Willis Group Reports Second Quarter 2009 Results
New York, NY, July 29, 2009 – Willis Group Holdings Limited (NYSE: WSH), the global insurance broker,
today reported results for the quarter and six months ended June 30, 2009.
Highlights of the quarter include:
- Reported (and adjusted) earnings per diluted share from continuing operations of $0.52
percent reported growth in commissions and fees
- 1 percent organic growth in commissions and
fees; Global and International segments with 7 percent and 5 percent growth, respectively
operating margin of 21.0 percent; adjusted operating margin of 21.2 percent
- North America segment
operating margin expansion of 660 basis points over a year ago, to 22.3 percent
- Interim bridge facility fully paid at June 30, 2009
“Willis’ strength lies in its business diversity. We continue to see excellent results from our International and
Global segments, and this is bolstering our overall performance in the face of difficult economic conditions,
particularly in the US, UK and Ireland,” said Joe Plumeri, Chairman and Chief Executive Officer, Willis
Group Holdings. “The HRH integration continues to go better than expected, with synergies tracking ahead of
schedule. We continue to run our company with discipline and foresight, implementing strict cost controls, right
sizing for the current environment, and investing in areas that will drive current and future growth.”
Second Quarter 2009 Financial Results
Reported net income from continuing operations for the quarter ended June 30, 2009 was $87 million, or
$0.52 per diluted share, compared with $39 million, or $0.27 per diluted share, in the same
period a year ago. Reported net income for the second quarters of 2009 and 2008 was
affected by certain items, including the acquisition of Hilb Rogal & Hobbs Company (HRH) and second
quarter 2008 expense review charges for severance and other costs totaling $62 million pre-tax.
Excluding certain items, which are reviewed in detail in this release, adjusted earnings per diluted share from
continuing operations were $0.52 in the second quarter of 2009 compared with $0.59 in the second
quarter of 2008. In addition, a gain was recognized in this year’s second quarter on the
curtailment of the US pension plan in the amount of $12 million pre-tax, or $0.04 per
diluted share. Foreign currency movements had no impact on earnings in the second quarter of 2009.
Total reported revenues for the quarter ended June 30, 2009 were $784 million compared with $661 million
for the same period last year, an increase of 19 percent. This increase was primarily due
to the HRH acquisition, while the effect of foreign currency movements decreased reported revenues by 7
Organic growth in commissions and fees was 1 percent in the second quarter of 2009 compared with
the second quarter of 2008. This growth reflected net new business won of 4 percent offset
by a negative 3 percent impact from declining premium rates and other market factors. Continued strong
client retention levels and momentum from Shaping our Future growth initiatives, such as Global Placement and
Client Profitability, also contributed to organic growth in commissions and fees.
The International business segment contributed 5 percent organic growth in commissions and fees in the second quarter
of 2009 compared with the same period in 2008. This growth came from strong net new
business and continued traction from Shaping our Future growth initiatives which more than offset the soft
rate environment and weakness in the UK and Ireland retail market. There was strong growth across
many regions including Europe and Latin America. Specifically there was double-digit growth in Denmark, Spain, Poland
and Russia, and Venezuela and Argentina.
The North America segment reported an 8 percent decline in organic commissions and fees compared with the
second quarter of 2008, reflecting soft insurance market conditions, as well as increased weakness in the
US economy, which has especially impacted the US Construction and Employee Benefits practices. The operating margin
in North America expanded 660 basis points to 22.3 percent in the second quarter of 2009
compared to the second quarter of 2008 as a result of HRH integration synergies, expense management,
and $9 million of the US pension curtailment gain.
The Global segment, which comprises Global Specialties, Faber & Dumas and Reinsurance, recorded 7 percent organic growth
in commissions and fees in the second quarter of 2009 compared with the second quarter of
2008. There was double-digit growth in reinsurance driven by International and North America reinsurance while Global
Specialties’ growth was slightly negative due to the effects of global economic weakness, specifically in energy
and financial and executive risks.
