Willis Group Reports First Quarter 2013 Results
4.1% reported and organic growth in commissions and fees
NEW YORK, April 30, 2013 – Willis Group Holdings plc (NYSE: WSH), the global risk advisor,
insurance and reinsurance broker, today reported results for the three months ended March 31,
Three months ended March 31,
|Reported net income per diluted share
|Adjusted net income per diluted share
|Reported operating margin
|Adjusted operating margin
|Reported commissions and fees growth
|Organic commissionsions and fees growth
Willis Group recorded first quarter organic commissions and fees growth of 4.1%. The Group’s
solid performance was consistent across its three business units, with Willis North America
contributing growth of 4.3%, Willis International contributing growth of 3.8% and Willis Global
contributing growth of 4.1%.
As previously announced, Willis Group incurred a charge during the first quarter primarily
related to headcount reduction and property and systems rationalization costs. The charge
amounted to $46 million and is expected to drive future savings, starting in the second quarter.
“We are very pleased with our solid results in the first quarter, spread evenly throughout our
business,” said Dominic Casserley, CEO of Willis Group Holdings. “We will continue working to
build on the positive trajectory of our organic growth over the last two quarters. As shown by
our first quarter charge, our efforts are also focused on tempering expense growth and
delivering strong, sustainable results over the long term.”
First Quarter 2013 Financial Results
Willis Group reported net income of $219 million, or $1.24 per diluted share, for the quarter
ended March 31, 2013. These results compared with reported net income of $225 million, or
$1.28 per diluted share, in the comparable period a year ago.
The tax rate in the first quarter 2013 was approximately 19%, down from approximately 24% in
the comparable prior year period due to the impact from recording a valuation allowance
against the Company’s U.S. deferred tax assets in 2012.
Notable items, in comparing reported net income between the two periods, include the $46
million charge in the first quarter of 2013 mentioned above and, in the first quarter of 2012, $13
million related to the write-off of uncollectible accounts receivable and associated legal fees.
Excluding the after-tax impact of these two items, adjusted net income for the first quarter 2013
was $257 million, or $1.46 per diluted share, compared with $233 million, or $1.32 per diluted
share, in the same period a year ago. Adjusted net income per diluted share in the first quarter
of 2012 does not reflect the $0.01 negative impact of the previously disclosed change in
The impact of the lower tax rate in first quarter 2013 relative to first quarter 2012, on an
adjusted net income basis, was $0.10 per share. Additionally, foreign currency movements
increased earnings by $0.01 per diluted share in the first quarter of 2013 compared with the first
quarter of 2012.
Commissions and fees for Willis Group improved to $1,046 million in the first quarter of 2013,
up from $1,005 million in the prior year quarter. Organic commissions and fees grew 4.1%
excluding the net impact of acquisitions and disposals and foreign currency movements.
Investment income for Willis Group declined to $4 million in the first quarter of 2013 from $5
million in the first quarter of 2012.
Willis North America Segment
The North America segment reported 4.9% commissions and fees growth in the first quarter of
2013 compared to the first quarter of 2012. The change reflects 4.3% organic commissions and
fees growth, a positive 0.4% impact from acquisitions and disposals, and a positive 0.2%
impact from foreign currency movements.
Growth in commissions and fees was recorded across most of Willis North America’s
geographic regions. All of the major industry practices recorded positive growth. Notable among
these results was the Human Capital business, which grew mid-single digits.
Willis International Segment
The International segment reported a 3.8% increase in commissions and fees compared with
the same period in 2012. The change reflects 3.8% organic growth, a negative 0.1% impact
from foreign currency movements, and a positive 0.1% impact from acquisitions and disposals.
Operations in Western Europe declined low-single digits in the quarter while Eastern Europe
recorded mid-single digit growth. Operations in the UK recorded low single-digit growth. Latin
America delivered double-digit growth, with strong growth across a number of the larger
countries in the region. Asia recorded double-digit growth and Australasia grew mid-single
Willis Global Segment
The Global segment, which comprises Willis Re, Specialty, Placement and Willis Capital
Markets and Advisory, reported 3.5% growth in commissions and fees in the first quarter of
2013, compared with the first quarter of 2012. The change reflects 4.1% organic growth, a
negative 0.4% impact from foreign currency movements, and a negative 0.2% impact from
acquisitions and disposals.
Global segment growth in the quarter was led by Willis Re, which delivered high single-digit
growth in the seasonally largest quarter for the business. North America reinsurance business
grew double-digits, driven primarily by new business wins and International reinsurance
business was up mid-single digits.
Global Specialty grew low-single digits as double-digit growth in Faber Global and the Energy
unit was tempered by a decline in Financial and Executive Risk.
Reported salaries and benefits for Willis Group were $568 million in the first quarter of 2013,
compared with $506 million in the first quarter of 2012. However, salaries and benefits in the
first quarter of 2013 included $29 million related to the previously announced charge. First
quarter 2013 salaries and benefits were favorably impacted by $2 million of foreign currency
Excluding the impact of the previously announced charge, salaries and benefits in the first
quarter of 2013 were $539 million, an increase of 6.5% from $506 million. This is equivalent to
51.3% of revenues in first quarter 2013, compared to 50.0% of revenues in the year ago
Salaries and benefits in the first quarter of 2012 are not directly comparable with the current
period expense due to the impact from the previously disclosed change in remuneration policy.
