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 28, 2015
Willis Group Holdings Public Limited Company
(Exact name of registrant as specified in its charter)
| Ireland | 001-16503 | 98-0352587 | ||
| (State or other jurisdiction | (Commission | (IRS Employer | ||
| of incorporation) | File Number) | Identification No.) |
c/o Willis Group Limited, 51 Lime Street, London, EC3M 7DQ, England and Wales
(Address, including Zip Code, of Principal Executive Offices)
Registrant’s telephone number, including area code: (011) 44-20-3124-6000
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 2.02 | Results of Operations and Financial Condition. |
On April 28, 2015, Willis Group Holdings Public Limited Company (the “Company”) issued a press release reporting results for the first quarter ended March 31, 2015 and posted a slide presentation to its website, which it may refer to during its conference call to discuss the results. Copies of the press release and the slide presentation are attached as Exhibit 99.1 and Exhibit 99.2, respectively, to this Current Report on Form 8-K and are incorporated herein by reference.
| Item 7.01 | Regulation FD. |
The slide presentation referred to in Item 2.02 above is attached hereto as Exhibit 99.2 and incorporated herein by reference.
The information contained in Item 2.02 and Item 7.01 of this Current Report on Form 8-K (including Exhibit 99.1 and Exhibit 99.2) are being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. Such information shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in any such filing.
| Item 9.01. | Financial Statements and Exhibits |
(d) Exhibits
| Exhibit No. |
Description | |
| 99.1 | Willis Group Holdings Public Limited Company Earnings Press Release issued April 28, 2015 | |
| 99.2 | Slide Presentation – Willis Group Holdings First Quarter 2015 Results | |
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: April 28, 2015 |
WILLIS GROUP HOLDINGS PUBLIC LIMITED COMPANY | |||||
| By: | /s/ Matthew Furman | |||||
| Name: | Matthew Furman | |||||
| Title: | Group General Counsel | |||||
INDEX TO EXHIBITS
| Exhibit No. |
Description | |
| 99.1 | Willis Group Holdings Public Limited Company Earnings Press Release issued April 28, 2015 | |
| 99.2 | Slide Presentation – Willis Group Holdings First Quarter 2015 Results | |
Exhibit 99.1
|
Contacts | |||
| Investors: | Peter Poillon +1 212 915 8084 Email: peter.poillon@willis.com | |||
| News Release | Media: | Juliet Massey +44 7984 156 739 Email: juliet.massey@willis.com | ||
Willis Group Reports First Quarter 2015 Results
| • | Underlying commissions and fees grew 5.8%; underlying expenses grew 5.6%; positive spread of 20 basis points achieved |
| • | Underlying net income of $230 million, or $1.26 per diluted share up 4.1%, from prior year period (rebased for current period exchange rates) |
| • | Organic commissions and fees grew 3.4%; organic expenses grew 1.7%; positive spread of 170 basis points achieved |
| • | Reported commissions and fees declined 0.9%, reported expenses grew 3.0% |
| • | Reported net income of $210 million, or $1.15 per diluted share, negatively impacted by foreign currency movements ($0.15 per share) and restructuring charges ($0.12 per share) |
| • | Continued execution of M&A strategy – expected closing of Miller by mid-year and proposal to accelerate Gras Savoye closing |
NEW YORK, April 28, 2015 – Willis Group Holdings plc (NYSE: WSH), the global risk advisory, re/insurance broking, and human capital and benefits firm, today reported results for the three months ended March 31, 2015.
Dominic Casserley, Willis Group Chief Executive Officer, commented, “The first quarter was a solid start to the year that demonstrates continued progress against our strategic goals. Most importantly, in market conditions that are best described as uneven, we achieved good underlying commissions and fees growth driven by organic growth across all of our segments and solid contributions from our 2014 acquisitions. In addition, we have maintained our focus on our cost management initiatives as well as achieving savings from our Operational Improvement Program.
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As a result, we managed our spread between organic commissions and fees growth and organic expense growth to positive 170 basis points. Overall, we’ve started the year with very good momentum towards our 2015 goal to achieve a positive 130 basis point spread organically.”
Casserley continued, “While we expect market conditions in certain parts of our business to remain challenging throughout 2015, we believe the combination of Willis’s market and geographic diversity, our client propositions, and the continued execution of our cost initiatives, should allow us to achieve our organic growth goals for the year. Additionally, momentum from our focused acquisition strategy will be more evident in future quarters, with the expected closing of the Miller transaction in mid-2015 and the recent announcement of our firm offer to acquire the share of Gras Savoye that Willis doesn’t currently own at the end of the year, both subject to regulatory approval. Overall, we are well positioned to build shareholder value as the year goes on.”
Select Willis Group financial measures
| Three months ended March 31, | ||||||||
| 2015 | 2014 | |||||||
| Reported measures |
||||||||
| Reported commissions and fees growth |
(0.9 | )% | 4.2 | % | ||||
| Reported total expenses growth |
3.0 | % | 0.1 | % | ||||
| Reported operating margin |
26.9 | % | 29.7 | % | ||||
| Reported diluted EPS |
$ | 1.15 | $ | 1.35 | ||||
| Underlying measures(1) |
||||||||
| Underlying commissions and fees growth |
5.8 | % | 3.9 | % | ||||
| Underlying total expenses growth |
5.6 | % | 5.5 | % | ||||
| Underlying operating margin |
29.8 | % | 29.7 | % | ||||
| Underlying diluted EPS |
$ | 1.26 | $ | 1.21 | ||||
| Organic measures(1) |
||||||||
| Organic commissions and fees growth |
3.4 | % | 4.2 | % | ||||
| Organic total expenses growth |
1.7 | % | 5.4 | % | ||||
| Organic operating margin |
30.7 | % | 29.5 | % | ||||
| (1) | Underlying measures exclude the impact of certain items and period-over-period foreign exchange movements. Organic measures exclude the impact of certain items, period-over-period foreign exchange movements, and the impact of acquisitions and disposals. We believe these measures provide a more complete and consistent comparative analysis of our results of operations. Please refer to the supplemental financial information attached to this press release for detailed definitions of our non-GAAP financial measures and accompanying reconciliations to GAAP measures. The supplemental financial information also includes the GAAP figures and accompanying reconciliations for commissions and fees growth by segment. |
First Quarter 2015 Financial Results
Willis Group reported net income of $210 million, or $1.15 per diluted share, in the first quarter of 2015 compared to net income of $246 million, or $1.35 per diluted share, in the prior year quarter. Items which affected the year-on-year movement in net income included restructuring costs related to the Operational Improvement Program of $0.12 per diluted share, gain on disposal of operations of $0.01, and unfavorable foreign currency movements totaling $0.15 per diluted share.
2
Underlying diluted earnings per share were $1.26 in the first quarter of 2015, up 4.1% compared to $1.21 in the first quarter 2014 (underlying diluted EPS of $1.36 that was originally announced for the first quarter of 2014 was rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods).
Revenues
First quarter 2015 total reported commissions and fees of $1,081 million were down 0.9% from $1,090 million in the first quarter of 2014, impacted by $69 million from unfavorable foreign currency movements. Total commissions and fees were also impacted by a $25 million period-over-period net increase from acquisitions and disposals completed in the past twelve months.
Underlying commissions and fees, which exclude the impact of foreign currency movements, grew 5.8%.
Organic commissions and fees, which exclude both the impact of foreign currency movements and the net impact of acquisitions and disposals, grew 3.4%, led by solid growth in Willis North America and Willis International.
Expenses
Total Expenses
On a reported basis, total expenses increased $23 million, or 3.0%, to $794 million in the first quarter of 2015, from $771 million in the first quarter of 2014. Total reported expense growth included $31 million of restructuring costs related to the Operational Improvement Program, and a $29 million period-over-period net increase from acquisitions and disposals. Expenses were favorably impacted by $48 million from foreign currency movements.
Underlying total expenses, which exclude restructuring costs and the impact of foreign currency movements, grew 5.6%. Included in this growth is the $29 million period-over-period net increase in total expenses from acquisitions and disposals which accounted for 390 basis points of the growth.
