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Form 8-K April 2014


 
 
 
 
 
UNITED STATES SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
_____________________
FORM 8-K
_____________________

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): April 4, 2014
_____________________

WILLIS GROUP HOLDINGS PUBLIC LIMITED COMPANY
(Exact name of registrant as specified in its charter)
_____________________
Ireland
001-16503
98-0352587
(State or other jurisdiction or incorporation)
(Commission File Number)
(IRS Employer Identification No.)
 
 
 
 
 
 
 
 
 

c/o Willis Group Limited,
51 Lime Street, London, EC3M 7DQ, England and Wales
(Address, including Zip Code, of Principal Executive Offices)

(011) 44-20-3124-6000
(Registrant's telephone number, including area code)


Not Applicable
(Former name or former address, if changed since last report)
_____________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following
provisions:
¨    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))



 
 
 
 
 





Item 8.01 - Changes to segmental and income statement presentation

The Company has announced a number of changes to the structure of its operations that are effective from January 1, 2014. In addition, we have made some changes to the segmental financial information that will be reported and to the presentation of certain items in the Consolidated Statement of Operations. To assist in understanding these changes, the following summarizes the impact of the changes on selected financial data for 2011, 2012 and 2013. These changes will be incorporated in full within the financial statements reported in our Quarterly Report on Form 10-Q to be filed on or about May 9, 2014.

The principal changes to the components of the North America, Global and International reporting segments are:

•
the UK retail business, previously reported within the International reporting segment, will be reported within the Global reporting segment;
•
the Mexican retail business, previously reported within the North America reporting segment, will be reported within the International reporting segment; and
•
the US captive consulting business and facultative reinsurance businesses, both previously reported within the North America reporting segment, will be reported within the Global reporting segment.

The Company has made additional changes to the segmental financial information that will be used and reported during 2014 to evaluate performance and to support decision making. We will continue to use organic growth in commissions and fees and operating income to evaluate segment performance however, operating income will be changed to reflect the following:

•
amortization of intangibles, previously reported in Corporate and other, will be reported in operating expenses for each of the reporting segments; and

•
certain leadership, project and other costs relating to group functions and the non-servicing or financing elements of the defined benefit pension scheme cost (income), previously allocated to each of the reporting segments will be reported in Corporate and other.

Finally, the Company has made changes to the presentation of certain items in the Consolidated Statement of Operations. Certain foreign exchange gains and losses, primarily from balance sheet revaluation, and gains and losses from the disposal of operations, previously reported within total operating expenses, will be reported in a new income statement line item, 'Other income (expense)', which will be reported below Operating income (loss).
Management believes that these changes to the presentation of the Consolidated Statement of Operations and components of segmental operating income will: (i) provide greater clarity of the performance of our reporting segments; (ii) reflect the new structure of our operations effective from January 1, 2014; and (iii) improve the transparency and visibility of foreign exchange in the income statement.
The impact of the changes to the selected financial data described above, retrospectively applied to 2011, 2012 and 2013 is disclosed in Exhibit 99.1.

Item 9.01 - Financial Statements and Exhibits

99.1
Impact of the changes to Consolidated Statement of Operations, segmental operating income and adjusted operating income





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
WILLIS GROUP HOLDINGS PLC
(REGISTRANT)
 
 
By:
 
/s/ MICHAEL K. NEBORAK
 
 
Michael K. Neborak
 
 
Group Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)
Dated: April 4, 2014





Exhibit 99.1 (April 2014)
Exhibit 99.1

The following is the impact of the unaudited changes to the Consolidated Statements of Operations presentation described above retrospectively applied to 2011, 2012 and 2013.
 
For the year ended December 31, 2011
 
For the year ended December 31, 2012
 
For the year ended December 31, 2013
 
As Reported
 
Reclassification
 
As Reclassified
 
As Reported
 
Reclassification
 
As Reclassified
 
As Reported
 
Reclassification
 
As Reclassified
Revenues
(millions)
     Total revenues
$
3,447

 
—

 
$
3,447

 
$
3,480

 
—

 
$
3,480

 
$
3,655

 
—

 
$
3,655

Expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
(2,087
)
 
—

 
(2,087
)
 
(2,475
)
 
—

 
(2,475
)
 
(2,207
)
 
—

 
(2,207
)
Other operating expenses
(656
)
 
9

 
(647
)
 
(581
)
 
(19
)
 
(600
)
 
(616
)
 
(20
)
 
(636
)
Depreciation expense
(74
)
 
—

 
(74
)
 
(79
)
 
—

 
(79
)
 
(94
)
 
