Jardine Lloyd Thompson's 2008 Profit Falls on Lower Investment Income

LONDON, Mar 04, 2009 (A. M. Best via COMTEX) -- LLTHF | Quote | Chart | News | PowerRating -- U.K.-based international broker Jardine Lloyd Thompson Group plc reported a 12.1% drop in 2008 after-tax profit on lower investment income and higher taxes and minority interest payments.

Pretax profit for the year fell 3% to 92.8 million pounds (103.6 million pounds) from 95.2 million pounds in 2007. After-tax profit fell 12.1% to 63.6 million pounds.

Revenue rose 13% to 536 million pounds from 473.2 million pounds. Earnings per share dropped 12% to 26.9 pence (30.04 euro cents). The dividend was unchanged at 20.5 pence.

The group?s 2008 performance, Burke said in an interview at JLT?s offices, ?demonstrates the well-being of JLT as we enter 2009."

JLT?s London market operation generated revenue of 215 million pounds, up 11% from 2007. The group?s U.K. employee benefits business reported an 8% growth in revenue to 87.6 million pounds.

Net investment income fell 12.4% to 15.5 million pounds.

"These results once again demonstrate JLT's excellent operational performance,? said Dominic Burke, chief executive officer, in a statement. ?The strong growth across all of our businesses underlines the progress we have made as a group during the past three years.?

JLT (LSE: JLT), Burke said, delivered on its goal of pushing momentum for growth in 2008, which he described as a ?pivotal year." In addition to top-line growth of 8%, Burke said JLT enjoyed organic revenue growth of 6%. ?That?s a really flashy number,? he said.

Over the last three years, Burke said, JLT had managed to break away from a structure that was based on silos, in which individual operations were more intent on their own profit margins than cooperating as members of a group.

?Today that is no longer the case,? Burke said. ?And wherever you go across JLT, from Canada to Peru to Indonesia to the U.K., all our businesses are working together.?

JLT?s London operation remains strong as a transactional broker in such specialty lines as oil and gas, construction, telecommunications and financial lines, Burke said. He said that the group?s ?global service proposition? has demonstrated its value to the market.

?Clients are choosing to ask JLT to be their global insurance providers,? Burke said.

JLT is ?cautiously optimistic? about the outlook for the wider economy," said Burke. ?No business is immune? to the current slowdown, he said. ?JLT is no different to any other business.?

Burke said the difficulty in obtaining capital, along with the drop in commodity prices, is affecting the oil and gas and mining sectors. A squeeze on capital is also likely to reduce investment spending by corporate customers, which could contribute to a reduction in gross written premiums, he said.

And while activity in the construction industry has slowed, he said, government spending around the world is boosting prospects for the creation of infrastructure.

?We?re seeing some positive signs in that space in the back end of 2008 and the early part of 2009,? Burke said.

Burke also pointed to signs that the underwriting market is hardening. But he warned against an ?invisible hard market,? in which costlier risks are offset by declining values. Such a situation would benefit neither brokers nor underwriters, Burke suggested.

Burke said JLT is well positioned to consider further acquisitions.

?We have a very strong balance sheet,? he said. ?We have very low net debt. We have fully committed bank facilities out through to December 2011-?250 million sterling.?

JLT, Burke added, can also draw on the support of a strong base of stockholders. He noted that the group completed nine acquisitions in 2008 and 18 over the last two years, for a total cost of about 50 million pounds. He described this activity as ?relatively modest set against the M&A [mergers and acquisitions] environment of 2007-8.?

Burke expects the price of acquisitions to continue to fall, as some companies may seek out partners in order to support their own growth plans. JLT would consider acquisitions of organizations where the price and culture are attractive, Burke said.

?We are interested,? he said. ?We don?t need to do a transforming deal.?

Asked if JLT itself might become a takeover target, Burke said that potential acquirers would ?need a big check.?

(By Robert O'Connor, London editor: Robert.OConnor@ambest.com)

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