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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): July 27, 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 July 27, 2005, Willis Group Holdings Limited ("WGHL") issued a press
release (the "Press Release") reporting results for the quarter and six months
ended June 30, 2005. 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 July 27, 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: July 27, 2005 By: /s/ William P. Bowden, Jr.
--------------------------
Name: William P. Bowden, Jr.
Title: General Counsel
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Press Release of WGHL dated July 27, 2005
Exhibit 99.1
Willis Group Reports Second Quarter 2005 Results
NEW YORK--(BUSINESS WIRE)--July 27, 2005--Willis Group Holdings
Limited (NYSE: WSH), the global insurance broker, today reports
results for the quarter and six months ended June 30, 2005.
Financial Results
Net income for the quarter ended June 30, 2005 was $119 million,
or $0.72 per diluted share, compared with $96 million, or $0.57 per
diluted share, a year ago. Included in the reported results for the
second quarter was a net gain on disposal of operations (primarily the
completion of the previously announced sale of the wholesale unit
Stewart Smith) of $78 million ($41 million or $0.25 per diluted share,
after tax).
Total reported revenues for the quarter ended June 30, 2005
increased 3 percent to $549 million, from $532 million for the same
period last year. The effect of foreign currency translation increased
reported revenues 1 percent and net acquisitions added 2 percent.
Organic revenue growth excluding volume and profit-based
contingent commissions and other market remuneration was 4 percent in
the second quarter, comprised of approximately 6 percent in net new
business and a negative 2 percent impact from declining insurance
premium rates and other market factors.
"As we are taking on the challenges and realizing the
opportunities in the current industry environment, our core business
remains strong," said Joe Plumeri, Chairman and Chief Executive
Officer. "I am pleased with our organic revenue growth this quarter -
especially in light of declining rates - as our employees, new and
long-standing, embrace the sales culture and are gaining traction in
the shifting insurance landscape."
Reported operating margin was 37.5 percent for the quarter ended
June 30, 2005. Excluding severance costs and net gain on disposal of
operations, adjusted operating margin was 23.3 percent for the second
quarter of 2005 compared with 28.2 percent for the same period last
year. Approximately 3 percent of the decline in adjusted operating
margin was due to the elimination of contingent commissions and the
decline in other market remuneration; the remainder of the decline was
due to net incremental hiring expenses.
Total volume and profit-based contingent commissions relating to
2004 arrangements totaled $8 million in the quarter ended June 30,
2005 (all of which derived from outside the United States) compared
with $15 million a year ago. Other market remuneration declined to $5
million in the second quarter compared with $20 million for second
quarter 2004. The decline in contingent commissions and other market
remuneration reduced organic revenue growth by 4 percent.
Net income for the six months ended June 30, 2005 after net gain
on disposal of operations and first quarter charges for regulatory
settlements and related expenses, severance costs and other provisions
was $191 million, or $1.14 per diluted share, compared to $244
million, or $1.44 per diluted share, a year ago.
Total reported revenues for the six months ended June 30, 2005
increased 2 percent to $1,218 million, up from $1,197 million for the
corresponding period in 2004. The adjusted operating margin, excluding
regulatory settlements and related expenses, severance costs and other
provisions and net gain on disposal of operations, was 27.1 percent
for the first half of 2005, compared with 32.2 percent for the same
period last year.
Other
At June 30, 2005, total long-term debt was $450 million and total
stockholders' equity was approximately $1.4 billion. On July 1, 2005,
the Company completed a senior notes offering of $600 million,
comprising $250 million, 5 year notes priced at 5.125 percent and $350
million, 10 year notes at 5.625 percent. The proceeds from the
offering were used to repay the existing $450 million bank debt on
July 6, 2005 and the remainder will be used for general corporate
purposes. Pro forma for the new senior notes, the capitalization ratio
(total long-term debt to total long-term debt and stockholders'
equity) was 30 percent at June 30, 2005.
During the second quarter, the Company completed the repurchase of
4.4 million shares of common stock for $152 million. The authorization
was increased from $300 million to $500 million by a Board of
Directors' resolution today.
