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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): February 9, 2005
Willis Group Holdings Limited
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(Exact Name of Registrant as Specified in Its Charter)
Bermuda
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(State or Other Jurisdiction of Incorporation)
001-16503 98-0352587
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(Commission File Number) (IRS Employer Identification No.)
c/o Willis Group Limited
Ten Trinity Square
London EC3P 3AX, England
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(Address of Principal Executive Offices)
(44) (20) 7488-8111
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
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(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 (see General Instruction A.2. below):
[ ] 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 February 9, 2005 Willis Group Holdings Limited ("WGHL") issued a press
release (the "Press Release") reporting results for the quarter and year ended
December 31, 2004. A copy of the Press Release is attached as Exhibit 99.1 to
this Report on Form 8-K and is incorporated herein by reference.
Item 9.01. Financial Statements and Exhibits.
(c) Exhibits.
99.1 Press Release of WGHL dated February 9, 2005.
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 hereunto duly authorized.
WILLIS GROUP HOLDINGS LIMITED
Date: February 9, 2005 By: /s/ Mary E. Caiazzo
-------------------------------
Name: Mary E. Caiazzo
Title: Assistant General Counsel
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Press Release of WGHL dated February 9, 2005.
EXHIBIT 99.1
Willis Group Reports Fourth Quarter and Full Year 2004 Results
NEW YORK--(BUSINESS WIRE)--Feb. 9, 2005--Willis Group Holdings
Limited (NYSE:WSH), the global insurance broker, today reports results
for the quarter and year ended December 31, 2004.
"Despite a declining rate environment and extraordinary challenges
facing the global insurance industry, we were able to continue growing
in 2004 and expanded revenues on an underlying basis by 4 percent for
the year," commented Joe Plumeri, Chairman and Chief Executive
Officer. "The recent addition of great new talent and clients to our
already strong platform makes us more enthusiastic than ever about the
future."
Fourth Quarter and Year Ended December 31, 2004 Review
The results for the fourth quarter of 2004 were affected by a
decline in volume and profit-related contingent commissions, following
the Company's decision to discontinue all agreements covering such
income. These contingent commissions declined $14 million pre tax,
compared to the fourth quarter of 2003.
Consequently, net income for the quarter ended December 31, 2004
was $108 million, or $0.65 per diluted share, compared with $118
million, or $0.69 per diluted share, a year ago. Excluding non-cash
compensation for performance-based stock options and net gain on
disposal of operations, adjusted net income decreased 13 percent to
$104 million for the quarter ended December 31, 2004 from $119 million
in the same period last year, while adjusted net income per diluted
share fell 10 percent to $0.63 for the fourth quarter of 2004 from
$0.70 a year ago. Foreign currency translation decreased fourth
quarter 2004 reported earnings by $0.01 per diluted share compared to
a year ago.
Net income for the year ended December 31, 2004 was $427 million,
or $2.54 per diluted share, compared to $414 million, or $2.45 per
diluted share, a year ago. Excluding non-cash compensation for
performance-based stock options, a related one-time tax benefit
arising from a change in UK tax legislation in 2003, net gain on
disposal of operations and a subordinated debt redemption premium,
adjusted net income for the year ended December 31, 2004 increased 13
percent to $437 million from $386 million in 2003, while adjusted net
income per diluted share rose 14 percent to $2.60 from $2.28 in 2003.
There was no net impact of foreign currency translation on reported
earnings for the year ended December 31, 2004 compared to a year ago.
Total reported revenues for the quarter ended December 31, 2004
increased 2 percent to $588 million, from $577 million for the same
period last year. The effect of foreign currency translation reduced
reported revenues 4 percent and net acquisitions added 6 percent.
Included in total reported revenues for the fourth quarter were volume
and profit-based contingent commissions of $25 million compared with
$39 million in the comparable quarter last year. Excluding contingent
commissions, organic revenue growth was 3 percent in the fourth
quarter, comprised of approximately 7 percent net new business growth
and a negative 4 percent impact from declining insurance premium
rates.
