Willis Group Reports Second Quarter 2008 Results;
Continued Execution of Shaping our Future Strategies for Profitable Growth Drives Results
7 Percent Growth in Reported Commissions and Fees;
Strong 3 Percent Organic Growth in Commissions and Fees despite Soft Insurance Market
Reported Earnings per Diluted Share $0.27;
Adjusted Earnings per Diluted Share increased 9 Percent to $0.59
New York, NY, July 30, 2008 – Willis Group Holdings Limited (NYSE: WSH), the global insurance
broker, today reported results for the quarter and six months ended June 30, 2008.
“Our three percent organic commissions and fees growth is a testament to our successful top line
growth strategies and diversified business mix, despite continued softness in the insurance
marketplace,” said Joe Plumeri, Chairman and Chief Executive Officer.
“We continue to diligently execute Shaping our Future strategies for profitable growth with the key
Shaping our Future Marketing and Client Profitability initiatives gaining momentum,” continued
Plumeri. “We are recognizing identified cost savings and remain vigilant on expense management
while continuing to make investments for future growth.”
Second Quarter 2008 Financial Results
Reported net income for the quarter ended June 30, 2008 was $39 million, or $0.27 per diluted
share, compared with $78 million, or $0.54 per diluted share, a year ago. The results for the
second quarter 2008 were significantly impacted by pre-tax charges totaling $62 million for contract
buyouts, severance and other costs.
Excluding these charges, which are reviewed in detail later in this release, adjusted earnings per
diluted share increased 9 percent to $0.59 in the second quarter 2008 from $0.54 a year ago. The
impact of foreign currency translation increased second quarter 2008 earnings per diluted share by
$0.01 compared with the second quarter 2007.
Total reported revenues for the quarter ended June 30, 2008 were $661 million compared with
$626 million for the same period last year, an increase of 6 percent. The effect of foreign currency
translation increased reported revenues by 4 percent.
Organic growth in commissions and fees was 3 percent in the second quarter 2008 compared with
second quarter 2007. This reflected net new business won of 5 percent; there was a negative 2
percent impact from declining premium rates tempered by other market factors, such as higher
commission rates, higher insured values and changes in limits and exposures. Improved client
retention levels and momentum from Shaping our Future growth initiatives, such as Shaping our
Future Marketing and Client Profitability, also contributed to organic growth.
The International business segment contributed 10 percent organic growth in commissions and
fees in the second quarter 2008 compared with the same period in 2007. There was continued
strength in Europe, especially Spain, Denmark and Norway, and in Latin America, as well as our
emerging market countries including Russia and China.
The North America segment reported organic growth in commissions and fees of negative 1
percent compared with second quarter 2007 in a soft insurance market. The North America
segment continues to make strategic investments in targeted practice areas and geographies.
The Global segment, which comprises Global Specialties and Reinsurance, recorded flat organic
growth in commissions and fees in the second quarter 2008 compared with second quarter 2007.
Global Specialties had positive organic growth in commissions and fees across many specialty
businesses. Reinsurance reported negative organic growth in commissions and fees due to
declining rates across most areas and higher retention levels by the primary carriers.
Reported operating margin was 11.6 percent for the quarter ended June 30, 2008 compared with
22.0 percent for the same period last year. Excluding the charges, adjusted operating margin was
21.0 percent for the quarter ended June 30, 2008 compared with 22.0 percent a year ago, as we
continue to reinvest growth in strategic hires and key initiatives. Foreign exchange translation had
a negative 40 basis point impact on the adjusted operating margin.
Six Months 2008 Financial Results
Reported net income for the six months ended June 30, 2008 was $205 million, or $1.43 per
diluted share, compared with $247 million or $1.65 a year ago. The results for the first six months
of 2008 were significantly impacted by pre-tax charges totaling $95 million for contract buyouts,
severance and other costs.