—

 
(94
)
Amortization of intangible assets
(68
)
 
—

 
(68
)
 
(59
)
 
—

 
(59
)
 
(55
)
 
—

 
(55
)
Goodwill impairment charge
—

 
—

 
—

 
(492
)
 
—

 
(492
)
 
—

 
—

 
—

Net gain (loss) on disposal of operations
4

 
(4
)
 
—

 
(3
)
 
3

 
—

 
2

 
(2
)
 
—

     Total expenses
(2,881
)
 
5

 
(2,876
)
 
(3,689
)
 
(16
)
 
(3,705
)
 
(2,970
)
 
(22
)
 
(2,992
)
Operating income (loss)
566

 
5

 
571

 
(209
)
 
(16
)
 
(225
)
 
685

 
(22
)
 
663

Other (expense) income
—

 
(5
)
 
(5
)
 
—

 
16

 
16

 
—

 
22

 
22

Make-whole on repurchase and redemption of senior notes and write-off of unamortized debt issuance costs
(171
)
 
—

 
(171
)
 
—

 
—

 
—

 
—

 
—

 
—

Loss on extinguishment of debt
—

 
—

 
—

 
—

 
—

 
—

 
(60
)
 
—

 
(60
)
Interest expense
(156
)
 
—

 
(156
)
 
(128
)
 
—

 
(128
)
 
(126
)
 
—

 
(126
)
Income (loss) from continuing operations before income taxes and interest in earnings of associates
239

 
—

 
239

 
(337
)
 
—

 
(337
)
 
499

 
—

 
499

Income taxes
(32
)
 
—

 
(32
)
 
(101
)
 
—

 
(101
)
 
(122
)
 
—

 
(122
)
Income (loss) from continuing operations before interest in earnings of associates
207

 
—

 
207

 
(438
)
 
—

 
(438
)
 
377

 
—

 
377

Interest in earnings of associates, net of tax
12

 
—

 
12

 
5

 
—

 
5

 
—

 
—

 
—

Income (loss) from continuing operations
219

 
—

 
219

 
(433
)
 
—

 
(433
)
 
377

 
—

 
377

Discontinued operations, net of tax
1

 
—

 
1

 
—

 
—

 
—

 
—

 
—

 
—

Net income (loss)
220

 
—

 
220

 
(433
)
 
—

 
(433
)
 
377

 
—

 
377

Less: net income attributable to noncontrolling interests
(16
)
 
—

 
(16
)
 
(13
)
 
—

 
(13
)
 
(12
)
 
—

 
(12
)
Net income (loss) attributable to Willis Group Holdings
$
204

 
—

 
$
204

 
$
(446
)
 
—

 
$
(446
)
 
$
365

 
—

 
$
365






1


The following is the impact of the above unaudited changes retrospectively applied to the 2011, 2012 and 2013 segmental and total commissions and fees, total revenue, operating income (loss), organic commission and fee growth and operating margin disclosures:

As reported
 
For the year ended December 31,
 
2013
 
 
2011
 
2012
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
 
(millions, except percentages)
Commissions and fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
1,073

 
$
1,124

 
$
383

 
$
305

 
$
250

 
$
250

 
$
1,188

North America
 
1,314

 
1,306

 
363

 
333

 
328

 
353

 
1,377

International
 
1,027

 
1,028

 
300

 
247

 
213

 
308

 
1,068

     Total commissions and fees
 
$
3,414

 
$
3,458

 
$
1,046

 
$
885

 
$
791

 
$
911

 
$
3,633

 
 
 
 
 
 

 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
1,082

 
$
1,129

 
$
384

 
$
306

 
$
251

 
$
250

 
$
1,191

North America
 
1,323

 
1,313

 
365

 
335

 
329

 
357

 
1,386

International
 
1,042

 
1,038

 
302

 
249

 
215

 
312

 
1,078

     Total revenues
 
$
3,447

 
$
3,480

 
$
1,051

 
$
890

 
$
795

 
$
919

 
$
3,655

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
352

 
$
372

 
$
171

 
$
106

 
$
36

 
$
21

 
$
334

North America
 
271

 
240

 
89

 
57

 
57

 
66

 
269

International
 
221

 
183

 
86

 
27

 
(9
)
 
77

 
181

Corporate & other
 
(278
)
 
(1,004
)
 
(59
)
 
(19
)
 
(9
)
 
(12
)
 
(99
)
     Total operating income
 
$
566

 
$
(209
)
 
$
287

 
$
171

 
$
75

 
$
152

 
$
685

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Organic commission and fee growth
 
 
 
