Willis Group Reports Third Quarter 2010 Results
Reported and adjusted net income per diluted share from continuing
operations of $0.37
1 percent reported growth in commissions and fees compared with third quarter of
4 percent organic growth in commissions and fees compared with third quarter of 2009, with
positive organic growth in commissions and fees in each segment: 2 percent in North America;
percent in Global; 6 percent in International
Reported and adjusted operating margin of 14.5 percent;
margin up 320 basis points, adjusted operating
margin up 140 basis points compared with third quarter
NEW YORK, October 27, 2010 – Willis Group Holdings plc (NYSE: WSH), the global insurance broker, today
reported results for the quarter and nine months ended September 30, 2010.
“Our results this quarter reflect the strength of the Willis culture, with great teamwork and cooperation across
the businesses, a commitment to growth and focus on cost control,” said Joe Plumeri, Chairman and
Chief Executive Officer, Willis Group Holdings. “Our global diversity and cooperation across businesses continued to deliver
results, as each segment recorded positive organic growth in commissions and fees in the face of
continued soft rate and economic conditions in a number of the regions in which we operate.”
Third Quarter 2010 Financial Results
Reported net income from continuing operations for the quarter ended September 30, 2010 was $64 million, or
$0.37 per diluted share, compared with $78 million, or $0.46 per diluted share, in the same
period a year ago.
Excluding certain items, which are detailed later in this release, adjusted net income per diluted share from
continuing operations was $64 million, or $0.37 per diluted share, in the third quarter of 2010
compared with $90 million, or $0.53 per diluted share in the third quarter of 2009. Foreign
currency movements favorably impacted earnings by $0.02 per diluted share compared with the third quarter of
Total reported revenues for the quarter ended September 30, 2010 were $733 million compared with $725 million
for the same period last year, an increase of 1 percent. Total commissions and fees rose
1 percent to $723 million from the third quarter of 2009. Investment income was $10 million
in the third quarter of 2010, unchanged from the third quarter of 2009.
Organic growth in commissions and fees was 4 percent in the third quarter of 2010 compared with
the third quarter of 2009. Net new business growth of 6 percent reflected strong new business
generation of 13 percent and steady client retention. Partially offsetting net new business growth was a
2 percent negative impact from declining premium rates and other market factors.
The North America segment reported a 2 percent increase in commissions and fees in the third quarter
of 2010 compared with the third quarter of 2009. Organic commissions and fees increased 2 percent
in the third quarter of 2010 compared with the negative 3 percent impact in the same
period a year ago. Strong growth was recorded across a number of geographic regions, and the
segment continued to benefit from specialist industry expertise. Organic growth was supported by increases in both
new business generation and client retention. Soft insurance market conditions and ongoing weakness in the US
economy continue to weigh on the segment. Operating margin was 21.4 percent in the third quarter
of 2010, in line with 21.5 percent in the third quarter of 2009.
The International business segment reported a 2 percent decrease in commissions and fees compared with the same
period in 2009, primarily due to unfavorable foreign currency movements. Organic growth in commissions and fees
was 6 percent in the third quarter of 2010, with positive contributions across all regions, including
continued double-digit performance in Latin America, Asia and Eastern Europe. Continental Europe and the UK and
Ireland retail market both recorded positive single digit organic growth. Operating margin was 9.6 percent in
the third quarter of 2010 compared with 13.4 percent in the year ago period, as margin
expansion from strong organic growth was offset by continued support of growth and unfavorable foreign currency
The Global segment, which comprises the Reinsurance, Global Specialties, Faber & Dumas, and Willis Capital Markets &
Advisory divisions, reported 3 percent growth in commissions and fees and 4 percent organic growth in
commissions and fees in the third quarter of 2010 compared with the third quarter of 2009.
Reinsurance and Global Specialties divisions each grew mid-single digits. Reinsurance continued to generate strong new business
despite ongoing market softness, while Global Specialties, particularly Financial and Executive Risks, Inspace, Aerospace and Construction
were significant contributors to organic growth in the quarter. Operating margin was 19.7 percent in the
third quarter of 2010, up from 18.8 percent in the year ago quarter.
Reported salaries and benefits were $462 million in the third quarter of 2010, an increase of 3
percent, compared with $449 million in the third quarter of 2009. Salaries and benefits, as a
percentage of revenues, were 63.0 percent in the third quarter of 2010 compared with 61.9 percent
in the third quarter of 2009. The rise in salaries and benefits expense was primarily attributable
to increased headcount and higher incentive compensation, moderated by favorable foreign currency movements and lower stock-based
compensation expense. Incentive compensation included $28 million of amortization of cash retention payments in the third
quarter of 2010 compared with $22 million in the third quarter of 2009. As of September
30, 2010, December 31, 2009 and September 30, 2009, the Company included $193 million, $98 million,
and $121 million, respectively, in other assets on the balance sheet, which represented the unamortized portion
of cash retention payments made before those dates.
Reported other operating expenses were $129 million in the third quarter of 2010 compared with $151 million
in the third quarter of 2009. Other operating expenses in the third quarter of 2010 benefited
from the release of a previously established $7 million legal accrual and foreign currency movements. Other
operating expenses, as a percentage of revenues, were 17.6 percent in the third quarter of 2010
compared with 20.8 percent in the third quarter of 2009.
