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    Willis Group Reports Third Quarter 2008 Results



    3 Percent Growth in Reported Commissions and Fees;

    2 Percent Organic Growth in Commissions and Fees Despite Soft Insurance Market

    Acquisition of HRH Completed October 1, 2008

    New York, NY, October 22, 2008 – Willis Group Holdings Limited (NYSE: WSH), the global insurance broker, today reported results for the quarter and nine months ended September 30, 2008.

    "Willis continues to deliver impressive growth relative to the industry despite very soft market conditions," said Joe Plumeri, Chairman and Chief Executive Officer. "We increased our organic commissions and fees by two percent this quarter, as we continue to drive growth from our existing client base, win new business, and take advantage of growth opportunities in international markets and in key global specialty areas.

    "We’re focused on driving solid business performance while building our long-term growth potential," said Plumeri. "We’re gaining momentum with our Shaping our Future strategy for profitable growth, especially in the areas of Marketing and Client Profitability. We continue to execute disciplined expense management to help navigate these difficult economic times, while generating the resources to invest in future profitable growth."

    Third Quarter 2008 Financial Results

    Reported net income for the quarter ended September 30, 2008 was $36 million, or $0.25 per diluted share, compared with $67 million, or $0.46 per diluted share, a year ago. The results for the third quarter 2008 were impacted by financing and integration costs totaling $10 million ($7 million, or $0.05 per diluted share, after tax) associated with the acquisition of Hilb Rogal & Hobbs Company (HRH) which closed on October 1, 2008.

    Excluding these costs and net loss on disposal of operations, adjusted earnings per diluted share were $0.32 in the third quarter 2008, a decrease of 30 percent from $0.46 in the third quarter 2007. The impact of foreign currency decreased third quarter 2008 earnings per diluted share by $0.09 compared with the third quarter 2007.

    Total reported revenues for the quarter ended September 30, 2008 were $579 million compared with $574 million for the same period last year, an increase of 1 percent. The effect of foreign currency increased reported revenues by 1 percent.

    Organic growth in commissions and fees was 2 percent in the third quarter 2008 compared with third quarter 2007. This reflected net new business won of 5 percent offset by a negative 3 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. Steady, strong 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 third quarter 2008 compared with the same period in 2007. There was continued strength in Europe, especially Spain, Denmark and Norway, Latin America, Asia, especially Hong Kong and Singapore, as well as our emerging market countries including Russia and China.

    The North America segment reported organic growth in commissions and fees of negative 2 percent compared with third quarter 2007 in a soft insurance market. North America had strong performance in key growth markets including New York, Boston and Chicago. Organic growth was tempered by the impact of the soft insurance market on placements of North America business in London and Bermuda.

    The Global segment, which comprises Global Specialties and Reinsurance, recorded negative 2 percent organic growth in commissions and fees in the third quarter 2008 compared with third 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 with growth in international operations more than offset by reduced US revenues due to declining rates, lower primary premium volumes, and decreased reinsurance purchasing by the primary carriers.

    Reported operating margin was 11.4 percent for the quarter ended September 30, 2008 compared with 16.2 percent for the same period last year. Excluding certain items, adjusted operating margin was 12.1 percent for the quarter ended September 30, 2008 compared with 16.2 percent a year ago, as we continue to reinvest growth in strategic hires and key initiatives. Foreign exchange translation had a negative 260 basis point impact on the adjusted operating margin in the third quarter 2008.

    Nine Months 2008 Financial Results

    Reported net income for the nine months ended September 30, 2008 was $241 million, or $1.70 per diluted share, compared with $314 million or $2.12 a year ago. The results for the first nine months of 2008 were significantly impacted by pre-tax charges totaling $95 million for the 2008 expense review and pre-tax financing and integration costs of $10 million associated with the acquisition of HRH.

    Excluding these items and net loss on disposal of operations, which are reviewed in detail later in this release, adjusted earnings per diluted share increased 6 percent to $2.24 for the nine months ended September 30, 2008, compared to $2.12 a year ago. Foreign currency translation had zero impact on earnings per diluted share for the first nine months of 2008 compared with the first nine months of 2007.