Organic total expense growth, which excludes restructuring costs, the impact of foreign currency movements, and the net impact of acquisitions and disposals, was 1.7%, driven primarily by increased salaries and benefits and costs associated with the proposed acquisition of Gras Savoye.
Salaries and Benefits
Reported salaries and benefits were $567 million in the first quarter of 2015, a decrease of 0.5% from $570 million in the prior year quarter. Salaries and benefits in the period include a $17 million period-over-period net increase from acquisitions and disposals but were favorably impacted by $37 million from foreign currency movements.
3
Underlying salaries and benefits grew 6.4%. Included in this growth is the $17 million period-over-period net increase from acquisitions and disposals which accounted for 310 basis points of the growth.
Organic salaries and benefits grew 3.3%. Salaries and benefits were impacted in the quarter by mandatory pay rises in Latin America and increased incentives. Headcount excluding the impact of acquisitions and disposals increased 0.9% compared to the first quarter of 2014.
Other operating expenses
Reported other operating expenses were $160 million in the first quarter of 2015, a decrease of 3.2% from $165 million in the prior year quarter. Other operating expenses in the period include an $8 million net period-over-period increase from acquisitions and disposals but were favorably impacted by $10 million from foreign currency movements.
Underlying other operating expenses grew 2.9%. Included in this growth is the $8 million period-over-period net increase from acquisitions and disposals.
Organic other operating expenses decreased 2.4% primarily as a result of progress on cost management initiatives, partially offset by costs associated with the due diligence process and other costs associated with the proposed acquisition of Gras Savoye.
Operating margin
Willis’s reported operating margin was 26.9% in the first quarter of 2015, a decrease of 280 basis points compared to the first quarter of 2014 as a result of increased restructuring charges related to the Operational Improvement Program.
Underlying operating margin, which excludes the restructuring costs and the net impact from foreign currency movements, was 29.8% in the first quarter of 2015, an increase of 10 basis points compared to the first quarter 2014.
Organic operating margin, which further excludes the net impact of revenues and expenses from acquisitions and disposals, was 30.7% in the first quarter 2015, an increase of 120 basis points from 29.5% in the prior year quarter. The increase reflects good organic revenue growth combined with solid execution of the Company’s cost management initiatives.
Taxes
The reported tax rate for the first quarter of 2015 was approximately 22.0%. After excluding the impact of certain items as described in note 6, the tax rate for the quarter was approximately 22.4%.
4
Segment Revenue Results
Willis GB
Organic commissions and fees in Willis GB, which comprises Willis’s Great Britain-based Specialty and Retail businesses, grew 1.1% in the first quarter of 2015 compared with the first quarter of 2014. The segment’s underlying commissions and fees also grew 1.1%.
The quarter’s performance reflects varied performance across the segment’s businesses. The segment had strong growth in Financial Lines and mid-single digit growth in Property and Casualty. However that growth was partially offset by a decline in Retail Networks spurred by weak Insolvency and Commercial network business.
Willis Capital, Wholesale and Reinsurance
Organic commissions and fees in Willis CW&R, which comprises Willis Re, Willis Capital Markets & Advisory, Willis’s wholesale operations and Willis Portfolio and Underwriting Services, grew 1.3% in the first quarter of 2015 compared with the first quarter of 2014. The segment’s underlying commissions and fees grew 1.7%, positively impacted by the acquisition of SurePoint Re in 2014.
During the quarter, Willis Re grew mid-single digits driven by double digit growth from strong new business and favorable timing in Willis Re North America. Willis Re International and Specialties both declined during the quarter impacted by lower rates and declining demand. Willis Capital Markets & Advisory and Willis Portfolio and Underwriting Services were approximately flat to prior year.
Willis North America
Organic commissions and fees in Willis North America grew 4.7% in the first quarter of 2015 compared with the first quarter of 2014. The segment’s underlying commissions and fees grew 0.7%, negatively impacted by the sales of certain non-core offices over the past 12 months.
The increase in organic commissions and fees growth was driven by strong growth from the M&A, FINEX and Real Estate/Hospitality practices and mid-single digit growth in the Human Capital practice. The Construction practice was up low single digits in the quarter due to project-driven revenue despite a decline in Surety revenue compared to the prior year period.
Willis International
Organic commissions and fees in Willis International grew 5.3% in the first quarter 2015 compared with the same period in 2014. The segment’s underlying commissions and fees grew 21.1%, positively impacted by the acquisitions of Max Matthiessen, Charles Monat and the IFG pension and financial advisory businesses over the past 12 months.
The performance in Willis International was primarily driven by strong growth in Latin America where Brazil and Colombia showed double digit growth; high single digit growth in Asia driven by good growth in Global Wealth Solutions and Marine specialty business; and mid-single digit growth in Eastern Europe. Western Europe grew low single digits with strong results in Spain, Portugal and Norway.
5
Operational Improvement Program
Willis generated savings from the Operational Improvement Program of approximately $10 million in the first quarter of 2015.
Restructuring costs from the program were $31 million in the first quarter of 2015. Details of the costs by segment and type of expense are included in note 7 of the supplemental financial information attached to the release.
The Company will provide an update on the progress of the Program and associated spend and savings estimates when it reports its second quarter 2015 results.
Balance Sheet Highlights
As of March 31, 2015, cash and cash equivalents were $503 million, total debt was $2,305 million and total equity was $2,321 million. As of December 31, 2014, cash and cash equivalents were $635 million, total debt was $2,309 million and total equity was $2,007 million.
Strategic M&A
Willis’s measured acquisition strategy, which is focused on high quality, specialized firms with leading market positions, is contributing to the Company’s overall growth rate. Revenues from acquisitions closed over the past twelve months, excluding any impact from divestitures, have increased group revenues by $39 million relative to the prior year quarter. Additionally, those businesses improved group EBITDA in the current quarter by approximately $9 million compared to the prior year period.
In line with this strategy, as previously announced, Willis has made a firm offer to pay approximately €510 million to acquire the remaining 70% of Gras Savoye that it does not currently own. Additionally, Willis would pay an estimated €40 million to repay third party debt. For the year ended December 31, 2014, under U.S. GAAP, Gras Savoye’s net revenue was approximately €370 million, and EBITDA was approximately €65 million. The transaction is expected to close on or around December 31, 2015, subject to customary regulatory consents and approvals, and acceptance of the firm offer by Gras Savoye’s shareholders, which can only occur after consultation with Gras Savoye’s workers’ councils.
Uniting both companies will enhance Willis as a truly multinational risk advisory, re/insurance broking and human capital and benefits firm with a presence in 131 countries, of which 84 are wholly-owned operations. Gras Savoye will bring a significant footprint in France; greater expertise and reach to serve multinationals based in France and worldwide; and stronger access to high-growth economies in Central and Eastern Europe, the Middle East, and Africa.
In addition to this firm offer, Willis has issued notice preserving its right under an existing shareholder agreement to acquire the remaining shares in Gras Savoye in June 2016, should the offer not be accepted. In that case, the purchase price would be determined by a formula under that agreement and the expected closing of the transaction would be mid-2016.
6
With the expected closing of the Miller transaction by the middle of this year and the proposed close of Gras Savoye for the start of 2016, both subject to regulatory approval, the Company expects that this strategy will continue to provide measurable growth for the foreseeable future.
Dividends
At its April 2015 Board meeting, the Board of Directors approved a regular quarterly cash dividend of $0.31 per share (an annual rate of $1.24 per share). The dividend is payable on July 15, 2015 to shareholders of record at June 30, 2015.
Share Buyback
In February, Willis announced that it intends to buy back approximately $175 million in shares in 2015 to offset the increase in shares outstanding resulting from the exercise of employee stock options. Since the announcement and through the end of the first quarter of 2015, the Company bought back approximately 300,000 shares for approximately $15 million.