Also during the quarter, Mr. Plumeri completed the sale of 1.6
million shares of common stock under his previously announced personal
trading plan entered into pursuant to Rule 10b5-1 under the Securities
Exchange Act of 1934. Mr. Plumeri has terminated this sales plan and
will not sell the additional 750,000 shares originally contemplated to
be sold in 2006 under the plan; he continues to hold approximately 3
million shares and options of Willis common stock.
During the six months ended June 30, 2005 the Company completed 5
acquisitions with annual revenues of approximately $15 million. On
April 14, 2005, the Company completed the sale of Stewart Smith, our
wholesale unit, with total reported revenues of $77 million in 2004.
There was approximately $67 million of immediately available cash at
June 30, 2005.
"Willis is a great company. We have outstanding professionals, the
right model and are well-positioned for the future," said Plumeri.
"While we are making significant progress toward our goals, it is
clear that we will continue to face a challenging business environment
in 2005, due to declining premium rates, the transition to new revenue
sources in the absence of contingent commissions, and our investments
in people who can help us build our business. We're confident that the
changes we are making will lead to a stronger, more resilient model
serving the long-term interests of our shareholders, clients and
associates."
Conference Call and Web Cast
A conference call to discuss second quarter 2005 results will be
held July 28, 2005 at 8:00 a.m. Eastern Standard Time. To participate
in the live teleconference, please dial (888) 552-9191 (U.S.) or (210)
234-0000 (International) with a pass code of "Willis." The live audio
web cast (which will be listen-only) may be accessed at
www.willis.com. This call will be available by replay starting at
approximately 10:00 a.m., Eastern Daylight Time, and ending August 11,
2005. To access the audio replay, please dial (866) 491-9106 (US), or
(203) 369-1737 (International), or by accessing the web site.
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
15,800 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 six months ended June 30, 2005.
WILLIS GROUP HOLDINGS LIMITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except per share data)
(unaudited)
Three months Six months
ended ended
June 30, June 30,
------------- ---------------
2005 2004 2005 2004
------ ------ ------- -------
Revenues:
Commissions and fees $530 $516 $1,181 $1,164
Interest income 19 16 37 33
------ ------ ------- -------
Total Revenues 549 532 1,218 1,197
------ ------ ------- -------
Expenses:
Salaries and benefits (after charging
non-cash compensation $nil, $4, $nil
and $6) 309 275 695 595
Other operating expenses 98 98 223 197
Regulatory settlements - - 51 -
Depreciation expense 11 10 22 21
Amortization of intangible assets 3 1 5 2
Net gain on disposal of operations (78) (5) (78) (5)
------ ------ ------- -------
Total Expenses 343 379 918 810
------ ------ ------- -------
Operating Income 206 153 300 387
Interest expense 6 4 12 9
Premium on redemption of subordinated
debt - - - 17
------ ------ ------- -------
Income before Income Taxes, Equity in
Net Income of Associates and Minority
Interest 200 149 288 361
Income taxes 77 52 103 124
------ ------ ------- -------
Income before Equity in Net Income of
Associates and Minority Interest 123 97 185 237
Equity in net income (loss) of
associates (2) - 12 12
Minority interest (2) (1) (6) (5)
------ ------ ------- -------
Net Income $119 $96 $191 $244
====== ====== ======= =======
Net Income per Share
- Basic $0.73 $0.61 $1.17 $1.54
- Diluted $0.72 $0.57 $1.14 $1.44
====== ====== ======= =======
Average Number of Shares Outstanding
- Basic 163 158 163 158
- Diluted 166 169 167 169
====== ====== ======= =======
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (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 revenue growth
Organic revenue growth excludes the impact of foreign currency
translation and acquisitions and disposals from reported revenues. We
use organic revenue 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
Our first half 2005 results were significantly impacted by net
gains on disposal of operations and charges for regulatory settlements
and related expenses, severance costs, other provisions, and a
non-recurring premium on redemption of subordinated debt in 2004. We
believe that excluding these items from operating income and net
income, along with the GAAP measures, provides a more complete and
consistent comparative analysis of our results of operations.