Reported operating margin was 21.0 percent for the quarter ended June 30, 2009 compared with 11.6 percent
for the same period last year. Excluding certain items, which are reviewed in detail in this
release, adjusted operating margin was 21.2 percent for the quarter ended June 30, 2009 compared with
21.0 percent a year ago.
Adjusted operating margin reflected good underlying business performance, HRH integration synergies, diligent cost management and favorable foreign
currency movements, tempered by lower investment income, higher amortization and higher pension expense.
Salaries and benefits were $443 million, or 56.5 percent of total revenues, in the second quarter of
2009 compared with $428 million, or 64.8 percent, in the second quarter of 2008. Excluding the
2008 expense review charges, adjusted salaries and benefits were $377 million, or 57.0 percent of total
revenues, in the second quarter of 2008. Other operating expenses were $139 million, or 17.7 percent
of total revenues, in the second quarter of 2009 compared with $141 million, or 21.3 percent,
in the second quarter of 2008. On an adjusted basis, other operating expenses in the second
quarter of 2009 were $138 million, or 17.6 percent of revenues, compared with $130 million, or
19.7 percent of revenues, in the second quarter of 2008.
Six Months 2009 Financial Results
Reported net income from continuing operations for the six months ended June 30, 2009 was $279 million,
or $1.67 per diluted share, compared with $205 million, or $1.43 per diluted share, in the
same period a year ago. Reported net income for the first six months of 2009 and
2008 was affected by certain items, including the acquisition of HRH and first half 2008 expense
review charges for severance and other costs totaling $95 million pre-tax.
Excluding certain items, which are reviewed in detail in this release, adjusted earnings per diluted share from
continuing operations were $1.68 for the six months ended June 30, 2009 compared with $1.91 in
the comparable period of 2008, a decrease of 12 percent. In addition, the pension curtailment gain
amounted to $12 million pre-tax, or $0.04 per diluted share, for the first half of 2009.
Foreign currency movements reduced earnings per diluted share by $0.12 for the six months ended June
30, 2009. This was primarily the result of the significant strengthening of the US dollar relative
to the Euro.
Total reported revenues for the six months ended June 30, 2009 were $1,714 million compared with $1,456
million for the same period last year, an increase of 18 percent. The increase was primarily
due to the HRH acquisition, while the effect of foreign currency translation decreased reported revenues by
Organic growth in commissions and fees was 2 percent in the first half of 2009 compared with
the comparable period of 2008. This growth reflected net new business won of 4 percent offset
by a negative 2 percent impact from declining premium rates and other market factors.
Reported operating margin was 25.6 percent for the six months ended June 30, 2009 compared with 20.7
percent for the same period last year. Excluding certain items, which are reviewed in detail in
this release, adjusted operating margin was 25.8 percent for the first half of 2009 compared with
27.3 percent a year ago.
The effective underlying tax rate for the quarter and six months ended June 30, 2009 was approximately
26 percent, the same as the 2008 full year rate.
Income from discontinued operations, net of tax, was $nil in the second quarter of 2009 and $1
million, or $0.01 per diluted share, for the six months ended June 30, 2009. In April
2009, Willis Group Holdings Limited disposed of Bliss & Glennon, its US-based wholesale insurance operation, for
net proceeds of $38 million. No net gain or loss was recognized relating to this transaction.
The Board of Directors declared a regular quarterly cash dividend on the Company’s common stock of $0.26
per share, or an annual rate of $1.04 per share. The dividend is payable on October
12, 2009 to shareholders of record on September 30, 2009.
As of June 30, 2009, cash and cash equivalents totaled $103 million and total debt was $2.5
billion. The interim bridge facility, with $103 million outstanding at March 31, 2009, was fully repaid
as at June 30, 2009. Total stockholders’ equity was $2.2 billion.