 
 
 
 
 
 
 
 
 
 

Global
 
6.6
 %
 
6.1
 %
 
4.1
%
 
10.3
%
 
6.4
 %
 
1.4
%
 
5.6
%
North America
 
(3.5
)%
 
(0.6
)%
 
4.3
%
 
5.5
%
 
3.9
 %
 
5.8
%
 
4.9
%
International
 
4.8
 %
 
4.9
 %
 
3.8
%
 
2.6
%
 
7.8
 %
 
3.0
%
 
4.1
%
     Total organic commission and fee growth
 
1.8
 %
 
3.1
 %
 
4.1
%
 
6.3
%
 
5.7
 %
 
3.7
%
 
4.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
32.5
 %
 
32.9
 %
 
44.5
%
 
34.6
%
 
14.3
 %
 
8.4
%
 
28.0
%
North America
 
20.5
 %
 
18.3
 %
 
24.4
%
 
17.0
%
 
17.3
 %
 
18.5
%
 
19.4
%
International
 
21.2
 %
 
17.6
 %
 
28.5
%
 
10.8
%
 
(4.2
)%
 
24.7
%
 
16.8
%
     Total operating margin
 
16.4
 %
 
(6.0
)%
 
27.3
%
 
19.2
%
 
9.4
 %
 
16.5
%
 
18.7
%



2


Reclassifications
 
For the year ended December 31,
 
2013
 
 
2011
 
2012
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
 
(millions, except percentages)
Commissions and fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
192

 
$
185

 
$
46

 
$
47

 
$
40

 
$
44

 
$
177

North America
 
(29
)
 
(25
)
 
(8
)
 
(6
)
 
(6
)
 
(8
)
 
(28
)
International
 
(163
)
 
(160
)
 
(38
)
 
(41
)
 
(34
)
 
(36
)
 
(149
)
     Total commissions and fees
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
196

 
$
187

 
$
46

 
$
48

 
$
41

 
$
45

 
$
180

North America
 
(29
)
 
(25
)
 
(8
)
 
(6
)
 
(7
)
 
(7
)
 
(28
)
International
 
(167
)
 
(162
)
 
(38
)
 
(42
)
 
(34
)
 
(38
)
 
(152
)
     Total revenues
 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
50

 
$
26

 
$
16

 
$
2

 
$
11

 
$
13

 
$
42

North America
 
(13
)
 
12

 
(7
)
 
(2
)
 
(11
)
 
—

 
(20
)
International
 
(23
)
 
(14
)
 
(8
)
 
(1
)
 
2

 
4

 
(3
)
Corporate & other
 
(9
)
 
(40
)
 
(7
)
 
(3
)
 
(7
)
 
(24
)
 
(41
)
     Total operating income
 
$
5

 
$
(16
)
 
$
(6
)
 
$
(4
)
 
$
(5
)
 
$
(7
)
 
$
(22
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Organic commission and fee growth
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
0.4
 %
 
(1.4
)%
 
(0.7
)%
 
(1.8
)%
 
(1.9
)%
 
(1.0
)%
 
(1.2
)%
North America
 
(2.1
)%
 
0.2
 %
 
0.1
 %
 
—
 %
 
(0.1
)%
 
(0.2
)%
 
(0.1
)%
International
 
2.7
 %
 
1.4
 %
 
0.7
 %
 
1.6
 %
 
3.5
 %
 
1.7
 %
 
1.6
 %
     Total organic commission and fee growth
 
—
 %
 
—
 %
 
—
 %
 
—
 %
 
—
 %
 
—
 %
 
—
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
(1.0
)%
 
(2.7
)%
 
(1.0
)%
 
(4.1
)%
 
1.8
 %
 
3.1
 %
 
(0.6
)%
North America
 
(0.6
)%
 
1.3
 %
 
(1.4
)%
 
(0.3
)%
 
(3.0
)%
 
0.4
 %
 
(1.1
)%
International
 
1.4
 %
 
(1.7
)%
 
1.0
 %
 
1.8
 %
 
0.3
 %
 
4.9
 %
 
2.4
 %
     Total operating margin
 
0.2
 %
 
(0.5
)%
 
(0.6
)%
 
(0.4
)%
 
(0.6
)%
 
(0.7
)%
 
(0.6
)%




3


As reclassified
 
For the year ended December 31,
 
2013
 
 
2011
 
2012
 
Q1
 
Q2
 
Q3
 
Q4
 
FY
 
 
(millions, except percentages)
Commissions and fees
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
1,265

