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Form 8-K August 2013


 
 
 
 
 
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): August 8, 2013
_____________________

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

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

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


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

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



 
 
 
 
 





Item 8.01 - Other Events
On August 8, 2013, the Company filed a post-effective amendment to its Registration Statement on Form S-3 (No. 333-184515) with the Securities and Exchange Commission (the "SEC") under which, amongst other things, Trinity Acquisition plc (the "Issuer") may offer debt securities that may be guaranteed by the Company and certain direct and indirect subsidiaries of the Company (“the Guarantor Subsidiaries”), including Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Willis Group Limited and Willis North America Inc.

 
Rule 3-10 of Regulation S-X requires that certain of the Company's financial statements incorporated by reference into the registration statement include certain condensed consolidating financial information relating to the Company, the Issuer, the Guarantor Subsidiaries and the subsidiary companies that are not named in the Registration Statement as Guarantor Subsidiaries.

Accordingly, the Company is filing this Current Report on Form 8-K to add Note 33 to the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012 (the "2012 10-K") filed with the SEC on February 28, 2013 and to add Note 21 to the Notes to the Condensed Consolidated Financial Statements included in the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2013 (the "2013 Q2 10-Q"). To reflect the addition of Note 33 to the Company's audited consolidated financial statements included within the Company's 2012 10-K and the addition of Note 21 to the unaudited condensed consolidated financial statements included within the Company's 2013 Q2 10-Q, the Company has amended such financial statements in their entirety which are attached as Exhibit 99.1 and 99.2 and will be incorporated by reference in the amended Registration Statement at such time it becomes effective.

 
Other than the changes described above, this Form 8-K does not modify or update the disclosures in the Company's 2012 10-K or the Company's 2013 Q2 10-Q in any way. Information in the 2012 10-K is generally stated as of December 31, 2012, the 2013 Q2 10-Q generally stated as of June 30, 2013 and this filing does not reflect any subsequent information or events other than the change described above. This report should be read in combination with the Company's 2012 10-K and its Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2013 and other filings.


Item 9.01 - Financial Statements and Exhibits

23.1
Consent of Deloitte LLP.
99.1
Financial Statements and Supplementary Data for the three years ended December 31, 2012 (which replaces and supersedes Part II, Item 8 of the 2012 Form 10-K filed with the SEC on February 28, 2013).
99.2
Financial Statements and Supplementary Data for the quarter ended June 30, 2013 (which replaces and supersedes Part I, Item 1 of the June 30, 2013 Form 10-Q filed with the SEC on August 6, 2013).
101.INS**
XBRL Instance Document
101.SCH**
XBRL Taxonomy Extension Schema Document
101.CAL**
XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF**
XBRL Taxonomy Extension Definition Linkbase Document
101.LAB**
XBRL Taxonomy Extension Label Linkbase Document
101.PRE**
XBRL Taxonomy Extension Presentation Linkbase Document
 _________________________________
** Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not field for purposes of Section 18 of the Securities and Exchange act of 1934, as amended, and otherwise are not subject to liability under those sections.




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
WILLIS GROUP HOLDINGS PLC
(REGISTRANT)
 
 
By:
 
/S/ MICHAEL K. NEBORAK
 
 
Michael K. Neborak
 
 
Group Chief Financial Officer
 
 
(Principal Financial and Accounting Officer)
Dated: August 8, 2013





Exhibit 23.1 Deloitte consent


CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statements No. 333-153769 and 333-184515 on Form S-3 and in Registration Statements No. 333-62780, No. 333-63186, No. 333-130605, No. 333-153202, No. 333-153770 and No. 333-169961 on Form S-8 of our report dated February 28, 2013 (August 8, 2013 as to Note 33) relating to the consolidated financial statements of Willis Group Holdings Public Limited Company as of December 31, 2012 and 2011 and for each of the three years in the period ended December 31, 2012 appearing in this Current Report on Form 8-K of Willis Group Holdings Public Limited Company.
/s/ Deloitte LLP
London, United Kingdom
August 8, 2013



Exhibit 99.1 Financial Statements 2012 10-K
Table of Contents
Exhibit 99.1 Financial Statements and Supplementary Data 2012

Willis Group Holdings plc

Item 8 — 
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements and Supplementary Data
 
 
Page
 
 
 
 
 
 
 
 
 
 


1
Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Willis Group Holdings Public Limited Company
Dublin, Ireland
We have audited the accompanying consolidated balance sheets of Willis Group Holdings Public Limited Company and subsidiaries (the ‘Company’) as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Willis Group Holdings Public Limited Company and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2012, in conformity with accounting principles generally accepted in the United States of America.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2012, based on the criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 28, 2013 expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ Deloitte LLP
London, United Kingdom
February 28, 2013 (August 8, 2013 as to Note 33)


