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