Stanford Financial Group
Willis and one of its subsidiaries have been sued in federal courts in Texas and Florida by
plaintiff lawyers acting on behalf of Mexican and South American investors in Stanford Financial Group. A
Willis employee has also been named in the Texas suit and Willis has separately received a
demand letter from a Texas law firm, in advance of commencing litigation. The matters relate to
the collapse of Stanford, for which Willis acted as broker of record for certain lines of
insurance. The complaints generally allege that Willis aided Stanford's efforts to sell certificates of deposit by
issuing to Stanford certain letters regarding the insurance policies that Willis placed for the firm. The
plaintiffs are collectively seeking damages in excess of $1 billion.
The Company said that it will defend itself vigorously in these lawsuits. The Company does not believe
that any Willis employee knew that Stanford was engaged in fraudulent activity, and it is undertaking
a full investigation of the facts so it can address this matter as expeditiously as possible.
“I am pleased with our performance for the quarter and the first six months. We continue to
grow in the worst global economy the world has ever seen, and that’s a testament to
our international diversity and specialist expertise,” Plumeri said. “We have always run this company with discipline,
and that continues to pay off in strong operating margins, as we keep a tight control
on expenses and maintain our business at the right size for the current environment. Importantly, we
remain ahead of plan on achieving HRH integration synergies, and we continue to invest in Shaping
our Future. Accelerating growth remains our number one priority.”
Conference Call and Web Cast
A conference call to discuss the second quarter 2009 results will be
held on Thursday, July 30, 2009, at 8:00 AM Eastern Time. To participate in the live
teleconference, please dial (866) 803-2143 (domestic) or +1 (210) 795-1098 (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
August 28, 2009 at 11:59 PM Eastern Time, by calling (888) 568-0618 (domestic) or +1 (402)
998-1520 (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 approximately 190 countries. Additional information on Willis may be
found at www.willis.com.
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
HRH acquisition, our outlook, future capital expenditures, growth in commissions and fees, business strategies, competitive strengths,
goals, the 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 the following:
- the impact of any regional, national or global political, economic, business, competitive, market and regulatory
conditions on our global business operations;
- the impact of current financial market conditions and
the current credit crisis on our results of operations and financial condition, including as a result
of any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions;
- our ability to achieve the expected cost savings, synergies and other strategic benefits as
a result of the HRH acquisition and how the integration of HRH may affect the timing
of such cost savings, synergies and benefits;
- our ability to continue to manage our
- our ability to implement and realize anticipated benefits of the Shaping our
Future initiative and any other new initiatives;
- material changes in commercial property and casualty
markets generally or the availability of insurance products or changes in premiums resulting from a catastrophic
event, such as a hurricane, or otherwise;
- the volatility or declines in other insurance
markets and premiums on which our commissions are based, but which we do not control;
- our ability to compete effectively in our industry;
- our ability to retain key
employees and clients and attract new business;
- the timing or ability to carry out
share repurchases or take other steps to manage our capital and the limitations in our long-term
debt agreements that may restrict our ability to take these actions;
- any 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;
- a significant decline in
the value of investments that fund our pension plans or changes in our pension plan funding
- the timing of any exercise of put and call arrangements with associated companies;
- changes in the tax or accounting treatment of our operations;
- the potential
costs and difficulties in complying with a wide variety of foreign laws and regulations and any
related changes, given the global scope of our operations;
- our involvements in and the
results of any regulatory investigations, legal proceedings and other contingencies;
- our exposure to potential
liabilities arising from errors and omissions and other potential claims against us; and
interruption or loss of our information processing systems or failure to maintain secure information systems.
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’ Form 10-K for the year ended December 31, 2008. Copies
of the 10-K are available online at http://www.sec.gov or on request from the Company
as set forth in Part I, Item 1 “Business-Available Information” in Willis’ Form 10-K.
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 achieved.
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 statements.
This press release contains 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, 2009 and balance sheet as at