2
Table of Contents

Willis Group Holdings plc


CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
Years ended December 31,
 
Note
 
2012
 
2011
 
2010
 
 
 
(millions, except per share data)
REVENUES
 

 
 

 
 

 
 

Commissions and fees
 

 
$
3,458

 
$
3,414

 
$
3,293

Investment income
 

 
18

 
31

 
38

Other income
 

 
4

 
2

 
1

Total revenues
 

 
3,480

 
3,447

 
3,332

EXPENSES
 

 
 

 
 

 
 

Salaries and benefits
3

 
(2,475
)
 
(2,087
)
 
(1,868
)
Other operating expenses
 

 
(581
)
 
(656
)
 
(564
)
Depreciation expense
12

 
(79
)
 
(74
)
 
(63
)
Amortization of intangible assets
14

 
(59
)
 
(68
)
 
(82
)
Goodwill impairment charge
13

 
(492
)
 
—

 
—

Net (loss) gain on disposal of operations
6

 
(3
)
 
4

 
(2
)
Total expenses
 

 
(3,689
)
 
(2,881
)
 
(2,579
)
OPERATING (LOSS) INCOME
 

 
(209
)
 
566

 
753

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

 
—

 
(171
)
 
—

Interest expense
20

 
(128
)
 
(156
)
 
(166
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
 

 
(337
)
 
239

 
587

Income taxes
7

 
(101
)
 
(32
)
 
(140
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
 

 
(438
)
 
207

 
447

Interest in earnings of associates, net of tax
15

 
5

 
12

 
23

(LOSS) INCOME FROM CONTINUING OPERATIONS
 

 
(433
)
 
219

 
470

Discontinued operations, net of tax
8

 
—

 
1

 
—

NET (LOSS) INCOME
 

 
(433
)
 
220

 
470

Less: net income attributable to noncontrolling interests
 

 
(13
)
 
(16
)
 
(15
)
NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
 

 
$
(446
)
 
$
204

 
$
455

AMOUNTS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS SHAREHOLDERS
 

 
 

 
 

 
 

(Loss) income from continuing operations, net of tax
 

 
$
(446
)
 
$
203

 
$
455

Income from discontinued operations, net of tax
 

 
—

 
1

 
—

NET (LOSS) INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
 

 
$
(446
)
 
$
204

 
$
455

EARNINGS PER SHARE — BASIC AND DILUTED
9

 
 

 
 

 
 

BASIC EARNINGS PER SHARE
 

 
 

 
 

 
 

— Continuing operations
 

 
$
(2.58
)
 
$
1.17

 
$
2.68

DILUTED EARNINGS PER SHARE
 

 
 

 
 

 
 

— Continuing operations
 

 
$
(2.58
)
 
$
1.15

 
$
2.66

CASH DIVIDENDS DECLARED PER SHARE
 

 
$
1.08

 
$
1.04

 
$
1.04


The accompanying notes are an integral part of these consolidated financial statements.

3
Table of Contents
Financial statements


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
Years ended December 31,
 
Note
 
2012
 
2011
 
2010
 
 
 
(millions)
 
 
 
 
 
 
 
 
Net (loss) income
 
 
$
(433
)
 
$
220

 
$
470

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
 
46

 
(29
)
 
(8
)
Unrealized holding gain
 
 
—

 
—

 
2

Pension funding adjustment:
 
 
 
 
 
 
 
Foreign currency translation on pension funding adjustment
 
 
(22
)
 
8

 
17

Net actuarial (loss) gain
 
 
(167
)
 
(208
)
 
9

Prior service gain
 
 
—

 
7

 
—

Amortization of unrecognized actuarial loss
 
 
38

 
25

 
29

Amortization of unrecognized prior service gain
 
 
(5
)
 
(4
)
 
(4
)
 
 
 
(156
)
 
(172
)
 
51

Derivative instruments:
 
 
 
 
 
 
 
Gain on interest rate swaps (effective element)
 
 
2

 
10

 
11

Interest rate swap reclassification adjustment
 
 
(4
)
 
(10
)
 
(19
)
Gain on forward exchange contracts (effective element)
 
 
9

 
2

 
—

Forward exchange contracts reclassification adjustment
 
 
(3
)
 
(5
)
 
14

 
 
 
4

 
(3
)
 
6

Other comprehensive (loss) income, net of tax
23

 
(106
)
 
(204
)
 
51

Comprehensive (loss) income
 
 
(539
)
 
16

 
521

Less: Comprehensive income attributable to noncontrolling interests
 
 
(13
)
 
(15
)
 
(13
)
Comprehensive (loss) income attributable to Willis Group Holdings
 
 
$
(552
)
 
$
1

 
$
508


The accompanying notes are an integral part of these consolidated financial statements.