Conference Call, Webcast and Slide Presentation
A conference call to discuss the first quarter 2015 results will be held on Wednesday, April 29, 2015, 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 May 29, 2015 at 5:00 PM Eastern Time, by calling (866) 430-4730 (U.S.) or + 1 (203) 369-0930 (international). A replay of the webcast will be available through the website.
About Willis
Willis Group Holdings plc is a leading global risk advisory, re/insurance broking, and human capital and benefits firm. With roots dating to 1828, Willis operates today on every continent with more than 18,000 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 and planned acquisitions, 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.
7
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 global economic conditions on our results of operations and financial condition, including as a result of those associated with the Eurozone, any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions; |
| • | our ability to implement and fully realize anticipated benefits of our growth strategy and revenue generating initiatives; |
| • | our ability to implement and realize anticipated benefits of any cost-savings or operational improvement initiative, including our ability to achieve expected savings and other benefits from the multi-year Operational Improvement Program as a result of unexpected costs or delays and demand on managerial, operational and administrative resources and/or macroeconomic factors affecting the program as well as the impact of the program on business processes and competitive dynamics; |
| • | the rejection of our Gras Savoye offer or failure to obtain regulatory approval; |
| • | our ability to consummate acquisitions, including Miller Insurance Services and Gras Savoye, or achieve the expected benefits; |
| • | our ability to effectively integrate any acquisition into our business; |
| • | volatility or declines in insurance markets and premiums on which our commissions are based, but which we do not control; |
| • | our ability to compete in our industry; |
| • | 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 including at a time when the Company is pursuing various strategic initiatives; |
| • | our ability to develop new products and services; |
| • | the practical challenges and costs of complying with a wide variety of foreign laws and regulations and any related changes, given the global scope of our operations and those of any acquired business and the associated risks of non-compliance and regulatory enforcement action; |
| • | our ability to develop and implement technology solutions and invest in innovative product offerings in an efficient and effective manner; |
| • | fluctuations in our earnings as a result of potential changes to our valuation allowance(s) on our deferred tax assets; |
| • | changes in the tax or accounting treatment of our operations and fluctuations in our tax rate; |
| • | our ability to achieve anticipated benefits of any acquisition or other transactions in which we may engage, including any revenue growth or operational efficiencies; |
| • | our inability to exercise full management control over our associates; |
| • | our ability to continue to manage our significant indebtedness; |
| • | 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; |
| • | any material fluctuations in exchange and interest rates that could adversely affect expenses and revenue; |
| • | a significant decline in the value of investments that fund our pension plans or changes in our pension plan liabilities or funding obligations; |
| • | rating agency actions, including a downgrade to our credit rating, that could inhibit our ability to borrow funds or the pricing thereof and in certain circumstances cause us to offer to buy back some of our debt; |
| • | our ability to receive dividends or other distributions in needed amounts from our subsidiaries; |
| • | our involvement in and the results of any regulatory investigations, legal proceedings and other contingencies; |
| • | our exposure to potential liabilities arising from errors and omissions and other potential claims against us; |
| • | underwriting, advisory or reputational risks associated with our business; |
| • | the interruption or loss of our information processing systems, data security breaches or failure to maintain secure information systems; and |
| • | impairment of the goodwill in one of our reporting units, in which case we may be required to record significant charges to earnings. |
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, 2014 and our subsequent filings with the Securities and Exchange Commission. Copies are available online at http://www.sec.gov or www.willis.com.
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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 earnings release or 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.
9
WILLIS GROUP HOLDINGS plc
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in millions, except per share data)
(unaudited)
| Three months ended March 31, |
||||||||
| 2015 | 2014 | |||||||
| Revenues |
||||||||
| Commissions and fees |
$ | 1,081 | $ | 1,090 | ||||
| Investment income |
3 | 4 | ||||||
| Other income |
3 | 3 | ||||||
|
|
|
|
|
|||||
| Total revenues |
1,087 | 1,097 | ||||||
|
|
|
|
|
|||||
| Expenses |
||||||||
| Salaries and benefits (including share-based compensation of $18 million, $14 million) |
567 | 570 | ||||||
| Other operating expenses |
160 | 165 | ||||||
| Depreciation expense |
22 | 23 | ||||||
| Amortization of intangible assets |
14 | 13 | ||||||
| Restructuring costs |
31 | — | ||||||
|
|
|
|
|
|||||
| Total expenses |
794 | 771 | ||||||
|
|
|
|
|
|||||
| Operating income |
293 | 326 | ||||||
| Other expense (income), net |
6 | — | ||||||
| Interest expense |
33 | 32 | ||||||
|
|
|
|
|
|||||
| Income before income taxes and interest in earnings of associates |
254 | 294 | ||||||
| Income taxes |
56 | 63 | ||||||
|
|
|
|
|
|||||
| Income before interest in earnings of associates |
198 | 231 | ||||||
| Interest in earnings of associates, net of tax |
16 | 19 | ||||||
|
|
|
|
|
|||||
| Net income |
214 | 250 | ||||||
| Less: Net income attributable to noncontrolling interests |
(4 | ) | (4 | ) | ||||
|
|
|
|
|
|||||
| Net income attributable to Willis Group Holdings |
$ | 210 | $ | 246 | ||||
|
|
|
|
|
|||||
10
WILLIS GROUP HOLDINGS plc
CONDENSED CONSOLIDATED INCOME STATEMENTS
(in millions, except per share data)
(unaudited)
| Three months ended March 31, |
||||||||
| 2015 | 2014 | |||||||
| Earnings per Share – Basic and Diluted |
||||||||
| Net income attributable to Willis Group Holdings shareholders: |
||||||||
| - Basic |
$ | 1.17 | $ | 1.37 | ||||
| - Diluted |
1.15 | 1.35 | ||||||
|
|
|
|
|
|||||
| Average Number of Shares Outstanding |
||||||||
| - Basic |
179 | 179 | ||||||
| - Diluted |
182 | 182 | ||||||
| Shares Outstanding at March 31 (thousands) |
179,587 | 179,249 | ||||||
11
WILLIS GROUP HOLDINGS plc
CONDENSED BALANCE SHEETS
(in millions) (unaudited)
| March 31, 2015 |
December 31, 2014 |
|||||||
| Current assets |
||||||||
| Cash & cash equivalents |
$ | 503 | $ | 635 | ||||
| Accounts receivable, net |
1,150 | 1,044 | ||||||
| Fiduciary assets |
9,444 | 8,948 | ||||||
| Deferred tax assets |
13 | 12 | ||||||
| Other current assets |
218 | 214 | ||||||
|
|
|
|
|
|||||
| Total current assets |
11,328 | 10,853 | ||||||
|
|
|
|
|
|||||
| Non-current assets |
||||||||
| Fixed assets, net |
462 | 483 | ||||||
| Goodwill |
2,889 | 2,937 | ||||||
| Other intangible assets, net |
418 | 450 | ||||||
| Investments in associates |
167 | 169 | ||||||
| Deferred tax assets |
6 | 9 | ||||||
| Pension benefits asset |
606 | 314 | ||||||
| Other non-current assets |
229 | 220 | ||||||
|
|
|
|
|
|||||
| Total non-current assets |
4,777 | 4,582 | ||||||
|
|
|
|
|
|||||
| Total assets |
$ | 16,105 | $ | 15,435 | ||||
|
|
|
|
|
|||||
| Liabilities and equity |
||||||||
| Current liabilities |
||||||||
| Fiduciary liabilities |
$ | 9,444 | $ | 8,948 | ||||
| Deferred revenue and accrued expenses |
408 | 619 | ||||||
| Income taxes payable |
49 | 33 | ||||||
| Current portion of long-term debt |
168 | 167 | ||||||
| Deferred tax liabilities |
18 | 21 | ||||||