The adjusted operating margin was 28.1 percent for the fourth
quarter of 2004 compared with 33.6 percent for the same period last
year. The decline in contingent commissions accounted for
approximately 2 percent of the reduction in adjusted operating margin;
the remainder was attributed to higher expenses related to legal,
investigative and regulatory compliance, and incremental salaries and
benefits expense for recruiting and retention.
Total reported revenues for the year ended December 31, 2004
increased 10 percent to $2,275 million, up from $2,076 million for the
corresponding period in 2003. The effect of foreign currency
translation increased reported revenues 2 percent and net acquisitions
added 4 percent. Included in total reported revenues for 2004 were
volume and profit-based contingent commissions of $71 million in 2004
compared to $70 million in 2003. Excluding contingent commissions,
organic revenue growth was 4 percent, comprised of approximately 6
percent net new business growth and a negative 2 percent impact from
declining insurance premium rates. The adjusted operating margin was
29.3 percent for the year ended December 2004, compared with 30.3
percent the previous year.
"Even though we are in a transition as we continue to build for
the future, we have good momentum heading into 2005," commented Joe
Plumeri, Chairman and Chief Executive Officer. "We are in a good
position and will do all we can to make it better. Everything we have
done or are doing is designed to make sure we have the best people and
the best processes to attract and look after our growing list of
clients."
Balance Sheet
At December 31, 2004, total long-term debt was $450 million and
total stockholders' equity was approximately $1.4 billion. The
capitalization ratio (total long-term debt to total long-term debt and
stockholders' equity) was 24 percent at year-end December 31, 2004.
Share Buybacks and Acquisitions
For the year ended December 31, 2004, the Company repurchased 9.3
million shares for $339 million under the Company's $500 million
authorization. Buyback activity in the fourth quarter was modest at
0.3 million shares for $12 million. There was approximately $222
million of immediately available cash at December 31, 2004, providing
significant financial flexibility to support the cash needs of the
Company.
In 2004, the Company completed 10 acquisitions with annual
revenues of approximately $155 million, including the acquisitions of
Coyle Hamilton, the Republic of Ireland's largest privately owned
insurance broker, and Opus and Jeffries which strengthened our middle
market and large account capabilities in the United Kingdom.
Taxes
Excluding the effects on taxation of amortization of intangibles,
disposals of operations, performance-based stock options and the
one-time tax benefit in 2003 that arose from a change in UK
legislation, the underlying tax rate for 2004 was 33 percent, compared
to 34 percent for 2003.
Conference Call
The Company will discuss financial results and outlook on a
conference call scheduled for 8:00 a.m. Eastern Time, February 10,
2005. This call is being webcast and can be accessed at
www.willis.com.
Willis Group Holdings Limited is a leading global insurance
broker, developing and delivering professional insurance, reinsurance,
risk management, financial and human resource consulting and actuarial
services to corporations, public entities and institutions around the
world. With over 300 offices in some 80 countries, its global team of
14,500 associates serves clients in some 180 countries. Additional
information on Willis may be found on its Web site www.willis.com.
This press release may contain certain statements relating to
future results, which are forward-looking statements as that term is
defined in the Private Securities Litigation Reform Act of 1995. These
forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially
from historical results or those anticipated, depending on a variety
of factors such as general economic conditions in different countries
around the world, fluctuations in global equity and fixed income
markets, changes in premium rates, the competitive environment and the
actual cost of resolution of contingent liabilities. Further
information concerning the Company and its business, including factors
that potentially could materially affect the Company's financial
results, are contained in the Company's filings with the Securities
and Exchange Commission.
This press release includes supplemental financial information
which may contain 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
generally accepted accounting principles (GAAP) information follows.