Excluding these charges, which are reviewed in detail later in this release, adjusted earnings per
diluted share increased 16 percent to $1.91 in the six months ended June 30, 2008, up from $1.65
a year ago. The impact of foreign currency translation increased earnings per diluted share for the
first six months of 2008 by $0.09 compared with the first six months of 2007.
Total reported revenues for the six months ended June 30, 2008 were $1,456 million compared
with $1,365 million for the same period last year, an increase of 7 percent. The effect of foreign
currency translation increased reported revenues by 5 percent.
Organic growth in commissions and fees was 3 percent for the six months ended June 30, 2008
compared with the same period in 2007. This growth was attributed to net new business won of 4
percent; there was a negative 1 percent impact from declining premium rates tempered by other
market factors such as higher commission rates, higher insured values and changes in limits and
Reported operating margin was 20.7 percent for the six months ended June 30, 2008 compared to
27.5 percent for the same period last year. Excluding the impact of the charges relating to
severance and other costs, adjusted operating margin was 27.3 percent for the six months ended
June 2008, relatively flat compared with the same period last year.
The effective underlying tax rate for the six months ended June 30, 2008 was 28.0 percent,
excluding the tax effects of the disposal of the London headquarters and share-based
compensation. The effective underlying tax rate for full year 2008 is currently estimated to remain
at approximately 28.0 percent compared to 29.5 percent in full year 2007.
The Board of Directors declared a regular quarterly cash dividend on the Company’s common
stock of $0.26 per share, an annual rate of $1.04 per share. The dividend is payable on October
13, 2008 to shareholders of record on September 30, 2008.
As at June 30, 2008, cash and cash equivalents totaled $205 million, total debt was $1.5 billion
and total stockholders’ equity was $1.4 billion. There were no share repurchases during the
quarter and $75 million has been repurchased to date under the existing $1 billion buyback
Announcement of Hilb Rogal & Hobbs Company Acquisition
On June 8, 2008, the Company announced the acquisition of Hilb Rogal & Hobbs Company
(HRH), the eighth largest insurance and risk management intermediary in the United States.
Under the terms of the definitive agreement, the Company will acquire all of the outstanding shares
of common stock of HRH for $46.00 per share (subject to adjustment based on changes in the
Company’s stock price in the period prior to the closing of the acquisition), with approximately fifty
percent of the total consideration being paid in cash and the other fifty percent being paid in stock.
The total purchase price of approximately $2.1 billion includes the assumption of approximately
$400 million of HRH existing debt. Over time, the Company plans to repurchase the majority of the
shares issued in connection with the merger under its existing buyback authorization.
The transaction is expected to close in the fourth quarter of 2008, subject to customary closing
conditions, including regulatory and HRH shareholder approval.
The Shaping our Future strategy is a series of initiatives designed to deliver profitable growth, and
as previously reported, the Company has decided to invest in further key hires and initiatives in
2008 and 2009. As previously announced, the Company is conducting a thorough review of all
businesses to identify additional opportunities to rationalize its expense base to help fund a portion
of these anticipated investments. The Company incurred a pre-tax charge of $62 million in the
second quarter and $95 million through the six months ended June 30, 2008 in connection with this
expense review for contract buyouts, severance and other costs, including property and systems
The Company currently anticipates that these charges and other actions arising from the expense
review will lead to cost savings in the range of $25 million to $35 million in 2008, rising to
approximately $45 million to $55 million in 2009. These savings are in addition to the anticipated
annualized net benefit from the 2006 Shaping our Future charges currently estimated to be
approximately $30 million in 2008 and $45 million by 2009.
Excluding these charges, the Company continues to expect an adjusted operating margin of
approximately 24 percent in 2008, as underlying business growth and cost savings are reinvested
for future growth. The Company issued revised financial goals in conjunction with the HRH
acquisition announcement, and currently expects adjusted operating margin of approximately 24
percent in 2009 and 27 percent in 2010. The Company currently expects to deliver adjusted
earnings per diluted share in the range of $2.85-$2.95 in 2008, $3.15-$3.25 in 2009, and $4.05-
$4.15 in 2010. Company guidance is based on the assumption that the acquisition of HRH closes
on December 31, 2008.
