Willis Group Reports First Quarter 2011 Results
NEW YORK, May 4, 2011 – Willis Group Holdings plc (NYSE: WSH), the global insurance broker,
today reported results for the quarter ended March 31, 2011.
First quarter 2011 highlights include:
- 4 percent reported and organic growth in commissions and fees compared with the first quarter
- Reported operating margin of 23.6 percent, compared with 31.0 percent in first quarter of 2010;
adjusted operating margin of 32.8 percent, up 60 basis points compared with 32.2 percent in
the first quarter of 2010
- Reported earnings per diluted share of $0.20; adjusted earnings per diluted share of $1.28
- Successfully completed an $800 million Senior Notes issue; repaid previously issued 12.875%
“When we reported our 2010 results, we laid out a plan for 2011 and beyond to deliver the results
we want to achieve. We had a great start to the year, delivering what we said we would. In the
first quarter of 2011, we completed the operational review and recorded most of the charge, and
implemented growth initiatives. We reduced the cost and extended the maturity profile of our debt
through a very successful bond issue and repaid our most expensive debt,” said Joe Plumeri,
Chairman and Chief Executive Officer, Willis Group Holdings. “Even though there was no
meaningful change in the economic and rate environment for much of our business in the first
quarter of 2011, we achieved 4 percent organic growth in commissions and fees. As planned, we
delivered modest growth in adjusted operating margin and adjusted earnings per diluted share,
which increased to 32.8 percent and $1.28, respectively.”
First Quarter 2011 Financial Results
Reported net income for the first quarter of 2011 was $34 million, or $0.20 per diluted share,
compared with $204 million, or $1.20 per diluted share, in the same period a year ago. Reported
net income in the first quarter of 2011 was impacted by a $97 million charge related to the 2011
operational review and $171 million make-whole amounts related to the repurchase and
redemption of Senior Notes and write-off of unamortized debt issuance costs, which are detailed
later in this release.
Adjusted net income per diluted share, which excludes the impact of certain items detailed later in
the release, was $1.28 in the first quarter of 2011 compared with $1.27 in the first quarter of 2010.
Foreign currency movements increased earnings per diluted share by $0.04 in the first quarter of
2011 compared with the first quarter of 2010.
Total reported revenues for the first quarter of 2011 were $1,008 million compared with $972
million for the same period of 2010, an increase of 4 percent. Total commissions and fees for the
first quarter of 2011 were $1 billion, an increase of 4 percent from $963 million reported in the first
quarter of 2010. Foreign currency movements increased reported commissions and fees by 1
percent compared with the same period a year ago. Investment income was $8 million in the first
quarter of 2011 compared with $9 million in the first quarter of 2010.
Organic growth in commissions and fees was 4 percent in the first quarter of 2011 compared with
the same period of 2010, of which $6 million was attributable to a change in accounting within one
of the Company’s Global Specialty businesses to conform to current Company accounting policy.
Organic growth reflected net new business won of 5 percent, driven by solid new business
generation with higher retention of existing clients. Partially offsetting net new business growth
was a negative 1 percent impact from declining premium rates and other market factors.
North America Segment
The North America segment reported a 2 percent decline in commissions and fees (of which 1
percent was due to a decline in legacy HRH contingent commissions) and a 1 percent decline in
organic commissions and fees in the first quarter of 2011 compared with the same period of 2010.
North America benefited from higher client retention and continued to generate solid new business
growth. There was good growth in specialty businesses although the segment results continue to
reflect soft insurance market and US economic conditions. Operating margin in the segment
declined 160 basis points to 23.7 percent in the first quarter of 2011 compared with the prior year
period primarily due to lower commissions and fees, including lower legacy HRH contingent
The International business segment reported 7 percent growth in commissions and fees compared
with the same period in 2010, including a 1 percent favorable impact from foreign currency
movements. Organic growth in commissions and fees was 6 percent, including double-digit growth
in Latin America, Asia, Eastern Europe and South Africa. The UK and Ireland retail market and
Continental Europe each recorded positive mid-single digit growth. Segment operating margin was
29.8 percent compared with 32.2 percent in the first quarter of 2010. Strong growth in
commissions and fees was more than offset by investments to fund growth, including increased
headcount and higher incentive compensation.
The Global segment, which comprises the Reinsurance, Global Specialties, London Markets
Wholesale, and Willis Capital Markets & Advisory business units, reported 8 percent growth in
commissions and fees and 8 percent organic growth in commissions and fees in the first quarter of
2011 compared with the first quarter of 2010. The change in accounting in the Global Specialty
unit described above resulted in a $6 million favorable impact to commissions and fees with a
corresponding 2 percent favorable impact to organic growth in commissions and fees in the first
quarter of 2011. The Reinsurance business, particularly in North America, performed strongly, with
net new business more than offsetting continued softness in reinsurance rates. Willis Capital
Markets & Advisory was also a driver of organic commission and fee growth in the quarter, as a
result of increased M&A advisory activity. Operating margin for the segment was a seasonally high
48.5 percent, compared with 46.1 percent in the first quarter of 2010. Strong growth in
commissions and fees, and favorable foreign currency movements were partially offset by
investments to fund growth, including higher incentive compensation.