Reported operating margin was 14.5 percent for the quarter ended September 30, 2010 compared with 11.3 percent
for the same period last year, an increase of 320 basis points. Adjusted operating margin was
14.5 percent for the quarter ended September 30, 2010 compared with 13.1 percent a year ago,
an increase of 140 basis points. Adjusted operating margin benefited from continued solid growth in organic
commissions and fees, rigorous expense management and favorable foreign currency movements, partially offset by higher incentive
compensation. Adjusted operating income for the third quarter of 2009 was impacted by certain items, which
are detailed later in this release.
Nine Months 2010 Financial Results
Reported net income from continuing operations for the nine months ended September 30, 2010 was $357 million,
or $2.09 per diluted share, compared with $357 million, or $2.13 per diluted share, in the
same period a year ago. Reported net income from continuing operations for the first nine months
of 2010 and 2009 was impacted by certain items, which are detailed later in this release.
Adjusted earnings per diluted share from continuing operations were $2.18 for the nine months ended September 30,
2010 compared with $2.21 in the comparable period of 2009. Foreign currency movements favorably impacted adjusted
earnings per diluted share by $0.11 in the nine months ended September 30, 2010 compared to
the same period in 2009.
Total reported revenues for the nine months ended September 30, 2010 were $2,504 million compared with $2,439
million for the same period last year, an increase of 3 percent. Total commissions and fees
were $2,475 million, up 3 percent compared with the first nine months of 2009. Investment income
was $29 million through the first nine months of 2010, down 17 percent from $35 million
in the same period a year ago, due to lower interest rates.
Organic growth in commissions and fees was 4 percent in the first nine months of 2010 compared
with the same period of 2009. This growth reflected net new business won of 6 percent,
partially offset by a negative 2 percent impact from declining premium rates and other market factors.
Reported operating margin was 23.0 percent for the nine months ended September 30, 2010 compared with 21.4
percent for the same period last year. Excluding items detailed later in this release, adjusted operating
margin was 23.6 percent for the first nine months of 2010 compared with 22.1 percent a
Income tax expense for the quarter ended September 30, 2010 was $10 million, compared to an income
tax credit of $29 million for the comparable period a year ago.
As in prior years, a $7 million credit was recognized in the third quarter of 2010, compared
with an $11 million credit in the year ago quarter, further to the closure of the
statute of limitations on assessments relating to previously unrecognized tax benefits.
In addition, the third quarter 2009 tax credit also reflected the release of a $27 million provision
following a change to UK tax law.
The effective tax rate was 15.2 percent for the quarter ended September 30, 2010 and 24.8 percent
for the nine months ended September 30, 2010. Excluding the impact of nonrecurring items, which are
detailed later in this release, the underlying tax rate for the quarter and nine months ended
September 30, 2010 was approximately 26.0 percent, the same as the 2009 full year rate.
As of September 30, 2010, cash and cash equivalents totaled $141 million and total debt was $2.3
billion. Total equity was $2.5 billion.
The Board of Directors declared a regular quarterly cash dividend on the Company’s ordinary shares of $0.26
per share (an annual rate of $1.04 per share). The dividend is payable on January 14,
2011 to shareholders of record at December 31, 2010.
“We do not anticipate significant near term changes to the external environment in which we operate. The
pace of economic recovery is expected to remain modest in a number of key geographies and
the overall rate environment remains soft. However I continue to believe that we have established, and
continue to build, a strong, disciplined business that is well positioned for success,” Mr. Plumeri said.
Conference Call and Web Cast
A conference call to discuss the third quarter 2010 results will be held on Thursday, October 28,
2010, at 8:00 AM Eastern Time. To participate in the live teleconference, please dial (866) 8032143
(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 November 28, 2010 at 11:59
PM Eastern Time, by calling (800) 385-2289 (domestic) or +1 (203) 369-3262 (international) with no pass
code, or by accessing the website.
Willis Group Holdings plc is a leading global insurance broker. Through its subsidiaries, Willis develops and delivers
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 17,000 employees serving clients in virtually every part of the
world. 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 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, environmental and regulatory conditions
on our global business operations;
- the impact of current financial market conditions 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 continue to manage our significant
- our ability to compete effectively in our industry;
- our ability to implement and realize anticipated
benefits of the Shaping Our Future, Right Sizing Willis, Funding for Growth initiatives or any other
- 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 retain key employees and clients and attract
- 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
- rating agency actions that could inhibit our 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;
- our ability to achieve the expected strategic benefits of transactions;
changes in the tax or accounting treatment of our operations;
- any potential impact from the new
US healthcare reform legislation;
- 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;
involvements in and the results of any regulatory investigations, legal proceedings and other contingencies;
- underwriting, advisory
or reputational risks associated with non-core operations;
- 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 more information see the section entitled ‘‘Risk
Factors’’ included in Willis’ Form 10-K for the year ended December 31, 2009 and our subsequent
filings with the Securities and Exchange Commission. Copies are available online at http://www.sec.gov or www.willis.com.
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.
Non-GAAP Supplemental Financial Information
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 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 financial statements.
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