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    Willis Group Reports Third Quarter 2013 Results

    Reported growth in commissions and fees of 5.6%
    Organic growth in commissions and fees of 5.7%

    NEW YORK, October 29, 2013 – Willis Group Holdings plc (NYSE: WSH), the global risk advisor, insurance and reinsurance broker, today reported results for the three and nine months ended September 30, 2013.

    Willis Group recorded third quarter organic commissions and fees growth of 5.7%. The Group’s three business units each contributed positively to this quarter’s performance, with Willis North America contributing growth of 3.9%, Willis International contributing growth of 7.8% and Willis Global contributing growth of 6.4%.

    Willis Group reported a net loss from continuing operations of $(27) million, or $(0.15) per diluted share, in the third quarter of 2013 after recording a $60 million loss related to early extinguishment of debt and an expense of $1 million for related fees. These results compare to reported earnings per diluted share of $0.15 in the third quarter of 2012. Foreign currency movements had no net impact on earnings per diluted share during the quarter.

    Adjusted net income from continuing operations, which excludes the after-tax impact of the previously noted charges and other items detailed in note 3 of the supplemental financial information included in this press release, was $0.19 per diluted share in the third quarter of 2013 compared to $0.22 per diluted share, in the same period a year ago. However, both reported and adjusted results in the third quarter of 2012 would have been $0.07 per diluted share lower had the previously disclosed change to remuneration policy been effective from the beginning of 2012.

    “Once again we delivered strong top line results, our fourth consecutive quarter of mid-single digit organic growth with positive contributions from each of our businesses,” said Willis Group CEO, Dominic Casserley. “We believe this is in line with the goals we laid out at our Investor Conference in July of growing revenues with positive operating leverage to improve cash flow and deliver strong shareholder returns.”

    Casserley added: “Also, during the quarter, we strengthened our balance sheet by effectively refinancing portions of our nearer term debt into new debt with maturities out ten and thirty years. We accomplished that while decreasing our overall debt costs.”

    Third quarter 2013 financial results

    Revenues

    Total revenues, which includes commissions and fees, investment income, and other income, were $795 million in the third quarter of 2013, an increase of 5.4% compared to the year ago quarter.

    Total reported commissions and fees for Willis Group improved to $791 million in the third quarter of 2013, up from $749 million in the prior year quarter. Commissions and fees in the third quarter of 2013 were unfavorably impacted by $4 million of foreign currency movements. Third quarter 2013 organic commissions and fees grew 5.7% relative to the third quarter of 2012.

    Commissions and fees by segment

    The table above reconciles reported commissions and fees growth to organic commissions and fees growth, as defined in note 1 of the supplemental financial information, for the three months ended September 30, 2013.

    Investment income for Willis Group was $4 million in the third quarter of 2013 unchanged from the year-ago quarter.

    Willis North America segment

    The North America segment achieved 3.9% organic commissions and fees growth in the third quarter of 2013 compared to the third quarter of 2012.

    Growth in commissions and fees was reported across most of North America’s geographic regions. Similarly, almost all of the major industry practices recorded positive growth with the two largest practices, Human Capital and Construction, growing low single digits and mid-single digits, respectively, during the quarter.

    Willis International segment

    The International segment achieved 7.8% organic growth in commissions and fees in the third quarter 2013 compared with the same period in 2012.

    Operations in Western Europe were flat in the quarter, with growth in some countries offset by declines in others. Eastern Europe recorded low double digit growth. Operations in the U.K. declined mid-single digits. Latin America operations grew mid-teens with strong growth from a number of the larger countries in the region. Operations in Asia grew high double digits and Australasia was up low double digits.

    Willis Global segment

    The Global segment, which comprises Willis Re, Specialty, Placement, and Willis Capital Markets and Advisory, achieved 6.4% organic growth in commissions and fees in the third quarter of 2013, compared with the third quarter of 2012.

    Global segment growth was led by Willis Re which recorded growth in the high single digits. The Specialties reinsurance business reported growth in the mid-teens, driven by new business. North America reinsurance business reported growth in the high single digits and the International reinsurance business grew mid-single digits.

    Global Specialty grew mid-single digits, with good growth from new business. Most notable was the strong performance from Financial and Executive risks, and P&C and Construction during the quarter.

    Expenses

    Total reported expenses, which include salaries and benefits, other operating expenses, depreciation expense, amortization of intangible assets, and gains and losses on disposal of operations, were $720 million in the third quarter of 2013, compared with $684 million in the third quarter of 2012, an increase of 5.3%. Total expenses were favorably impacted by $4 million of foreign currency movements in the third quarter of 2013 and the quarter over quarter comparison was negatively impacted by the previously disclosed change in remuneration policy, discussed below.

    Reported salaries and benefits were $541 million in the third quarter of 2013, compared with $502 million in the third quarter of 2012, an increase of 7.8%. Had the previously disclosed change in remuneration policy been effective from January 1, 2012, comparable salaries and benefits in the third quarter of 2012 would have been approximately $17 million higher and the quarter over quarter increase in salaries and benefits would have been 4.2%.

    This remaining increase in reported salaries and benefits was primarily due to increased headcount relative to the prior year and annual salary reviews, partially offset by favorable foreign currency movements amounting to $3 million in the quarter.

    Reported salaries and benefits were equivalent to 68.1% of revenues in the third quarter of 2013 and, had the previously disclosed change in remuneration policy been effective from January 1, 2012, salaries and benefits would have been 68.8% of revenues in the third quarter of 2012.