 
$
1,309

 
$
429

 
$
352

 
$
290

 
$
294

 
$
1,365

North America
 
1,285

 
1,281

 
355

 
327

 
322

 
345

 
1,349

International
 
864

 
868

 
262

 
206

 
179

 
272

 
919

     Total commissions and fees
 
$
3,414

 
$
3,458

 
$
1,046

 
$
885

 
$
791

 
$
911

 
$
3,633

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
1,278

 
$
1,316

 
$
430

 
$
354

 
$
292

 
$
295

 
$
1,371

North America
 
1,294

 
1,288

 
357

 
329

 
322

 
350

 
1,358

International
 
875

 
876

 
264

 
207

 
181

 
274

 
926

     Total revenues
 
$
3,447

 
$
3,480

 
$
1,051

 
$
890

 
$
795

 
$
919

 
$
3,655

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
$
402

 
$
398

 
$
187

 
$
108

 
$
47

 
$
34

 
$
376

North America
 
258

 
252

 
82

 
55

 
46

 
66

 
249

International
 
198

 
169

 
78

 
26

 
(7
)
 
81

 
178

Corporate & other
 
(287
)
 
(1,044
)
 
(66
)
 
(22
)
 
(16
)
 
(36
)
 
(140
)
     Total operating income
 
$
571

 
$
(225
)
 
$
281

 
$
167

 
$
70

 
$
145

 
$
663

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Organic commission and fee growth
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
7.0
 %
 
4.7
 %
 
3.4
%
 
8.5
%
 
4.5
 %
 
0.4
%
 
4.4
%
North America
 
(5.6
)%
 
(0.4
)%
 
4.4
%
 
5.5
%
 
3.8
 %
 
5.6
%
 
4.8
%
International
 
7.5
 %
 
6.3
 %
 
4.5
%
 
4.2
%
 
11.3
 %
 
4.7
%
 
5.7
%
     Total organic commission and fee growth
 
1.8
 %
 
3.1
 %
 
4.1
%
 
6.3
%
 
5.7
 %
 
3.7
%
 
4.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating margin
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Global
 
31.5
 %
 
30.2
 %
 
43.5
%
 
30.5
%
 
16.1
 %
 
11.5
%
 
27.4
%
North America
 
19.9
 %
 
19.6
 %
 
23.0
%
 
16.7
%
 
14.3
 %
 
18.9
%
 
18.3
%
International
 
22.6
 %
 
19.3
 %
 
29.5
%
 
12.6
%
 
(3.9
)%
 
29.6
%
 
19.2
%
     Total operating margin
 
16.6
 %
 
(6.5
)%
 
26.7
%
 
18.8
%
 
8.8
 %
 
15.8
%
 
18.1
%


4


The following is the impact of the reclassification of foreign exchange gains and losses and gains and losses from the disposal of operations to the reconciliation of operating income (loss), the most directly comparable GAAP measures, to adjusted operating income and adjusted operating margin disclosures, which are non-GAAP financial measures as defined under Regulation G of SEC rules, for the years ended December 31, 2011, 2012 and 2013.
 
 
 
2011
 
2012
 
2013
 
 
 
(millions, except percentages)
As reported:
Operating income (loss), GAAP basis
 
$
566

 
$
(209
)
 
$
685

 
 
 
 
 
 
 
 
Reclassification:
Foreign exchange gains and losses and gains and losses from the disposal of operations
 
5

 
(16
)
 
(22
)
 
 
 
 
 
 
 
 
As reclassified:
Operating income (loss), GAAP basis
 
571

 
(225
)
 
663

 
Excluding:
 
 
 
 
 
 
 
Expense reduction initiative
 
—

 
—

 
46

 
Fees related to the extinguishment of debt
 
—

 
—

 
1

 
Additional incentive accrual for change in remuneration policy
 
—

 
252

 
—

 
Write-off of unamortized cash retention awards debtor
 
—

 
200

 
—

 
Goodwill impairment charge
 
—

 
492

 
—

 
India JV settlement
 
—

 
11

 
—

 
Insurance recovery
 
—

 
(10
)
 
—

 
Write-off of uncollectible accounts receivable balance
 
22

 
13

 
—

 
2011 Operational Review
 
180

 
—

 
—

 
FSA regulatory settlement
 
11

 
—

 
—

 
Adjusted operating income
 
$
784

 
$
733

 
$
710

 
 
 
 
 
 
 
 
 
Operating margin
 
16.6
%
 
(6.5
)%
 
18.1
%
 
 
 
 
 
 
 
 
 
Adjusted operating margin
 
22.7
%
 
21.1
 %
 
19.4
%


5