“Overall, we’re very pleased with our first-half performance. We said we were going to deliver
industry-leading organic revenue growth and a steady adjusted operating margin this year. Thus
far, we’ve done that, despite soft market conditions, thanks to the great progress we’re making with
our Shaping our Future initiatives,” Plumeri said. “We’re building a solid platform for future
profitable growth at Willis, both with the Shaping our Future strategy and with our pending
acquisition of Hilb Rogal & Hobbs, which will double the size and footprint of our North America
Conference Call and Web Cast
A conference call to discuss second quarter 2008 results will be held on Thursday, July 31, 2008,
at 8:00 AM Eastern Time. To participate in the live teleconference, please dial (866) 617-1526
(domestic) or +1 (210) 795-0624 (international) with a pass code of "Willis”. The live audio web
cast (which will be listen-only) may be accessed at www.willis.com. This call will be available by
replay starting at approximately 10:00 AM Eastern Time, and through October 31, 2008 at 11:00
PM Eastern Time, by calling (800) 876-4955 (domestic) or +1 (203) 369-3997 (international) with
no pass code, or by accessing the website.
Willis Group Holdings Limited is a leading global insurance broker, developing and delivering
professional insurance, reinsurance, risk management, financial and human resource consulting
and actuarial services to corporations, public entities and institutions around the world. Willis has
more than 300 offices in some 100 countries, with a global team of approximately 16,000
Associates serving clients in some 190 countries. Additional information on Willis may be found at
We have included in this document ‘‘forward-looking statements’’ within the meaning of Section 27A of the Securities Act
of 1933, and Section 21E of the Securities Exchange Act of 1934, which are intended to be covered by the safe harbors
created by those laws. These forward-looking statements include information about possible or assumed future results of
our operations. All statements, other than statements of historical facts, included in this document that address activities,
events or developments that we expect or anticipate may occur in the future, including such things as the potential
benefits of the business combination transaction involving Willis and HRH, our outlook and guidance regarding future
adjusted operating margin and adjusted earnings per diluted share, future capital expenditures, expected growth in
commissions and fees, business strategies, competitive strengths, goals, the anticipated benefits of new initiatives,
growth of our business and operations, plans, and references to future successes are forward-looking statements. Also,
when we use the words such as ‘‘anticipate’’, ‘‘believe’’, ‘‘estimate’’, ‘‘expect’’, ‘‘intend’’, ‘‘plan’’, ‘‘probably’’, or similar
expressions, we are making forward-looking statements.
There are important uncertainties, events and factors that could cause our actual results or performance to differ
materially from those in the forward-looking statements contained in this document, including regional, national or global
political, economic, business, competitive, market and regulatory conditions and the following:
- our ability to achieve the expected cost savings, synergies and other strategic benefits as a result of the proposed
acquisition or the amount of time it may take to achieve such cost savings, synergies and benefits expected due to
the integration of HRH with our operations,
- the satisfaction of conditions to closing, including receipt of shareholder, regulatory and other approvals on the
proposed terms and schedule for the proposed acquisition of HRH,
- our ability to implement and realize anticipated benefits of the Shaping our Future initiative and other new initiatives,
- the extent and timing of, and prices paid in connection with, any share repurchases under existing or future
- our ability to retain existing clients and attract new business, and our ability to retain key employees,
- changes in commercial property and casualty markets, or changes in premiums and availability of insurance
products due to a catastrophic event such as a hurricane,
- volatility or declines in other insurance markets and the premiums on which our commissions are based,
- impact of competition,
- the timing or ability to carry out share repurchases or take other steps to manage our capital,
- fluctuations in exchange and interest rates that could affect expenses and revenue,
- rating agency actions that could inhibit ability to borrow funds or the pricing thereof,
- domestic and foreign legislative and regulatory changes affecting both our ability to operate and client demand,
- potential costs and difficulties in complying with a wide variety of foreign laws and regulations, given the global
scope of our operations,
- changes in the tax or accounting treatment of our operations,
- our exposure to potential liabilities arising from errors and omissions claims against us,
- the results of regulatory investigations, legal proceedings and other contingencies, and
- the timing of any exercise of put and call arrangements with associated companies.
