NEW YORK (Bloomberg) - Willis Group Holdings Ltd., the world's third-largest insurance broker, said second-quarter profit fell 50 percent on costs including severance and buyouts.

Net income dropped to $39 million, or 27 cents a share, from $78 million, or 54 cents, in the same period a year earlier, the London-based company said in a statement on Wednesday.

Profit excluding the cost-saving expenses was 59 cents a share, a penny more than the estimate of 11 analysts surveyed by Bloomberg.

Willis CEO Joseph Plumeri won new accounts and charged more in commissions as US insurance rates fell.

Brokerage revenue rose three percent excluding the impact of acquisitions and foreign exchange, driven by growth outside North America.

Arthur J Gallagher & Co., the fourth-largest insurance broker, yesterday said second-quarter revenue declined one percent by the same measure.

The price of business policies in the US declined 12 percent in the second quarter as insurers competed for market share, according to a survey by the Council of Insurance Agents and Brokers.

Mr. Plumeri said in the statement that Willis grew "despite continued softness in the insurance marketplace".

Brokers, who help corporate clients shop for coverage and charge a percentage of the premium for the service, say they are pushing for higher commissions to make up for lower rates.

Willis said severance, buyouts and other expense-cutting measure cost $62 million before taxes.

Savings from the initiative may reach $55 million in 2009, the broker said.

The company and larger competitors Aon Corp. and Marsh & McLennan Cos. are also seeking to increase revenue by reversing a ban on fees paid to the brokers by insurers.

The three companies agreed to end the practice in 2005 after New York's then-attorney general, Eliot Spitzer, said they were kickbacks.

Mr. Spitzer's successor, Andrew Cuomo, and the insurance watchdog, never extended the ban to all brokers and now the state is considering changes to regulation.

The brokerage fell 66 cents, or 2.1 percent, to $30.14 at 4.15pm in New York Stock Exchange composite trading.

The company's shares have lost 21 percent this year. Results were disclosed after the close of regular hours.

Willis last month agreed to buy Hilb Rogal & Hobbs Co. for about $1.7 billion in the largest acquisition of a brokerage in nine years. The deal is expected to close by the end of 2008.