    Total reported revenues for the nine months ended September 30, 2008 were $2,035 million compared with $1,939 million for the same period last year, an increase of 5 percent. The effect of foreign currency translation increased reported revenues by 3 percent.

    Organic growth in commissions and fees was 3 percent for the nine months ended September 30, 2008 compared with the same period in 2007. This growth was attributed to net new business won of 5 percent offset by 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.

    Reported operating margin was 18.1 percent for the nine months ended September 30, 2008 compared to 24.2 percent for the same period last year. Excluding certain items, adjusted operating margin was 22.9 percent for the nine months ended September 2008, compared to 24.2 percent for the same period last year. Foreign exchange had a negative 80 basis point impact on the adjusted operating margin through the first nine months of 2008.

    The effective underlying tax rate for the nine months ended September 30, 2008 was 27.0 percent, excluding the tax effects of the disposal of the London headquarters and the benefit of the release of tax provisions relating to the resolution of prior period tax positions.

    Capital

    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 January 16, 2009 to shareholders of record on December 31, 2008.

    As at September 30, 2008, cash and cash equivalents totaled $156 million, total debt was $1.4 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 authorization.

    Acquisition of Hilb Rogal & Hobbs Company

    On October 1, 2008, the Company completed the acquisition of Hilb Rogal & Hobbs Company (HRH), the eighth largest insurance and risk management intermediary in the United States.

    Total consideration paid by Willis was approximately $1.7 billion, which was comprised of approximately 24.4 million shares of common stock valued at $773 million and $942 million of cash. The total purchase price of approximately $2.1 billion included the assumption of approximately $400 million of HRH existing debt.

    The Company funded the transaction on October 1, 2008 with $1.0 billion from a 364-day interim credit facility and $525 million from a $700 million 5-year term loan facility. In addition, the Company repaid the outstanding balance on its existing revolving credit facility and replaced this with a new $300 million line of credit. Over time, the Company plans to repurchase the majority of the shares issued in connection with the merger under its existing $1 billion buyback authorization.

    Outlook

    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. In light of current global economic uncertainty, the Company continues to review vigorously the expense base. The Company incurred a pre-tax charge of $95 million through the nine months ended September 30, 2008. Currently the Company does not anticipate further charges in conjunction with this ongoing exercise. The Company anticipates achieving a higher level of cost savings than originally estimated to enable continued funding for growth.

    The Company completed the acquisition of HRH on October 1, 2008 and its results of operations will be included in reported results from that day forward. Hence, previously stated 2008 financial goals for Willis on a stand alone basis of adjusted earnings per diluted share in the range of $2.85 - $2.95 and adjusted operating margin of approximately 24 percent have been revised. The Company currently expects adjusted earnings per diluted share to be in the range of $2.60-$2.70 and adjusted operating margin of approximately 22 percent for the full year 2008, excluding the impact of foreign exchange movements in the fourth quarter.

    In light of current global economic uncertainty, the Company is also reviewing its current stated financial goals for 2009 and 2010. While the Company hopes to reaffirm these goals, the potential impact of this uncertainty on current insurance pricing or on potential changes in the buying decisions of clients cannot be predicted at this time. The Company expects to update financial goals with the release of full year 2008 results.

    "These are unprecedented times, and we are responding with an appropriate sense of urgency,” Plumeri said. “We will continue to execute Shaping our Future strategies for profitable growth and have already begun the integration of the HRH acquisition. We are striving to meet the stated financial goals for 2009 and 2010, yet we need time to assess the potential impact of the current global economic uncertainty on the current outlook. Therefore, we will update those goals when we announce year-end results."

    Conference Call and Web Cast

    A conference call to discuss third quarter 2008 results will be held on Thursday, October 23, 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 November 24, 2008 at 11:00 PM Eastern Time, by calling (866) 372-3809 (domestic) or +1 (203) 369-0248 (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 400 offices in nearly 120 countries, with a global team of approximately 20,000 Associates serving clients in some 190 countries. Additional information on Willis may be found at www.willis.com.

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