| Other current liabilities |
461 | 444 | ||||||
|
|
|
|
|
|||||
| Total current liabilities |
10,548 | 10,232 | ||||||
|
|
|
|
|
|||||
| Non-current liabilities |
||||||||
| Long-term debt |
2,137 | 2,142 | ||||||
| Liability for pension benefits |
277 | 284 | ||||||
| Deferred tax liabilities |
185 | 128 | ||||||
| Provision for liabilities |
188 | 194 | ||||||
| Other non-current liabilities |
398 | 389 | ||||||
|
|
|
|
|
|||||
| Total non-current liabilities |
3,185 | 3,137 | ||||||
|
|
|
|
|
|||||
| Total liabilities |
13,733 | 13,369 | ||||||
|
|
|
|
|
|||||
| Redeemable noncontrolling interest |
51 | 59 | ||||||
| Total Willis Group Holdings stockholders’ equity |
2,298 | 1,985 | ||||||
| Noncontrolling interests |
23 | 22 | ||||||
|
|
|
|
|
|||||
| Total equity |
2,321 | 2,007 | ||||||
|
|
|
|
|
|||||
| Total liabilities and equity |
$ | 16,105 | $ | 15,435 | ||||
|
|
|
|
|
|||||
12
WILLIS GROUP HOLDINGS plc
CONDENSED CASH FLOW STATEMENTS
(in millions) (unaudited)
| Three months ended March 31, |
||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities |
||||||||
| Net income |
$ | 214 | $ | 250 | ||||
| Adjustments to reconcile net income to total net cash provided by operating activities |
72 | 42 | ||||||
| Changes in operating assets and liabilities, net of effects from purchase of subsidiaries |
(350 | ) | (287 | ) | ||||
|
|
|
|
|
|||||
| Net cash (used in) provided by operating activities |
$ | (64 | ) | $ | 5 | |||
|
|
|
|
|
|||||
| Net cash used in investing activities |
$ | (8 | ) | $ | (21 | ) | ||
|
|
|
|
|
|||||
| Net cash used in financing activities |
$ | (39 | ) | $ | (49 | ) | ||
|
|
|
|
|
|||||
| Decrease in cash and cash equivalents |
$ | (111 | ) | $ | (65 | ) | ||
| Effect of exchange rate changes on cash and cash equivalents |
(21 | ) | 3 | |||||
| Cash and cash equivalents, beginning of period |
635 | 796 | ||||||
|
|
|
|
|
|||||
| Cash and cash equivalents, end of period |
$ | 503 | $ | 734 | ||||
|
|
|
|
|
|||||
13
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 1. | Definitions of non-GAAP financial measures |
We believe that investors’ understanding of the Company’s performance is enhanced by our disclosure of the following non-GAAP financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited.
Organic commissions and fees growth
Organic commissions and fees growth excludes: (i) the impact of foreign currency movements; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; and (iii) the net commission and fee revenues related to operations disposed of in each period presented, from reported commissions and fees growth.
We believe organic growth in commissions and fees provides a measure that the investment community may find helpful in assessing the performance of operations that were part of our business in both the current and prior periods, and provides a measure against which our businesses may be assessed in the future.
Underlying commissions and fees, underlying revenues, underlying total expenses, underlying salaries and benefits, underlying other operating expenses, underlying operating income, underlying operating margin, underlying EBITDA, underlying net income and underlying earnings per diluted share (“Underlying measures”).
Underlying measures are calculated by excluding the impact of certain items, including foreign currency movements, from the most directly comparable GAAP measures. We believe that excluding such items provides a more complete and consistent comparative analysis of our results of operations.
Organic revenues, organic total expenses, organic salaries and benefits, organic other operating expenses, organic operating income, organic operating margin and organic EBITDA (“Organic measures”).
Organic measures are calculated by excluding the twelve month impact from acquisitions and disposals (together with the impact of certain items, including foreign currency movements noted above), from the most directly comparable GAAP measures. We believe that excluding these items provides a more complete and consistent comparative analysis of our results of operations.
14
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 2. | Underlying and organic commissions and fees |
The following table reconciles reported commissions and fees growth to underlying and organic commissions and fees growth, as defined in note 1 of the supplemental financial information, for the three months ended March 31, 2015.
| Three months ended March 31, |
||||||||||||||||||||||||||||
| 2015 | 2014 | % Change(1) |
Foreign currency movements |
Underlying commissions and fees growth |
Acquisitions and disposals |
Organic commissions and fees growth |
||||||||||||||||||||||
| Willis GB |
$ | 142 | $ | 150 | (4.6 | )% | (5.7 | )% | 1.1 | % | — | % | 1.1 | % | ||||||||||||||
| Willis Capital, Wholesale and Reinsurance |
296 | 303 | (2.5 | )% | (4.3 | )% | 1.7 | % | 0.4 | % | 1.3 | % | ||||||||||||||||
| Willis North America |
356 | 354 | 0.5 | % | (0.2 | )% | 0.7 | % | (4.1 | )% | 4.7 | % | ||||||||||||||||
| Willis International |
287 | 283 | 1.1 | % | (20.1 | )% | 21.1 | % | 15.8 | % | 5.3 | % | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| Total |
$ | 1,081 | $ | 1,090 | (0.9 | )% | (6.7 | )% | 5.8 | % | 2.4 | % | 3.4 | % | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
| (1) | Percentages may differ due to rounding. |
15
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 3. | Underlying and Organic total expenses, salaries and benefits and other operating expenses |
The following tables reconcile total expenses, salaries and benefits and other operating expenses, respectively the most directly comparable GAAP measures to underlying and organic total expenses, underlying and organic salaries and benefits, and underlying and organic other operating expenses, for the three months ended March 31, 2015 and 2014:
| Three months ended March 31, |
||||||||||||
| % | ||||||||||||
| 2015 | 2014 | Change(2) | ||||||||||
| Reported Total expenses |
$ | 794 | $ | 771 | 3.0 | |||||||
| Excluding: |
||||||||||||
| Restructuring costs |
(31 | ) | — | |||||||||
| Foreign currency movements (1) |
— | (48 | ) | |||||||||
|
|
|
|
|
|||||||||
| Underlying Total expenses |
$ | 763 | $ | 723 | 5.6 | |||||||
|
|
|
|
|
|||||||||
| Net expenses from acquisitions and disposals |
(37 | ) | (8 | ) | ||||||||
|
|
|
|
|
|||||||||
| Organic Total expenses |
$ | 726 | $ | 715 | 1.7 | |||||||
|
|
|
|
|
|||||||||
| Three months ended March 31, |
||||||||||||
| % | ||||||||||||
| 2015 | 2014 | Change(2) | ||||||||||
| Reported Salaries and benefits |
$ | 567 | $ | 570 | (0.5 | ) | ||||||
| Excluding: |
||||||||||||
| Foreign currency movements (1) |
— | (37 | ) | |||||||||
|
|
|
|
|
|||||||||
| Underlying Salaries and benefits |
$ | 567 | $ | 533 | 6.4 | |||||||
|
|
|
|
|
|||||||||
| Net expenses from acquisitions and disposals |
(23 | ) | (6 | ) | ||||||||
|
|
|
|
|
|||||||||
| Organic Salaries and benefits |
$ | 544 | $ | 527 | 3.3 | |||||||
|
|
|
|
|
|||||||||
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
| (2) | Percentages may differ due to rounding. |
16
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 3. | Underlying and Organic total expenses, salaries and benefits and other operating expenses (continued) |
| Three months ended March 31, |
||||||||||||
| % | ||||||||||||
| 2015 | 2014 | Change(2) | ||||||||||
| Reported Other operating expenses |
$ | 160 | $ | 165 | (3.2 | ) | ||||||
| Excluding: |
||||||||||||
| Foreign currency movements (1) |
— | (10 | ) | |||||||||
|
|
|
|
|
|||||||||
| Underlying Other operating expenses |
$ | 160 | $ | 155 | 2.9 | |||||||
|
|
|
|
|
|||||||||
| Net expenses from acquisitions and disposals |
(9 | ) | (1 | ) | ||||||||
|
|
|
|
|
|||||||||
| Organic Other operating expenses |
$ | 151 | $ | 154 | (2.4 | ) | ||||||
|
|
|
|
|
|||||||||
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
| (2) | Percentages may differ due to rounding. |
17
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 4. | Underlying and organic revenue, operating income, and operating margin |
The following table reconciles total revenues and operating income, respectively the most directly comparable GAAP measures, to underlying and organic revenue, and underlying and organic operating income, for the three months ended March 31, 2015 and 2014:
