NEW YORK (Reuters) - Willis Group Holdings Ltd (WSH.N: Quote, Profile, Research), the world's third largest insurance broker, said on Wednesday that its quarterly net income tumbled 50 percent on charges for contract buyouts, severance and other costs.

Willis' second-quarter net fell to $39 million, or 27 cents a share, from $78 million, or 54 cents, a year-ago.

Willis said it took a $62 million charge in the quarter as it bought out some employees' contracts and paid others severance as part of cost cuts it says will be used to fund hires and initiatives in certain areas.

Excluding those charges, earnings rose 9 percent to 59 cents a share, in line with analysts' forecasts.

The cost-cutting moves will result in savings of between $25 million and $35 million this year and between $45 million and $55 million in 2009, Willis said.

Willis, which last month agreed to buy smaller rival Hilb Rogal & Hobbs Co HRH.N for $1.7 billion, said it had revised its outlook as a result, but that it still expects full-year adjusted earnings per share to be in the range of $2.85 to $2.95 this year.

But it lowered its outlook for 2009 by 15 cents a share to a range of $3.15 to $3.25 a share. It raised its outlook for 2010 by 5 cents, to a range of $4.05 to $4.15.

(Reporting by Christian Plumb, editing by Leslie Gevirtz)