Willis Group Reports Third Quarter 2009 Results
New York, NY, October 26, 2009 - Willis Group Holdings Limited (NYSE: WSH), the global insurance broker,
today reported results for the quarter and nine months ended September 30, 2009.
Highlights of quarter ended September 30, 2009 include:
- Reported earnings per diluted share from continuing operations of $0.46; adjusted earnings per diluted share from continuing
operations of $0.53
- 28 percent reported growth in commissions and fees compared with third quarter of 2008
percent organic growth in commissions and fees: Global and International segments with 4 percent and 3
percent growth, respectively; North America decline of 3 percent improved from second quarter of 2009
- North America
segment operating margin expansion of 1,140 basis points over a year ago
- Outlook raised to Stable by
both Moody’s and Standard & Poor’s
- Issued $300 million of senior unsecured notes due 2019 at 7.0
percent; repurchased $160 million of 5.125 percent senior notes due July 2010
Highlights of the nine months ended September 30, 2009 include:
- Reported earnings per diluted share from continuing operations of $2.13; adjusted earnings per diluted share from continuing
operations of $2.21
- 2 percent organic growth in commissions and fees over the comparable prior year; Global
and International segments each with 5 percent growth
- Reported operating margin of 21.4 percent; adjusted operating
margin of 22.1 percent
- North America segment operating margin expansion of 970 basis points over prior year
“Willis continues to maintain its growth momentum in spite of the difficult global economy and soft market
conditions - and that’s a tribute to the strength of our diverse global business,” said Joe
Plumeri, Chairman and Chief Executive Officer, Willis Group Holdings. “We continue to get strong contributions
from each segment, despite the marketplace challenges we face, which are especially pronounced in the US,
UK and Ireland. We continue to run the 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.”
Third Quarter 2009 Financial Results
Reported net income from continuing operations for the quarter ended September 30, 2009 was $78 million, or
$0.46 per diluted share, compared with $36 million, or $0.25 per diluted share, in the same
period a year ago. Reported net income for the third quarters of 2009 and 2008
was affected by certain items, including the acquisition of Hilb Rogal & Hobbs Company (HRH).
Excluding certain items, which are reviewed in detail in this release, adjusted earnings per diluted share from
continuing operations were $0.53 in the third quarter of 2009 compared with $0.32 in the third
quarter of 2008. Foreign currency movements had a negative $0.05 impact on earnings per diluted
share in the third quarter of 2009.
Total reported revenues for the quarter ended September 30, 2009 were $725 million compared with $579 million
for the same period last year, an increase of 25 percent. This increase was primarily
due to the HRH acquisition. Foreign currency movements decreased reported revenues by 2 percent compared
with a year ago.
Organic growth in commissions and fees was 2 percent in the third quarter of 2009 compared with
the third quarter of 2008. This growth reflected net new business won of 5 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 3 percent organic growth in commissions and fees in the third quarter
of 2009 compared with the same period in 2008. This growth came from strong 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. Outside of the UK and
Ireland, the International business segment had high single-digit growth. There was strong growth across many
regions, including Europe and Latin America.
The North America segment reported an improvement from the second quarter of 2009 with a 3 percent
decline in organic commissions and fees compared with the third quarter of 2008, reflecting soft insurance
market conditions as well as continued weakness in the US economy. North America remains focused
on the integration of HRH and ongoing expense management. As a result, its operating margin
expanded 1,140 basis points to 21.5 percent in the third quarter of 2009 compared to the
The Global segment, which comprises the Global Specialties, Faber & Dumas and Reinsurance divisions, recorded 4 percent
organic growth in commissions and fees in the third quarter of 2009 compared with the third
quarter of 2008. Each division within the Global segment recorded positive growth, led by continued
high single-digit growth in reinsurance, together with strong performance in the aerospace, marine and financial and
executive risks specialties.
Reported operating margin was 11.3 percent for the quarter ended September 30, 2009 compared with 11.4 percent
for the same period last year. Excluding certain items, which are reviewed in detail in
this release, adjusted operating margin was 13.1 percent for the quarter ended September 30, 2009 compared
with 12.1 percent a year ago. Foreign currency had an unfavorable 150-basis-point impact on adjusted
operating margin in the quarter.
Nine Months 2009 Financial Results
Reported net income from continuing operations for the nine months ended September 30, 2009 was $357 million,
or $2.13 per diluted share, compared with $241 million, or $1.70 per diluted share, in the
same period a year ago. Reported net income for the first nine months of 2009
and 2008 was affected by certain items, including the acquisition of HRH and 2008 expense review
charges for severance and other costs.