| Three months ended March 31, |
||||||||||||
| % | ||||||||||||
| 2015 | 2014 | Change(2) | ||||||||||
| Total revenues |
$ | 1,087 | $ | 1,097 | (0.9 | ) | ||||||
| Excluding: |
||||||||||||
| Foreign currency movements |
— | (69 | ) | |||||||||
|
|
|
|
|
|||||||||
| Underlying revenue |
$ | 1,087 | $ | 1,028 | 5.7 | |||||||
|
|
|
|
|
|||||||||
| Net revenue from acquisitions and disposals |
(39 | ) | (14 | ) | ||||||||
|
|
|
|
|
|||||||||
| Organic revenue |
$ | 1,048 | $ | 1,014 | 3.3 | |||||||
|
|
|
|
|
|||||||||
| Operating income |
$ | 293 | $ | 326 | (10.3 | ) | ||||||
| Excluding: |
||||||||||||
| Restructuring costs |
31 | — | ||||||||||
| Foreign currency movements (1) |
— | (21 | ) | |||||||||
|
|
|
|
|
|||||||||
| Underlying operating income |
$ | 324 | $ | 305 | 5.9 | |||||||
|
|
|
|
|
|||||||||
| Net operating income from acquisitions and disposals |
(2 | ) | (6 | ) | ||||||||
|
|
|
|
|
|||||||||
| Organic operating income |
$ | 322 | $ | 299 | 7.4 | |||||||
|
|
|
|
|
|||||||||
| Operating margin, or operating income as a percentage of total revenues |
26.9 | % | 29.7 | % | ||||||||
|
|
|
|
|
|||||||||
| Underlying operating margin, or underlying operating income as a percentage of total underlying revenues |
29.8 | % | 29.7 | % | ||||||||
|
|
|
|
|
|||||||||
| Organic operating margin, or organic operating income as a percentage of total organic revenues |
30.7 | % | 29.5 | % | ||||||||
|
|
|
|
|
|||||||||
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
| (2) | Percentages may differ due to rounding. |
18
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 5. | Underlying and organic EBITDA |
The following table reconciles net income, the most directly comparable GAAP measure to EBITDA, underlying EBITDA and organic EBITDA, for the three months ended March 31, 2015 and 2014:
| Three months ended March 31, |
||||||||||||
| % | ||||||||||||
| 2015 | 2014 | Change(2) | ||||||||||
| Net income attributable to Willis Group Holdings |
$ | 210 | $ | 246 | (14.7 | ) | ||||||
| Excluding: |
||||||||||||
| Net income attributable to non-controlling interests |
4 | 4 | ||||||||||
| Interest in earnings of associates, net of tax |
(16 | ) | (19 | ) | ||||||||
| Income taxes |
56 | 63 | ||||||||||
| Interest expense |
33 | 32 | ||||||||||
| Other expense (income), net |
6 | — | ||||||||||
| Depreciation |
22 | 23 | ||||||||||
| Amortization |
14 | 13 | ||||||||||
|
|
|
|
|
|||||||||
| EBITDA |
$ | 329 | $ | 362 | (9.2 | ) | ||||||
| Excluding: |
||||||||||||
| Restructuring costs |
31 | — | ||||||||||
| Foreign currency movements(1) |
— | (22 | ) | |||||||||
|
|
|
|
|
|||||||||
| Underlying EBITDA |
$ | 360 | $ | 340 | 5.8 | |||||||
|
|
|
|
|
|||||||||
| Net EBITDA from acquisitions and disposals |
(7 | ) | (7 | ) | ||||||||
|
|
|
|
|
|||||||||
| Organic EBITDA |
$ | 353 | $ | 333 | 6.0 | |||||||
|
|
|
|
|
|||||||||
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
| (2) | Percentages may differ due to rounding. |
19
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 6. | Underlying net income and earnings per diluted share |
The following tables reconcile net income attributable to Willis Group Holdings and earnings per diluted share, the most directly comparable GAAP measures, to underlying net income and underlying net income per diluted share, for the three months ended March 31, 2015 and 2014:
| Three months ended March 31, |
Per diluted share Three months ended March 31, |
|||||||||||||||||||||||
| 2015 | 2014 | % Change(2) |
2015 | 2014 | % Change |
|||||||||||||||||||
| Net income attributable to Willis Group Holdings plc |
$ | 210 | $ | 246 | (14.7 | ) | $ | 1.15 | $ | 1.35 | (14.8 | ) | ||||||||||||
| Excluding: |
||||||||||||||||||||||||
| Restructuring costs, net of tax ($9, $nil) |
22 | — | 0.12 | — | ||||||||||||||||||||
| Net (gain) loss on disposal of operations, net of tax ($2, $1) |
(2 | ) | 2 | (0.01 | ) | 0.01 | ||||||||||||||||||
| Foreign currency movements(1) |
— | (28 | ) | — | (0.15 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Underlying net income |
$ | 230 | $ | 220 | 4.5 | $ | 1.26 | $ | 1.21 | 4.1 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||||
| Average diluted shares outstanding |
182 | 182 | ||||||||||||||||||||||
|
|
|
|
|
|||||||||||||||||||||
| (1) | For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements when comparing periods. |
| (2) | Percentages may differ due to rounding. |
| 7. | Operational Improvement Program restructuring costs |
By segment:
| Twelve months ended December 31, 2014 |
Three months ended March 31, 2015 |
Total Cumulative Restructuring Costs |
||||||||||
| Willis GB |
$ | 10 | $ | 4 | $ | 14 | ||||||
| Willis Capital, Wholesale and Reinsurance |
1 | 6 | 7 | |||||||||
| Willis North America |
3 | 7 | 10 | |||||||||
| Willis International |
5 | 3 | 8 | |||||||||
| Corporate & other |
17 | 11 | 28 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total restructuring costs |
$ | 36 | $ | 31 | $ | 67 | ||||||
|
|
|
|
|
|
|
|||||||
20
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 7. | Operational Improvement Program restructuring costs (continued) |
By type of restructuring cost:
| Twelve months ended December 31, 2014 |
Three months ended March 31, 2015 |
Total Cumulative Restructuring Costs |
||||||||||
| Termination benefits |
$ | 16 | $ | 10 | $ | 26 | ||||||
| Professional services & other |
20 | 21 | 41 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total restructuring costs |
$ | 36 | $ | 31 | $ | 67 | ||||||
|
|
|
|
|
|
|
|||||||
21
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 8. | Condensed consolidated income statements by quarter |
| 2014 | 2015 | |||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | FY | Q1 | |||||||||||||||||||
| Revenues |
||||||||||||||||||||||||
| Commissions and fees |
$ | 1,090 | $ | 930 | $ | 808 | $ | 939 | $ | 3,767 | $ | 1,081 | ||||||||||||
| Investment income |
4 | 4 | 4 | 4 | 16 | 3 | ||||||||||||||||||
| Other income |
3 | 1 | — | 15 | 19 | 3 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total revenues |
1,097 | 935 | 812 | 958 | 3,802 | 1,087 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Expenses |
||||||||||||||||||||||||
| Salaries and benefits |
570 | 575 | 569 | 600 | 2,314 | 567 | ||||||||||||||||||
| Other operating expenses |
165 | 173 | 156 | 165 | 659 | 160 | ||||||||||||||||||
| Depreciation expense |
23 | 24 | 23 | 22 | 92 | 22 | ||||||||||||||||||
| Amortization of intangible assets |
13 | 12 | 13 | 16 | 54 | 14 | ||||||||||||||||||
| Restructuring costs |
— | 3 | 17 | 16 | 36 | 31 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total expenses |
771 | 787 | 778 | 819 | 3,155 | 794 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
326 | 148 | 34 | 139 | 647 | 293 | ||||||||||||||||||
| Other expense (income), net |
— | 3 | 9 | (18 | ) | (6 | ) | 6 | ||||||||||||||||
| Interest expense |
32 | 35 | 34 | 34 | 135 | 33 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income (loss) before income taxes and interest in earnings (losses) of associates |
294 | 110 | (9 | ) | 123 | 518 | 254 | |||||||||||||||||
| Income taxes |
63 | 59 | 2 | 35 | 159 | 56 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Income (loss) before interest in earnings(losses) of associates |
231 | 51 | (11 | ) | 88 | 359 | 198 | |||||||||||||||||
| Interest in earnings (losses) of associates, net of tax |
19 | (3 | ) | 3 | (5 | ) | 14 | 16 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) |
250 | 48 | (8 | ) | 83 | 373 | 214 | |||||||||||||||||
| Net (loss) income attributable to non-controlling interests |
(4 | ) | (1 | ) | 1 | (7 | ) | (11 | ) | (4 | ) | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Net income (loss) attributable to Willis Group Holdings |
$ | 246 | $ | 47 | $ | (7 | ) | $ | 76 | $ | 362 | $ | 210 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Diluted earnings per share |
||||||||||||||||||||||||
| Net income (loss) attributable to Willis Group Holdings shareholders |
$ | 1.35 | $ | 0.26 | $ | (0.04 | ) | $ | 0.42 | $ | 2.00 | $ | 1.15 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Average number of shares outstanding |
||||||||||||||||||||||||
| - Diluted |