Reported salaries and benefits were $584 million in the first quarter of 2011 compared with $486
million in the first quarter of 2010. Salaries and benefits, as a percentage of revenues, were 58.0
percent in the first quarter of 2011 compared with 50.0 percent in the first quarter of 2010. The
increase in salaries and benefits was primarily attributable to severance and other costs associated
with the 2011 operational review charge. Excluding the impact of the charge, salaries and
benefits, as a percentage of revenues, would have been 49.8 percent, consistent with the prior
The Company made $195 million of cash retention payments during the first quarter of 2011
compared with $169 million in the first quarter of 2010. Incentive compensation included $44
million of amortization of cash retention payments in the first quarter of 2011 compared with $28
million in the first quarter of 2010. As of March 31, 2011, December 31, 2010 and March 31, 2010,
the Company included $328 million, $173 million and $233 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 $153 million in the first quarter of 2011 compared with
$149 million in the first quarter of 2010. Other operating expenses, as a percentage of revenues,
were 15.2 percent in the first quarter of 2011 compared with 15.3 percent in the same quarter a
Reported operating margin was 23.6 percent for the first quarter of 2011 compared with 31.0
percent for the same period of 2010. Adjusted operating margin was 32.8 percent in the first
quarter of 2011, compared with 32.2 percent in the year ago quarter. The improvement in adjusted
operating margin reflected solid organic growth in commissions and fees and favorable foreign
currency movements, tempered by higher salary and benefit expense, including incentive
2011 Operational Review
The Company recorded a pre-tax charge of $97 million in the first quarter of 2011 related to the
previously announced operational review. It is anticipated that the total pre-tax charge in 2011
related to the operational review will be approximately $130 million. The Company anticipates that
the balance of the charge will be recorded over the remaining quarters of 2011.
The Company anticipates that the operational review will result in total cost savings of
approximately $65 to $75 million in 2011. It is also anticipated that the Company will achieve
annualized cost savings of approximately $95 to $105 million beginning in 2012.
The effective tax rate for the quarter ended March 31, 2011 was 4 percent. After adjusting for the
net effect of certain non-recurring items, the underlying tax rate for the quarter ended March 31,
2011 was 26 percent, in line with the underlying effective tax rate for the full year 2010.
As of March 31, 2011, cash and cash equivalents totaled $432 million and total debt was $2.6
In the first quarter of 2011, the Company issued $300 million aggregate principal amount of Senior
Notes due March 2016 at 4.125%, and $500 million aggregate principal amount of Senior Notes
due March 2021 at 5.75%.
In the first quarter of 2011, the Company repurchased $465 million of its 12.875% Senior Notes
due September 2016. The Company also called for redemption the $35 million of 12.875% Senior
Notes due 2016 that remained outstanding. This redemption was completed on April 18, 2011. As
a result of these actions, the Company recorded costs of $171 million related to make-whole
amounts on the repurchase and redemption of Senior Notes and the write-off of unamortized debt
issuance costs in the first quarter of 2011.
Total equity as at March 31, 2011 was $2.7 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 July 15,
2011 to shareholders of record on June 30, 2011.
“While the external operating environment continues to be challenging, we remain focused on
executing our plan. During the remainder of the year we will focus on implementing our growth
initiatives and delivering cost savings. We believe these building blocks will enable us to deliver
modest adjusted operating margin and adjusted earnings per share growth in 2011 and
significantly accelerate operating margin and earnings growth in 2012 and beyond,” said Mr.
Conference Call and Web Cast
A conference call to discuss the first quarter 2011 results will be held on Thursday, May 5, 2011, 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 June 5, 2011 at 11:59 PM
Eastern Time, by calling (866) 489-2844 (domestic) or +1 (203) 369-1658 (international) with no
pass code, or by accessing the website.
Willis Group Holdings plc 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 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, potential cost savings and
acceleration of operating margin and earnings growth, 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-
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, environmental, market 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
- our ability to continue to manage our significant indebtedness;
- our ability to compete effectively in our industry;
- our ability to implement and realize anticipated benefits of the 2011 operational review, the Willis Cause or any other initiative we pursue;
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 new business;
- the timing or ability to carry out share repurchases, refinancings 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 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;
- our ability to receive dividends or other distributions in needed amounts from our subsidiaries;
- changes in the tax or accounting treatment of our operations;
- any potential impact from the 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;
- our involvements in and the results of any regulatory investigations, legal proceedings and other contingencies;
- risks associated with non-core operations including underwriting, advisory or reputational;
- 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, 2010 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
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
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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