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 consolidated statements of
operations for the quarter and year ended December 31, 2004.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months Year
ended ended
December 31, December 31,
------------- ---------------
2004 2003 2004 2003
------ ------ ------- -------
Revenues:
Commissions and fees $569 $558 $2,205 $2,004
Interest income 19 19 70 72
------ ------ ------- -------
Total Revenues 588 577 2,275 2,076
------ ------ ------- -------
Expenses:
General and administrative expenses
(excluding non-cash compensation) 411 372 1,562 1,408
Non-cash compensation - performance
options (Note 1) 1 3 11 20
Depreciation expense 10 10 41 36
Amortization of intangible assets 2 1 6 3
Net gain on disposal of operations (6) (1) (11) (11)
------ ------ ------- -------
Total Expenses 418 385 1,609 1,456
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Operating Income 170 192 666 620
Interest expense 7 13 22 53
Premium on redemption of subordinated
debt - - 17 -
------ ------ ------- -------
Income before Income Taxes, Equity in
Net Income of Associates and Minority
Interest 163 179 627 567
Income tax expense (Note 2) 53 57 208 159
------ ------ ------- -------
Income before Equity in Net Income of
Associates and Minority Interest 110 122 419 408
Equity in net income of associates - - 15 14
Minority interest (2) (4) (7) (8)
------ ------ ------- -------
Net Income $108 $118 $427 $414
====== ====== ======= =======
Net Income per Share
- Basic $0.69 $0.76 $2.72 $2.72
- Diluted $0.65 $0.69 $2.54 $2.45
====== ====== ======= =======
Average Number of Shares Outstanding
- Basic 157 156 157 152
- Diluted 166 170 168 169
====== ====== ======= =======
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (cont'd)
(in millions, except per share data)
(unaudited)
Note 1: Non-Cash Compensation - Performance Options
As of December 31, 2004, the Company had recognized 100 percent of
the $270 million non-cash compensation charge for performance-based
stock options granted to management as part of the 1998 leveraged
buyout arrangement for meeting or exceeding 2001 and 2002 targets.
Note 2: Income tax expense
Following a change to UK legislation regarding the taxation of
employee stock options, a one-time tax benefit of $37 million was
recognized in the third quarter of 2003.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
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 revenue growth
Organic revenue growth excludes the impact of foreign currency
translation and acquisitions and disposals from reported revenues. We
use organic growth as a measure of business growth generated by
operations that were part of the Group at the end of the period.
Adjusted operating income and adjusted net income
Because the non-cash compensation charge for performance-based
stock options was based on our stock price at the end of each quarter
until December 31, 2002, changes in our stock price increased the
volatility of our reported operating income and reported net income.
The net gain or loss on disposal of operations, together with the
non-recurring subordinated debt redemption premium in 2004 and
one-time tax benefit relating to employee stock options in 2003, also
impact the volatility of our reported results. We believe that
excluding these items from the following non-GAAP measures, along with
the GAAP measures, provides a more complete and consistent comparative
analysis of our results of operations.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Adjusted Operating Income:
Adjusted operating income is defined as operating income excluding
non-cash compensation for performance-based stock options and net gain
or loss on disposal of operations. Operating income is the most
directly comparable GAAP measure, and the following table reconciles
adjusted operating income to operating income for the quarters and
years ended December 31, 2004 and 2003:
Three months ended
December 31,
---------------------
2004 2003 % Change
----- ----- ---------
Operating Income, GAAP basis $170 $192 (11)%
Excluding:
Non-cash compensation - performance options 1 3
Net gain on disposal of operations (6) (1)
----- -----
Adjusted Operating Income $165 $194 (15)%
===== =====
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 28.9% 33.3%