    Other operating expenses in the third quarter of 2013 were $144 million, compared to $146 million in the year ago period, a decrease of 1.4%.

    Other operating expenses in the third quarters of 2013 and 2012 were impacted by items detailed in note 2 of the supplemental financial information. After adjusting for these items, other operating expenses were $8 million or 5.9% higher in third quarter 2013 compared to the year ago period. This increase was primarily driven by higher business development expenses and professional fees.

    Depreciation and Amortization of intangible assets were $21 million and $14 million respectively, in both third quarter 2013 and 2012.

    Operating margin

    Willis Group reported and adjusted operating margin was 9.4% and 9.6%, respectively, in the third quarter 2013. This compares to reported and adjusted operating margin in third quarter 2012 of 9.3% and 10.9%, respectively. The decline in adjusted operating margin was primarily driven by higher salary and benefits and other operating expenses (as discussed above); partially offset by higher commissions and fees.

    Interest expense

    Interest expense was $30 million in the third quarter of 2013 compared with $32 million in the year ago quarter.

    Early extinguishment of debt

    Willis Group recorded a $60 million loss related to the previously announced early extinguishment of debt that was executed during the quarter in conjunction with the refinancing of a portion of the Company’s outstanding debt, as described below in “Balance sheet and capital management highlights”. The Company also reported a $1 million expense (recorded within Other operating expenses) for related fees.

    Tax

    Despite reporting a pre-tax net loss of $(15) million for the quarter ended September 30, 2013, the Company recorded $11 million of tax expense in the period. This was driven by the charges related to the early extinguishment of debt that was issued by Willis North America. As previously disclosed, the Company has maintained a valuation allowance against net U.S. deferred tax assets. Therefore, no tax benefit was recognized for the debt extinguishment charges recorded during the quarter, resulting in a higher consolidated tax expense. When looking at the quarter’s results excluding the extinguishment charges, the tax rate was approximately 24%. For the nine months ended September, 30, 2013, the reported tax rate was approximately 23%. The reported tax rate for the three months and nine months ended September 30, 2012 was 26% and 24%, respectively.

    Nine months 2013 financial results

    Reported net income from continuing operations, for the nine months ended September 30, 2013 was $297 million, or $1.67 per diluted share, compared with $358 million, or $2.03 per diluted share, in the same period a year ago.

    Adjusted earnings from continuing operations per diluted share, which excludes the impact of items detailed in note 3 of the supplemental financial information, were $2.22 for the nine months ended September 30, 2013 compared with $2.13 in the comparable period of 2012. However, both reported and adjusted results in the first nine months of 2012 would have been $0.14 per diluted share lower had the previously disclosed change to remuneration policy been effective from the beginning of 2012. Net foreign currency movements decreased earnings by $0.04 per diluted share in the nine months ended September 30, 2013.

    Total commissions and fees were $2,722 million for the first nine months of 2013, compared to $2,591 million for the first nine months of 2012. Organic growth in commissions and fees was 5.3% in the first nine months of 2013.

    The table above reconciles reported commissions and fees growth to organic commissions and fees growth, as defined in note 1 of the supplemental financial information, for the nine months ended September 30, 2013

    Reported operating margin was 19.5% for the nine months ended September 30, 2013 compared with 21.7% for the same period last year. Excluding items detailed in note 2 of the supplemental financial information, adjusted operating margin was 21.2% for the first nine months of 2013 compared with 22.5% a year ago.

    Balance sheet and capital management highlights

    As of September 30, 2013, cash and cash equivalents totaled $623 million, total debt was $2,332 million and total equity was $2,047 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.

    As previously disclosed, in the third quarter of 2013, Willis Group completed an amendment and extension to its existing senior unsecured credit facility. The maturity date of the $300 million 5-year term loan was extended to July 2018 from December 2016. At the same time, the $500 million revolving credit facility was increased by $300 million to $800 million and the maturity date of any borrowings from that facility was also extended to July 2018 from December 2016.

    In addition, during the quarter, the Company issued $250 million of 4.625% senior notes due August 2023 and $275 million of 6.125% senior notes due August 2043.

    The net proceeds from the notes offering were used to repurchase $521 million aggregate principal amount of the Company’s outstanding senior notes (comprising $202 million of 5.625% senior notes due 2015, $206 million of 6.200% senior notes due 2017 and $113 million of 7.000% senior notes due 2019) through a tender offer. The net result of the refinancing was to extend the weighted average maturity of our outstanding debt by about 4 years while slightly decreasing the weighted average coupon.

    Dividends

    At its October 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 January 15, 2014 to shareholders of record at December 31, 2013.

    Conference call, webcast and slide presentation

    A conference call to discuss the third quarter 2013 results will be held on Wednesday, October 30, 2013, at 8:00 AM Eastern Time. To participate in the live call, please dial (866) 803-2143 (U.S.) or +1 (210) 795-1098 (international) with a pass code of “Willis”. A live (listen-only) audio web cast may be accessed through the investor relations section of the Company website at www.willis.com.

    A replay of the call will be available through November 30, 2013 at 5:00 PM Eastern Time, by calling (800) 645-7395 (U.S.) or + 1 (203) 369-3306 (international). A replay of the webcast will be available through 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 at www.willis.com.

    About Willis

    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, modelling and mitigation strategies at the intersection of global commerce and extreme events. Find more information at our Website, www.willis.com, our leadership journal, Resilience, 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.

    Forward-looking statements

    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 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;
    • our ability to implement and fully realize anticipated benefits of our new growth strategy;
    • 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 tax assets;
    • 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 contingencies;
    • 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; 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, 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.

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