Had the change in remuneration policy been effective from January 1, 2012, salaries and
benefits in the first quarter of 2012 would have been approximately $4 million, or 0.8%, higher.
Other operating expenses in the first quarter of 2013 were $156 million, unchanged from the
year ago period. Other operating expenses in the first quarter of 2013 included $12 million
related to the charge as described earlier. Included within this line in the first quarter 2012 was
a $13 million write-off of uncollectible accounts receivable and associated legal costs. Adjusted
for the items mentioned above, other operating expenses as a percentage of revenues were
13.7% in the first quarter of 2013, compared to 14.1% in the year ago quarter.
Reported operating margin for Willis Group was 27.3% for the first quarter of 2013 compared
with 31.3% for the same period of 2012. Adjusted operating margin, excluding the items
detailed in note four of the supplemental financial information, was 31.7% for the quarter ended
March 31, 2013, compared with 32.6% a year ago. The decline in margin was primarily driven
by increased salary and benefits expense and lower investment and other income, partially
offset by higher commissions and fees revenue.
Expense Reduction Initiative
Willis Group recorded a pre-tax charge of $46 million in the first quarter of 2013 related to the
previously announced assessment of the Company’s organizational design. Actions taken in
the quarter included the elimination of 207 positions and rationalization of property and
systems. The Company does not expect to incur any further charge related to this assessment.
Willis Group anticipates that the actions taken will result in total cost savings of approximately
$20 million in 2013, starting in the second quarter. It is also anticipated that Willis Group will
achieve annualized cost savings of approximately $25 to $30 million.
The tax rate for the quarter ended March 31, 2013 was 19%, compared to 24% for the first
quarter of 2012. The lower tax rate in first quarter of 2013 was primarily due to the impact of a
valuation allowance maintained against U.S. deferred tax assets, which results in a smaller tax
charge on U.S. income in the current period compared with prior periods.
Balance Sheet Highlights
As of March 31, 2013, cash and cash equivalents totaled $531 million, total debt was $2,402
million and total equity was $1,893 million. As of December 31, 2012, cash and cash
equivalents were $500 million, total debt was $2,353 million and total equity was $1,725 million.
At its April 2013 Board meeting, the Board of Directors approved a regular quarterly cash
dividend of $0.28 per share (an annual rate of $1.12 per share). The dividend is payable on
July 15, 2013 to shareholders of record at June 28, 2013.
Conference Call and Web Cast
2013, at 8:00 AM Eastern Time. To participate in the live teleconference, please dial (866) 803-
2143 (U.S.) 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 June 1, 2013
at 5:00 PM Eastern Time, by calling (800) 386-4113 (domestic) or + 1 (402) 220-9811
(international) with no pass code, or by accessing the website.
The Company may refer to a slide presentation during its conference call. The slides will be
available to view and download from the Investor Relations section of the Company’s website
Willis Group Holdings plc is a leading global risk advisor, insurance and reinsurance broker. With roots dating
to 1828, Willis operates today on every continent with more than 17,000 employees in over 400
offices. Willis offers its clients superior expertise, teamwork, innovation and market-leading products and professional services in
risk management and transfer. Our experts rank among the world’s leading authorities on analytics, modeling and
mitigation strategies at the intersection of global commerce and extreme events. Additional information on Willis may
be found at www.willis.com, our leadership journal, Resilence, or our up-to-the-minute blog on breaking
news, WillisWire. Across geographies, industries and specialisms, Willis provides its local and multinational clients with resilience
for a risky world.
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 forwardlooking
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 or 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 those associated with the current Eurozone crisis, any insolvencies of or other
difficulties experienced by our clients, insurance companies or financial institutions;
- • our ability to implement and realize anticipated benefits of any expense reduction initiative, charge or any
revenue generating initiatives;
- • volatility or declines in insurance markets and premiums on which our commissions are based, but which
we do not control;
- • our ability to continue to manage our significant indebtedness;
- • our ability to compete effectively in our industry, including the impact of our refusal to accept contingent
commissions from carriers in the non-Human Capital areas of our retail brokerage business;
- • 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;
- • our ability to retain key employees and clients and attract new business;
- • the timing or ability to carry out share repurchases and redemptions;
- • the timing or ability to carry out refinancing 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;
- • fluctuations in our earnings as a result of potential changes to our valuation allowance(s) on our deferred
- • any fluctuations in exchange and interest rates that could affect expenses and revenue;
- • 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;
- • 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
liabilities or funding obligations;
- • our ability to achieve the expected strategic benefits of transactions, including any growth from associates;
- • further impairment of the goodwill of one of our reporting units, in which case we may be required to record
additional significant charges to earnings;
- • our ability to receive dividends or other distributions in needed amounts from our subsidiaries;
- • changes in the tax or accounting treatment of our operations and fluctuations in our tax rate;
- • any potential impact from the US healthcare reform legislation;
- • our involvements in and the results of any regulatory investigations, legal proceedings and other
- • underwriting, advisory or reputational risks associated with non-core operations as well as the potential
significant impact our non-core operations (including the Willis Capital Markets & Advisory operations) can
have on our financial results;
- • our exposure to potential liabilities arising from errors and omissions and other potential claims against us;
- • the interruption or loss of our information processing systems or failure to maintain secure information
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, 2012 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 consolidated financial statements.