182 | 182 | 178 | 180 | 181 | 182 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
22
WILLIS GROUP HOLDINGS plc
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data) (unaudited)
| 9. | Segment information by quarter |
| 2014 | 2015 | |||||||||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | FY | Q1 | |||||||||||||||||||
| Commissions and fees |
||||||||||||||||||||||||
| Willis GB |
$ | 150 | $ | 187 | $ | 148 | $ | 177 | $ | 662 | $ | 142 | ||||||||||||
| Willis Capital, Wholesale and Reinsurance |
303 | 192 | 144 | 110 | 749 | 296 | ||||||||||||||||||
| Willis North America |
354 | 323 | 321 | 320 | 1,318 | 356 | ||||||||||||||||||
| Willis International |
283 | 228 | 195 | 332 | 1,038 | 287 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total commissions and fees |
$ | 1,090 | $ | 930 | $ | 808 | $ | 939 | $ | 3,767 | $ | 1,081 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total revenues |
||||||||||||||||||||||||
| Willis GB |
$ | 153 | $ | 190 | $ | 149 | $ | 177 | $ | 669 | $ | 143 | ||||||||||||
| Willis Capital, Wholesale and Reinsurance |
304 | 193 | 145 | 124 | 766 | 297 | ||||||||||||||||||
| Willis North America |
355 | 323 | 322 | 323 | 1,323 | 359 | ||||||||||||||||||
| Willis International |
285 | 229 | 196 | 334 | 1,044 | 288 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total revenues |
$ | 1,097 | $ | 935 | $ | 812 | $ | 958 | $ | 3,802 | $ | 1,087 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Operating income |
||||||||||||||||||||||||
| Willis GB |
$ | 22 | $ | 57 | $ | 21 | $ | 48 | $ | 148 | $ | 21 | ||||||||||||
| Willis Capital, Wholesale and Reinsurance |
168 | 63 | 9 | (16 | ) | 224 | 153 | |||||||||||||||||
| Willis North America |
83 | 47 | 45 | 57 | 232 | 78 | ||||||||||||||||||
| Willis International |
84 | 23 | (10 | ) | 98 | 195 | 70 | |||||||||||||||||
| Corporate and other(a) |
(31 | ) | (42 | ) | (31 | ) | (48 | ) | (152 | ) | (29 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Total operating income |
$ | 326 | $ | 148 | $ | 34 | $ | 139 | $ | 647 | $ | 293 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
| Organic commissions and fees growth |
||||||||||||||||||||||||
| Willis GB |
(6.3 | )% | 6.9 | % | (5.1 | )% | (2.2 | )% | (1.5 | )% | 1.1 | % | ||||||||||||
| Willis Capital, Wholesale and Reinsurance |
6.3 | % | 2.1 | % | 3.6 | % | 2.8 | % | 4.3 | % | 1.3 | % | ||||||||||||
| Willis North America |
5.4 | % | 3.5 | % | 4.2 | % | (1.8 | )% | 2.7 | % | 4.7 | % | ||||||||||||
| Willis International |
7.2 | % | 6.1 | % | 5.6 | % | 15.0 | % | 8.8 | % | 5.3 | % | ||||||||||||
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| Total organic commissions and fees growth |
4.2 | % | 4.5 | % | 2.5 | % | 3.6 | % | 3.8 | % | 3.4 | % | ||||||||||||
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| Operating margin |
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| Willis GB |
14.4 | % | 30.0 | % | 14.1 | % | 27.1 | % | 22.1 | % | 14.9 | % | ||||||||||||
| Willis Capital, Wholesale and Reinsurance |
55.3 | % | 32.6 | % | 6.2 | % | (12.9 | )% | 29.2 | % | 51.7 | % | ||||||||||||
| Willis North America |
23.4 | % | 14.6 | % | 14.0 | % | 17.6 | % | 17.5 | % | 21.6 | % | ||||||||||||
| Willis International |
29.5 | % | 10.0 | % | (5.1 | )% | 29.3 | % | 18.7 | % | 24.4 | % | ||||||||||||
| Total operating margin |
29.7 | % | 15.8 | % | 4.2 | % | 14.5 | % | 17.0 | % | 26.9 | % | ||||||||||||
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| (a) | Corporate and other includes 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). |
23
Exhibit 99.2
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Willis Group Holdings
FIRST RESULTS QUARTER 2015
April, 2015
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Important disclosures regarding forward-looking statements
This presentation contains certain “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, w hich are intended to be covered by the safe harbors created by those law s. These forward-looking statements include information about possible or assumed future results of our operations.
All statements, other than statements of historical facts, included in this document that address activities, events or developments that w e expect or anticipate may occur in the future, including such things as our outlook, potential cost savings and accelerated adjusted operating margin and adjusted earnings per share grow th, 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 forw ard-looking statements. Also, w hen we use the w ords 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 follow ing: 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 global economic conditions on our results of operations and financial condition, including as a result of those associated w ith the Eurozone, any insolvencies of or other difficulties experienced by our clients, insurance companies or financial institutions; our ability to implement and fully realize anticipated benefits of our grow th strategy and revenue generating initiatives; our ability to implement and realize anticipated benefits of any cost-savings or operational improvement initiative, including our ability to achieve expected savings and other benefits from the multi-year Operational Improvement Program as a result of unexpected costs or delays and demand on managerial, operational and administrative resources and/or macroeconomic factors affecting the program as w ell as the impact of the program on business processes and competitive dynamics; the rejection of our Gras Savoye offer or failure to obtain regulatory approval; our ability to consummate acquisitions, including Miller Insurance Services and Gras Savoye, or achieve the expected benefits; our ability to effectively integrate any acquisition into our business; volatility or declines in insurance markets and premiums on w hich our commissions are based, but w hich we do not control; our ability to compete in our industry; 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 including at a time w hen the Company is pursuing various strategic initiatives; our ability to develop new products and services; the practical challenges and costs of complying w ith a w ide variety of foreign law s and regulations and any related changes, given the global scope of our operations and those of any acquired business and the associated risks of non-compliance and regulatory enforcement action; our ability to develop and implement technology solutions and invest in innovative product offerings in an efficient and effective manner; fluctuations in our earnings as a result of potential changes to our valuation allow ance(s) on our deferred tax assets; changes in the tax or accounting treatment of our operations and fluctuations in our tax rate; our ability to achieve anticipated benefits of any acquisition or other transactions in w hich we may engage, including any revenue grow th or operational efficiencies; our inability to exercise full management control over our associates; our ability to continue to manage our significant indebtedness; 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; any material fluctuations in exchange and interest rates that could adversely affect expenses and revenue; a significant decline in the value of investments that fund our pension plans or changes in our pension plan liabilities or funding obligations; rating agency actions, including a dow ngrade to our credit rating, that could inhibit our ability to borrow funds or the pricing thereof and in certain circumstances cause us to offer to buy back some of our debt; our ability to receive dividends or other distributions in needed amounts from our subsidiaries; our involvement in and the results of any regulatory investigations, legal proceedings and other contingencies; our exposure to potential liabilities arising from errors and omissions and other potential claims against us; underw riting, advisory or reputational risks associated with our business; the interruption or loss of our information processing systems, data security breaches or failure to maintain secure information systems; and impairment of the goodw ill in one of our reporting units, in w hich case we may be required to record significant charges to earnings.