The foregoing list of factors is not exhaustive and new factors may emerge from time to time that could also affect actual
performance and results. For additional factors see also Part I, Item 1A ‘‘Risk Factors’’ included in Willis’s Form 10-K for
the year ended December 31, 2007 and Item 1A of HRH’s Form 10-K for the fiscal year ended December 31, 2007, and
similar sections of each company’s quarterly report on Form 10-Q for the fiscal quarter ended March 31, 2008. Copies of
said 10-Ks and 10-Qs are available online at http://www.sec.gov or on request from the applicable company.
Although we believe that the assumptions underlying our forward-looking statements are reasonable, any of these
assumptions, and therefore also the forward-looking statements based on these assumptions, could themselves prove to
be inaccurate. In light of the significant uncertainties inherent in the forward-looking statements included in this
document, our inclusion of this information is not a representation or guarantee by us that our objectives and plans will be
Our forward-looking statements speak only as of the date made and we will not update these forward-looking statements
unless the securities laws require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this document may not occur, and we caution you against unduly relying on these forward-looking
This press release includes supplemental financial information which may contain references to non-GAAP financial
measures as defined in Regulation G of SEC rules. Consistent with Regulation G, a reconciliation of this supplemental
financial information to our generally accepted accounting principles (GAAP) information is in the note disclosures that
follow. We present such non-GAAP supplemental financial information, as we believe such information is of interest to
the investment community because it provides additional meaningful methods of evaluating certain aspects of the
Company’s operating performance from period to period on a basis that may not be otherwise apparent on a GAAP
basis. This supplemental financial information should be viewed in addition to, not in lieu of, the Company’s condensed
consolidated income statements for the three and six months ended June 30, 2008 and balance sheet as at that date.
Additional Information About the Proposed Merger and Where to Find It
In connection with the proposed transaction, Willis and HRH intend to file relevant materials with the Securities and
Exchange Commission (“SEC”). Willis will file with the SEC a Registration Statement on Form S-4 that includes a proxy
statement of HRH that also constitutes a prospectus of Willis. HRH will mail the proxy statement/prospectus to its
shareholders. Investors are urged to read the proxy statement/prospectus regarding the proposed transaction when it
becomes available, because it will contain important information. Investors will be able to obtain a free copy of the proxy
statement/prospectus, as well as other filings containing information about Willis and HRH without charge, at the SEC’s
website (http://www.sec.gov) once such documents are filed with the SEC. You may also obtain these documents, free of
charge, from Willis’s website (www.willis.com) under the tab “Investor Relations” and then under the heading “Financial
Reporting” then under the item “SEC Filings.” You may also obtain these documents, free of charge, from HRH’s website
(www.hrh.com) under the heading “Investor Relations” and then under the tab “SEC Filings.”
Willis, HRH and their respective directors, executive officers and other employees may be deemed to be participants in
the solicitation of proxies from HRH shareholders in connection with the proposed transaction. Information about Willis’s
directors and executive officers is available in Willis’s proxy statement, dated March 17, 2008. Information about HRH’s
directors and executive officers is available in HRH’s proxy statement, dated March 31, 2008. Additional information
about the interests of potential participants will be included in the prospectus/proxy statement when it becomes available.
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of
a prospectus, meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.
Willis Group Holdings Limited is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around the world. Willis has more than 300 offices in some 100 countries, with a global team of approximately 16,000 Associates serving clients in some 190 countries. Additional information on Willis may be found at www.willis.com.