===== =====
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 28.1% 33.6%
===== =====
Year ended December
31,
---------------------
2004 2003 % Change
----- ----- ---------
Operating Income, GAAP basis $666 $620 7%
Excluding:
Non-cash compensation - performance options 11 20
Net gain on disposal of operations (11) (11)
----- -----
Adjusted Operating Income $666 $629 6%
===== =====
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 29.3% 29.9%
===== =====
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 29.3% 30.3%
===== =====
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Adjusted Net Income:
Adjusted net income is defined as net income excluding non-cash
compensation for performance-based stock options, net gain or loss on
disposal of operations and the non-recurring subordinated debt
redemption premium in 2004 and the one-time tax benefit relating to
employee stock options in 2003. Net income is the most directly
comparable GAAP measure, and the following table reconciles adjusted
net income to net income for the quarters and years ended December 31,
2004 and 2003:
Per Diluted Share
Three months ended Three months ended
December 31, December 31,
--------------------- -----------------------
2004 2003 % Change 2004 2003 % Change
----- ----- --------- ------ ------ ---------
Net Income, GAAP basis $108 $118 (8)% $0.65 $0.69 (6)%
Excluding:
Non-cash compensation -
performance options,
net of tax ($nil, $1) 1 2 0.01 0.01
Net gain on disposal of
operations, net of tax
($(1), $nil) (5) (1) (0.03) -
----- ----- ------ ------
Adjusted Net Income $104 $119 (13)% $0.63 $0.70 (10)%
===== ===== ====== ======
Diluted shares
outstanding, GAAP basis 166 170
===== =====
Per Diluted Share
Year ended Year ended
December 31, December 31,
--------------------- -----------------------
2004 2003 % Change 2004 2003 % Change
----- ----- --------- ------ ------ ---------
Net Income, GAAP basis $427 $414 3% $2.54 $2.45 4%
Excluding:
Non-cash compensation -
performance options,
net of tax ($3, $4) 8 16 0.05 0.09
Net gain on disposal of
operations, net of tax
($(3), $(4)) (8) (7) (0.05) (0.04)
Non-recurring premium on
redemption of
subordinated debt, net
of tax ($7, $nil) 10 - 0.06 -
One-time income tax
benefit - performance
options (Note 2) - (37) - (0.22)
----- ----- ------ ------
Adjusted Net Income $437 $386 13% $2.60 $2.28 14%
===== ===== ====== ======
Diluted shares
outstanding, GAAP basis 168 169
===== =====
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
Organic revenue growth and volume and profit-based contingent
commissions:
Organic revenue growth is defined as revenue growth excluding the
impact of foreign currency translation and acquisitions and disposals.
The percentage change in reported revenues is the most directly
comparable GAAP measure, and the following table reconciles this
change to organic revenue growth by business unit for the year ended
December 31, 2004.
The table also discloses organic revenue growth excluding volume
and profit-based contingent commissions which are summarized in the
second table. Following our announcement in October 2004 that we were
abolishing volume and profit-based contingent commissions, we believe
that separate disclosure of these revenues will enhance investors'
understanding of our performance in 2004.
Total Revenues:
Year ended December 31,
---------------------------
2004 2003 % change
------- -------- ---------
Global $1,162 $1,090 7%
North America 680 654 4%
International 433 332 30%
------- --------
Total
revenues $2,275 $2,076 10%
======= ========
Change Attributable to: Organic
----------------------------------- revenue
Foreign Acquisitions Organic growth
currency and revenue excluding
translation disposals growth contingent
commissions
------------ ------------ --------- -------------
Global 1% 3% 3% 3%
North America 1% - 3% 4%
International 7% 14% 9% 9%
Total
revenues 2% 4% 4% 4%
Volume and profit-based contingent commissions:
2004 2003
----------- -----------
First quarter $21 $18
Second quarter 15 8
Third quarter 10 5
Fourth quarter 25 39
----------- -----------
$71 $70
=========== ===========
CONTACT: Willis Group Holdings Limited
Investors:
Kerry K. Calaiaro, 212-837-0880
calaiaroke@willis.com
or
Media:
Dan Prince, 212-837-0806
princeda@willis.com