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 additional information see also Part I, Item 1A “Risk Factors” included in Willis’ Form 10-K for the year ended December 31, 2014, and our subsequent filings w ith the Securities and Exchange Commission. Copies are available online at http://www.sec.gov or on request from the Company.
Although w e 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 presentation, our inclusion of this information is not a representation or guarantee by us that our objectives and plans w ill be achieved. Our forward-looking statements speak only as of the date made and w e will not update these forward-looking statements unless the securities law s require us to do so. In light of these risks, uncertainties and assumptions, the forward-looking events discussed in this presentation may not occur, and w e caution you against unduly relying on these forward-looking statements.
| 1 |
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Important disclosures regarding non-GAAP measures
This presentation contains references to “non-GAAP financial measures” as defined in Regulation G of SEC rules. We present these measures because we believe they are of interest to the investment community and they provide 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 generally accepted accounting principles (GAAP) basis. These financial measures should be viewed in addition to, not in lieu of, the Company’s condensed consolidated income statements and balance sheet as of the relevant date. Consistent with Regulation G, a description of such information is provided below and a reconciliation of certain of such items to GAAP information can be found in our periodic filings with the SEC. Our method of calculating these non-GAAP financial measures may differ from other companies and therefore comparability may be limited.
Definitions of non-GAAP financial measures
We believe that investors’ understanding of the Company’s performance is enhanced by our disclosure of the following non-GAAP financial measures. Our method of calculating these measures may differ from those used by other companies and therefore comparability may be limited.
Organic commissions and fees growth
Organic commissions and fees growth excludes: (i) the impact of foreign currency movements; (ii) the first twelve months of net commission and fee revenues generated from acquisitions; and (iii) the net commission and fee revenues related to operations disposed of in each period presented, from reported commissions and fees growth. We believe organic growth in commissions and fees provides a measure that the investment community may find helpful in assessing the performance of business that were part of our business in both the current and prior periods, and provides a measure against which our businesses may be assessed in the future.
Underlying commissions and fees, underlying revenues, underlying total expenses, underlying salaries and benefits, underlying other operating expenses, underlying operating income, underlying operating margin, underlying EBITDA, underlying net income and underlying earnings per diluted share (“Underlying measures”).
Underlying measures are calculated by excluding the impact of certain items, including foreign currency movements, from the most directly comparable GAAP measures. We believe that excluding such items provides a more complete and consistent comparative analysis of our results of operations.
Organic revenues, organic total expenses, organic salaries and benefits, organic other operating expenses, organic operating income, organic operating margin and organic EBITDA (“Organic measures”).
Organic measures are calculated by excluding the twelve month impact from acquisitions and disposals (together with the impact of certain items, including foreign currency movements noted above), from the most directly comparable GAAP measures. We believe that excluding these items provides a more complete and consistent comparative analysis of our results of operations.
| 2 |
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1Q 2015 EPS growth
Good revenue growth combined with excellent cost management drove underlying earnings growth
Business performance = +$0.08 Adjusting items:
Operational Improvement
Program = ($0.12)
| $1.35 |
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$0.01 Gain on Disposal = +$0.01 |
| $1.21 |
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$0.26 $1.26 |
Loss Adjusting on disposal item:($0.18)($0.03) $1.15
$0.01($0.15)($0.11)
+4.1%
1Q 2014 Adjusting Item Foreign 1Q 2014 Total Total Other 1Q 2015 Adjusting 1Q 2015
Reported EPS Currency Underlying Revenues Operating Underlying Items Reported EPS
Movements EPS Expenses EPS
Prior year Underlying EPS rebased for net ($0.15) unfavorable foreign currency impact in the current quarter The net of revenue and expense growth increased current Underlying EPS by $0.08
See important disclosures regarding non-GAAP measures on page 2 and reconciliations starting on page 14
| 3 |
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1Q 2015 Commissions and fees growth
Reported Underlying Organic Commentary
| 5.8% |
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• Solid organic growth with positive contributions from all |
3.4%
Group segments
• Reported growth significantly impacted by unfavorable F/X:
| (0.9)% |
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• Biggest driver: EUR: 1Q14 = 1.383; 1Q15 = 1.082 Diff -22% |
| 1.1% |
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1.1% • Organic growth led by Financial Lines and P&C |
Willis GB • Reported growth significantly impacted by unfavorable F/X:
• Biggest driver: GBP: 1Q14 = 1.662; 1Q15 = 1.495 Diff -10%
(4.6)%
• Solid mid-single digit organic growth achieved in
Willis Capital, 1.7% 1.3% Reinsurance, Wholesale was down, other businesses were
Wholesale and essentially flat
Reinsurance -2.5% • Reported growth impacted by unfavorable F/X
• Organic growth across a number of practices
Willis North 4.7% • Mid-single digit growth in Human Capital and Benefits
America 0.5% 0.7% • Reported and underlying growth impacted by portfolio
management actions
Willis 21.1% • Strong organic growth from LatAm, Asia and E Europe
International 5.3% • Underlying growth reflects strong contribution from M&A
| 1.1% |
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• Reported growth significantly impacted by unfavorable F/X |
See important disclosures regarding non-GAAP measures on page 2 and reconciliations starting on page 14
| 4 |
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1Q 2015 Total operating expenses
Ongoing cost management initiatives drive continued decline in organic expense growth
$ millions $794
5.6%
$771 $31
$763
$5 $1
($48) $34 $37
$723
$8 Acquisitions & Dispositions
1.7%
Acquisition & Dispositions Organic 1.7%
$715 growth $726
1Q 2014 Foreign 1Q 2014 Salaries and Other operating Depreciation 1Q 2015 Operational 1Q 2015
Reported Currency Underlying Benefits Expenses and Underlying Improvement Reported
Movement Amortization Program
Expense growth from acquisitions and disposals accounted for 390 bps of the underlying expense growth Organic expense growth driven by the costs associated with the proposed acquisition of Gras Savoye and higher salaries and benefits
See important disclosures regarding non-GAAP measures on page 2 and reconciliations starting on page 14
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1Q 2015 Salaries and benefits
Underlying salaries and benefits growth impacted by acquisitions and disposals
$ millions 6.4% Acquisitions & Dispositions
$570 $567 $567
($37) $34 $23
$533
$6
Acquisitions & Dispositions Organic $544
growth 3.3%
$527
1Q 2014 Foreign Currency 1Q 2014 Salaries and Benefits 1Q 2015 1Q 2015
Reported Movement Underlying Underlying Reported
Reported S&B impacted by $37 million from favorable FX movements, partially offset by $17 million net increase from M&A activity Underlying S&B grew $34 million, including the $17 million net increase from M&A
Organic growth reflects:
Salary increases generally in line with inflation Organic headcount growth of about 1%
Increased incentives driven by higher production awards in certain businesses
See important disclosures regarding non-GAAP measures on page 2 and reconciliations starting on page 14 6
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1Q 2015 Onshore / offshore FTE analysis
Trends helping to optimize cost structure
+1.1%
Total Organic FTEs 17,800 17,900 18,000
Offshore 1,800 2,000 2,300
Onshore
16,000 15,900 15,700
1Q14 4Q14 1Q15
Total FTEs 18,100 18,400 18,600
Offshore Center capabilities and FTEs continue to grow Organic FTEs increased by 1.1% Y-o-Y
Total FTEs up about 500 driven by M&A and offshore build-out Onshore FTEs down about 300