2. Revenue analysis
Organic Revenue Growth
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 quarter
ended June 30, 2005.
Quarter ended June 30 Change attributable to
--------------------- ----------------------------------
Foreign Acquisitions Organic
% Currency and Revenue
2005 2004 Change Translation Disposals Growth
----- --------------- ------------ ------------ --------
Global $263 $263 0% 1% 2% (3)%
North America 169 162 4% 0% 1% 3%
International 98 91 8% 4% 1% 3%
----- ----- --------- ------------ ------------ --------
Commissions
and fees $530 $516 3% 1% 2% 0%
(see below)
Interest
Income 19 16 19% 2% 1% 16%
----- ----- --------- ------------ ------------ --------
Total
revenues $549 $532 3% 1% 2% 0%
===== ===== ========= ============ ============ ========
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
2. Revenue analysis (continued)
Commissions and Fees
Organic growth in commissions and fees for the quarter ended June
30, 2005 was attributable to:
Commissions Volume and Other market Commissions
and fees profit- remuneration and fees
based (a) organic
contingent growth
commissions
----------- ------------ ------------- -----------
Global 4% 0% (7)% (3)%
North America 6% (4)% 1% 3%
International 3% 0% 0% 3%
----------- ------------ ------------- -----------
Total Group 4% (1)% (3)% 0%
=========== ============ ============= ===========
a) Other market remuneration includes fees received for product
and market research we carry out on behalf of insurers and
income related to administration and other services we provide
to the market.
Market remuneration
Volume and profit-based contingent commissions and other market
remuneration by quarter are set out in the following table:
Volume and profit-based Other market
contingent commissions remuneration
------------------------ -------------------
2005 2004 2005 2004
------------ ----------- --------- ---------
First quarter $3 $21 $3 $22
Second quarter 8 15 5 20
Third quarter 10 19
Fourth quarter 25 16
----------- ---------
$71 $77
=========== =========
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions, except per share data)
(unaudited)
3. General and administrative expenses
An analysis of general and administrative expenses between
salaries and benefits and other operating expenses by quarter is set
out in the following table:
Salaries and Other General and
benefits operating administrative
expenses expenses
---------------- ------------- -----------------
2005 2004 2005 2004 2005 2004
-------- ------- ------------- -------- --------
First quarter $386 $320 $125 $99 $511 $419
Second quarter 309 275 98 98 407 373
Third quarter 276 93 369
Fourth quarter 311 101 412
------- ------ --------
$1,182 $391 $1,573
======= ====== ========
Salaries and benefits include salaries, pensions, non-cash
compensation, severance and other employee benefits.
4. Sale of Stewart Smith
The Company completed the sale of Stewart Smith, its wholesale
division, on April 14, 2005. The following table sets out the impact
of Stewart Smith on the previous five quarters:
2004 2005
------------------------------ -----
Q1 Q2 Q3 Q4 FY Q1
Revenues $15 $19 $18 $25 $77 $10
General and administrative
expenses (10) (10) (11) (13) (44) (11)
------------------------------ ----
Operating income/ (loss) 5 9 7 12 33 (1)
Income taxes (2) (4) (2) (5) (13) -
------------------------------ ----
Net income/ (loss) $3 $5 $5 $7 $20 $(1)
============================== ====
Contribution to net income per
diluted share $0.02 $0.03 $0.03 $0.04 $0.12 $-
============================== ====
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION
(in millions) (unaudited)
5. Adjusted Operating Income
Adjusted operating income is defined as operating income excluding
net gain on disposal of operations and charges for regulatory
settlements and related expenses, severance costs and other