Excluding certain items, which are reviewed in detail in this release, adjusted earnings per diluted share from
continuing operations were $2.21 for the nine months ended September 30, 2009 compared with $2.24 in
the comparable period of 2008, a decrease of 1 percent. Foreign currency movements reduced earnings
per diluted share by $0.14 for the nine months ended September 30, 2009.
Total reported revenues for the nine months ended September 30, 2009 were $2,439 million compared with $2,035
million for the same period last year, an increase of 20 percent. The increase was
primarily due to the HRH acquisition, while the effect of foreign currency translation decreased reported revenues
by 6 percent.
Organic growth in commissions and fees was 2 percent in the first nine months of 2009 compared
with the comparable period of 2008. This growth reflected net new business won of 5
percent, offset by a negative 3 percent impact from declining premium rates and other market factors.
Reported operating margin was 21.4 percent for the nine months ended September 30, 2009 compared with 18.1
percent for the same period last year. Excluding certain items, which are reviewed in detail
in this release, adjusted operating margin was 22.1 percent for the first nine months of 2009
compared with 22.9 percent a year ago.
The reported income tax credit for the quarter ended September 30, 2009 was $29 million compared to
$2 million income tax expense for the comparable period a year ago.
The third quarter 2009 tax credit included a provision of $27 million which had been recorded related
to tax that would potentially be payable should the unremitted earnings of our foreign subsidiaries be
repatriated. Following a change in UK tax law effective in the third quarter of 2009,
these earnings could now be repatriated without additional tax cost and, consequently, the provision has been
released. In addition, as in prior years, an $11 million credit has been recognized in
the third quarter of 2009, compared with a $5 million credit in the year ago quarter,
further to the closure of the statute of limitations on assessments relating to previously unrecognized tax
The effective underlying tax rate for the quarter and nine months ended September 30, 2009 was approximately
26 percent, the same as the 2008 full-year rate.
Income from discontinued operations, net of tax, was $1 million, or $0.01 per diluted share, in the
third quarter of 2009 and $2 million, or $0.01 per diluted share, for the nine months
ended September 30, 2009, relating to disposals of Bliss & Glennon and Managing Agency Group, the
Company’s US-based wholesale insurance operations. No net gain or loss was recognized relating to either
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
January 15, 2010 to shareholders of record on December 30, 2009.
As of September 30, 2009, cash and cash equivalents totaled $203 million and total debt was $2.6
billion. The Company issued $300 million of senior notes due 2019 at 7.0 percent, and
repurchased $160 million of its 5.125 percent Senior Notes due July 2010 at a premium of
$27.50 per $1,000 face value.
Total stockholders’ equity as at September 30, 2009 was $2.2 billion.
In June 2009, the Company announced that it was in discussions regarding the potential sale of a
portion of its interest in Gras Savoye. Since that time, the Company and other Gras
Savoye shareholders have entered into an exclusive arrangement with Astorg Partners, a private equity fund, but
as of the date hereof, we have not entered into any definitive sale agreement.
Pending the finalization of the financing terms, we anticipate executing definitive agreements in the next few
months. We would expect: (i) elimination of the put presently exercisable by the Gras
Savoye shareholders; (ii) receipt of cash proceeds between $100-$150 million, and (iii) retention of a 33
percent interest following the sale as well as the ability to acquire a majority interest in
Gras Savoye in 2015. As a result of the significant uncertainties underlying these forward-looking
statements, our inclusion of this information is not a representation or guarantee by us that our
objectives and plans will be achieved.
“I am proud of what we’ve been able to accomplish this quarter and over the first nine
months of 2009. This is a strong, diverse business that is able to perform well
even under the worst global economic conditions,” Plumeri said. “As always, we are rigorous about
our expenses and keeping our company 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 third quarter 2009 results will be held on Tuesday, October 27,
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, through November 27, 2009
at 11:59 PM Eastern Time, by calling (877) 611-5293 (domestic) or +1 (203) 369-4862 (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 that address activities, events or developments that we expect or anticipate may occur in the
future, including such things as our redomestication from Bermuda to Ireland, the potential benefits of the
HRH acquisition, discussions concerning the sale of a portion of our interest in Gras Savoye, 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;
ability to continue to manage our significant indebtedness;
- 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 obligations;
- the timing of any exercise
of put and call arrangements with associated companies;
- changes in the tax or accounting treatment of our
operations, such as the recent proposals made by the Obama administration regarding international tax reform;
- 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
- the 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 the section entitled “Risk
Factors’’ included in Willis’ Form 10-K for the year ended December 31, 2008, and our subsequent
filings with the Securities and Exchange Commission. Copies 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 nine months ended September 30, 2009 and balance
sheet as at that date.