See important disclosures regarding non-GAAP measures on page 2 and reconciliations starting on page 14
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1Q 2015 underlying EBITDA
Underlying EBITDA expands on C&F/Cost Spread
$ millions
| +1.5% |
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+5.8% |
$360
$335 $340
1Q 2013 1Q 2014 1Q 2015
Underlying
spread,(150)(160) + 20
bps
Organic
spread,(130)(120) + 170
bps
Underlying EBITDA driven by: ? Solid revenue growth
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Good organic C&F growth of 3.4% |
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Solid contributions from acquisitions (Max Matthiessen, Charles Monat, etc.) driving healthy underlying C&F growth of 5.8% ? Expense management |
| • |
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Organic expense growth of only 1.7% |
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Underlying expense growth of 5.6% |
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Operational improvement program beginning to impact |
Significant improvement in Y-o-Y growth rate reflects building success of strategic execution
See important disclosures regarding non-GAAP measures on page 2 and reconciliations starting on page 14
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Gras Savoye Profile
Gras Savoye Profile: 2014
€ millions – US GAAP basis
370
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17.6% |
Revenue EBITDA EBITDA Margin
Gras Savoye revenue sources
By geography By product line
10%
32%
39%
30%
60%
29%
Paris Regions International P&C HCB Affinity
Demonstrated improving EBITDA margin from 2013
Expect growth in both revenue and underlying EBITDA in 2015
Total purchase price of ¬550 million, includes repay of third party debt of ¬40
Expect impact on reported 2016 EPS to be
$0.06 to $0.08 dilutive
Expect impact on 2016 cash EPS (ex amortization expense) to be $0.13 to $0.17 accretive
Transaction likely to be funded with debt
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Gras Savoye: Excellent Strategic Fit
Doubles Willis’s wholly-owned network
131 131
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44 |
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| 84 |
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Correspondent Affiliate Owned
Expands Willis’ presence in targeted, high-growth geographies and product areas
Enhanced ability to serve France-based multinationals
Opportunity for growth through revenue synergies
Solidifies Willis’ position as a global industry leader
Immediately accretive on a cash EPS basis
Next phase in a 40-year relationship
10
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APPENDICES
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Segment Structure
Segment structure from January 1, 2015
Willis GB
Comprises Willis’s Great Britain-based Specialty and Retail businesses Focused on serving corporate clients, delivering full range of Willis expertise across Great Britain
Willis Capital, Wholesale and Reinsurance
Willis Re
Willis Capital Markets & Advisory Wholesale businesses (e.g., Miller) Willis Portfolio and Underwriting Services
Willis North America
Focused on serving corporate clients, delivering full range of Willis expertise across the United States and Canada
Willis International
Focused on serving corporate clients, delivering full range of Willis expertise across Asia, CEMEA, Latin America and Western Europe Upon closing of transaction, 100% of Gras Savoye operations will be included
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1Q 2015 Other operating expenses
Ongoing expense management reflected in 2.4% organic decline
$ millions
Acquisitions & Dispositions
Acquisitions & Dispositions
$165 2.9%
$160 $160
($10)
$155 $5
$1 $9
Organicdecline (2.4)%
$154
$151
1Q 2014 Foreign Currency 1Q 2014 Other Operating 1Q 2015 1Q 2015
Reported Movement Underlying Expenses Underlying Reported
Reported decline in other operating expenses of (3.2)% included $10 million from favorable FX movements offset by $8 million increase from M&A activity Underlying growth included the $8 million increase from M&A activity Organic decline reflects ongoing expense management initiatives ? non-recurrence of systems-related expenses incurred in 1Q14
See important disclosures regarding non-GAAP measures on page 2 and reconciliations starting on page 14
13
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Important disclosures regarding non-GAAP measures
Reported commissions and fees growth to underlying and organic measures
Underlying Organic
Foreign commissions Acquisitions commissions
currency and fees and and fees
2015 2014 Change(1) translation growth disposals growth
($ millions) % % % % %
Three months ended March 31, 2015
Willis GB $142 $150 (4.6) (5.7) 1.1 - 1.1
Willis Capital, Wholesale and 296 303 (2.5) (4.3) 1.7 0.4 1.3
Reinsurance
Willis North America 356 354 0.5 (0.2) 0.7 (4.1) 4.7
Willis International 287 283 1.1 (20.1) 21.1 15.8 5.3
Total $1,081 $1,090 (0.9) (6.7) 5.8 2.4 3.4
| (1) |
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Percentages may differ due to rounding. |
14
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Important disclosures regarding non-GAAP measures
Operating income to underlying and organic operating income
2014 2015
(In millions) 1Q 1Q
Total revenue $1,097 $1,087
excluding:
Foreign currency movements (69) -
Underlying revenue $1,028 $1,087
Net revenue from acquisitions and disposals (14) (39)
Organic revenue $1,014 $1,048
Operating income $326 $293
excluding:
Restructuring costs - 31
Foreign currency movements (21) -
Underlying operating income $305 $324
Net operating income from acquisitions and
disposals (6) (2)
Organic operating income $299 $322
Operating margin (operating income as a 29.7% 26.9%
percentage of total revenue)
Underlying operating margin (underlying operating 29.7% 29.8%
income as a percentage of underlying total revenue)
Organic operating margin (organic operating income 29.5% 30.7%
as a percentage of organic total revenue)
For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements w hen comparing periods
15
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Important disclosures regarding non-GAAP measures
Net income (loss) to underlying net income
2014 2015
(In millions, except per share data) 1Q 1Q
Net income $246 $210
Excluding the following, net of tax:
Operational improvement program - 22
Net (gain) loss on disposal of operations 2 (2)
Foreign currency movements (28) -
Underlying net income $220 $230
Diluted shares outstanding 182 182
Net income per diluted share $1.35 $1.15
Underlying net income per diluted share $1.21 $1.26
For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements w hen comparing periods
16
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Important disclosures regarding non-GAAP measures
Net income to underlying and organic EBITDA
2014 2015
1Q 1Q
Net income attributable to Willis
Group Holdings $246 $210
Excluding:
Net income attributable to
noncontrolling interests 4 4
Interest in earnings(losses) of
associates, net of tax (19) (16)
Income taxes 63 56
Interest expense 32 33
Other expense (income), net - 6
Depreciation 23 22
Amortization 13 14
EBITDA $362 $329
Excluding:
Restructuring costs - 31
Foreign currency movements (22) -
Underlying EBITDA $340 $360
Net EBITDA from acquisitions and
disposals (7) (7)
Organic EBITDA $333 $353
For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements w hen comparing periods
17
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Important disclosures regarding non-GAAP measures
Reported total expenses, salaries and benefits and other operating expenses to underlying and organic measures
2014 2015
(In millions) 1Q 1Q
Reported total expenses $771 $794
Excluding:
Restructuring costs - (31)
Foreign currency movements (48) -
Underlying total expenses $723 $763
Net expenses from acquisitions and disposals (8) (37)
Organic total expenses $715 $726
Reported salaries and benefits $570 $567
Excluding:
Foreign currency movements (37) -
Underlying salaries and benefits $533 $567
Net expenses from acquisitions and disposals (6) (23)
Organic Salaries and benefits $527 $544
Reported other operating expenses $165 $160
Excluding:
Foreign currency movements (10) -
Underlying other operating expenses $155 $160
Net expenses from acquisitions and disposals (1) (9)
Organic other operating expenses $154 $151
For prior periods, underlying measures have been rebased to current period exchange rates to remove the impact of foreign currency movements w hen comparing periods
18
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IR Contacts
Peter Poillon
Tel: +1 212 915-8084
Email: peter.poillon@willis.com
Media Contact
Juliet Massey
Tel: +44 7984 156 739
Email: juliet.massey@willis.com
19