provisions. Operating income is the most directly comparable GAAP
measure, and the following tables reconcile adjusted operating income
to operating income for the quarters ended June 30, 2005 and 2004 and
the six months ended June 20, 2005 and 2004:
Three months ended
June 30,
---------------------
2005 2004 % Change
----- ----- ---------
Operating Income, GAAP basis $206 $153 35%
Excluding:
Severance costs - 2
Net gain on disposal of operations (78) (5)
----- -----
Adjusted Operating Income $128 $150 (15)%
===== =====
Operating Margin, GAAP basis, or Operating Income
as a percentage of Total Revenues 37.5% 28.8%
===== =====
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 23.3% 28.2%
===== =====
Six months ended
June 30,
---------------------
2005 2004 % Change
----- ----- ---------
Operating Income, GAAP basis $300 $387 (22)%
Excluding:
Regulatory settlements (a) 51 -
Costs related to regulatory settlements (a) 9 -
Severance costs 28 4
Other provision (b) 20 -
Net gain on disposal of operations (78) (5)
----- -----
Adjusted Operating Income $330 $386 (15)%
===== =====
Operating Margin, GAAP basis, or Operating
Income as a percentage of Total Revenues 24.6% 32.3%
===== =====
Adjusted Operating Margin, or Adjusted Operating
Income as a percentage of Total Revenues 27.1% 32.2%
===== =====
a) Comprises $51 million to establish the reimbursement funds
agreed with the New York and Minnesota Attorneys General and
New York Department of Insurance in April 2005 and $9 million
of related legal and administrative expenses.
b) Based on a review of legal proceedings at 31 March 2005, the
Company increased its provision for claims by an additional $20
million.
WILLIS GROUP HOLDINGS LIMITED
SUPPLEMENTAL FINANCIAL INFORMATION (cont'd)
(in millions, except per share data)
(unaudited)
6. Adjusted Net Income
Adjusted net income is defined as net income excluding net gain on
disposal of operations and charges for regulatory settlements and
related expenses, severance costs, other provisions, and a
non-recurring premium on redemption of subordinated debt in 2004. Net
income is the most directly comparable GAAP measure, and the following
tables reconcile adjusted net income to net income for the quarters
ended June 30, 2005 and 2004 and the six months ended June 30, 2005
and 2004:
Three months ended Per Diluted Share
June 30, Three months ended
June 30,
--------------------- -----------------------
2005 2004 % Change 2005 2004 % Change
----- ----- --------- ------ ------ ---------
Net Income, GAAP basis $119 $96 24% $0.72 $0.57 26%
Excluding:
Net gain on disposal of
operations, net of tax
($(37), $(2)) (41) (3) (0.25) (0.02)
Severance costs, net of
tax ($nil,$2) - - - -
----- ----- ------ ------
Adjusted Net Income $78 $93 (16)% $0.47 $0.55 (15)%
===== ===== ====== ======
Diluted shares
outstanding, GAAP basis 166 169
===== =====
Six months ended Per Diluted Share
June 30, Six months ended
June 30,
--------------------- -----------------------
2005 2004 % Change 2005 2004 % Change
----- ----- --------- ------ ------ ---------
Net Income, GAAP basis $191 $244 (22)% $1.14 $1.44 (21)%
Excluding:
Regulatory settlements,
net of tax ($20) 31 - 0.19 -
Costs related to
regulatory settlements,
net of tax ($4) 5 - 0.03 -
Severance costs, net of
tax ($9 ,$2) 19 2 0.11 0.01
Other provision, net of
tax ($6) 14 - 0.08 -
Net gain on disposal of
operations, net of tax
($(37), $(2)) (41) (3) (0.25) (0.02)
Non-recurring premium on
redemption of
subordinated debt, net
of tax ($7) - 10 - 0.06
----- ----- ------ ------
Adjusted Net Income $219 $253 (13)% $1.30 $1.49 (13)%
===== ===== ====== ======
Diluted shares
outstanding, GAAP basis 167 169
===== =====
CONTACT: Willis Group
Investors:
Kerry K. Calaiaro, +1 212-837-0880
kerry.calaiaro@willis.com
or
Media:
Dan Prince, +1 212-837-0806
daniel.prince@willis.com