4
Table of Contents

Willis Group Holdings plc


CONSOLIDATED BALANCE SHEETS
 
 
 
December 31,
 
Note
 
2012
 
2011
 
 
 
(millions, except share data)
ASSETS
 

 
 

 
 

CURRENT ASSETS
 

 
 

 
 

Cash and cash equivalents
 

 
$
500

 
$
436

Accounts receivable, net
 

 
933

 
910

Fiduciary assets
11

 
9,271

 
9,338

Deferred tax assets
7

 
13

 
44

Other current assets
16

 
181

 
259

Total current assets
 

 
10,898

 
10,987

NON-CURRENT ASSETS
 

 
 

 
 

Fixed assets, net
12

 
468

 
406

Goodwill
13

 
2,827

 
3,295

Other intangible assets, net
14

 
385

 
420

Investments in associates
15

 
174

 
170

Deferred tax assets
7

 
18

 
22

Pension benefits asset
19

 
136

 
145

Other non-current assets
16

 
206

 
283

Total non-current assets
 

 
4,214

 
4,741

TOTAL ASSETS
 

 
$
15,112

 
$
15,728

LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES
 

 
 

 
 

Fiduciary liabilities
 

 
$
9,271

 
$
9,338

Deferred revenue and accrued expenses
 

 
541

 
320

Income taxes payable
 

 
19

 
15

Short-term debt and current portion of long-term debt
20

 
15

 
15

Deferred tax liabilities
7

 
21

 
26

Other current liabilities
17

 
327

 
282

Total current liabilities
 

 
10,194

 
9,996

NON-CURRENT LIABILITIES
 

 
 

 
 

Long-term debt
20

 
2,338

 
2,354

Liability for pension benefits
19

 
282

 
270

Deferred tax liabilities
7

 
18

 
32

Provisions for liabilities
21

 
180

 
196

Other non-current liabilities
17

 
375

 
363

Total non-current liabilities
 

 
3,193

 
3,215

Total liabilities
 

 
13,387

 
13,211

(Continued on next page)


5
Table of Contents
Financial statements

CONSOLIDATED BALANCE SHEETS (Continued)
 
 
 
December 31,
 
Note
 
2012
 
2011
 
 
 
(millions, except share data)
COMMITMENTS AND CONTINGENCIES
22

 


 


EQUITY
 

 
 

 
 

Ordinary shares, $0.000115 nominal value; Authorized: 4,000,000,000; Issued 173,178,733 shares in 2012 and 173,829,693  shares in 2011
 

 
—

 
—

Ordinary shares, €1 nominal value; Authorized: 40,000; Issued 40,000 shares in 2012 and 2011
 

 
—

 
—

Preference shares, $0.000115 nominal value; Authorized: 1,000,000,000; Issued nil shares in 2012 and 2011
 

 
—

 
—

Additional paid-in capital
 

 
1,125

 
1,073

Retained earnings
 

 
1,427

 
2,160

Accumulated other comprehensive loss, net of tax
23

 
(850
)
 
(744
)
Treasury shares, at cost, 46,408 shares in 2012 and 2011, and 40,000 shares, €1 nominal value, in 2012 and 2011
 

 
(3
)
 
(3
)
Total Willis Group Holdings stockholders’ equity
 
 
1,699

 
2,486

Noncontrolling interests
24

 
26

 
31

Total equity
 
 
1,725

 
2,517

TOTAL LIABILITIES AND EQUITY
 

 
$
15,112

 
$
15,728


The accompanying notes are an integral part of these consolidated financial statements.


6
Table of Contents

Willis Group Holdings plc


CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
Years ended December 31,
 
Note
 
2012
 
2011
 
2010
 
 
 
(millions)
CASH FLOWS FROM OPERATING ACTIVITIES
 

 
 

 
 

 
 

Net (loss) income
 

 
$
(433
)
 
$
220

 
$
470

Adjustments to reconcile net income to total net cash provided by operating activities:
 

 
 

 
 

 
 

Income from discontinued operations
 

 
—

 
(1
)
 
—

Goodwill impairment
 
 
492

 
—

 
—

Net loss (gain) on disposal of operations, fixed and intangible assets
 

 
—

 
(6
)
 
3

Depreciation expense
12

 
79

 
74

 
63

Amortization of intangible assets
14

 
59

 
68

 
82

Amortization and write-off of cash retention awards
3

 
416

 
185

 
119

Net periodic cost of defined benefit pension plans
19

 
2

 
11

 
35

Provision for doubtful accounts
 

 
16

 
4

 
—

Provision for deferred income taxes
 

 
54

 
17

 
77

Excess tax benefits from share-based payment arrangements
 

 
(2
)
 
(5
)
 
(2
)
Share-based compensation
4

 
32

 
41

 
47

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

 
—

 
171

 
—

Undistributed earnings of associates
 

 
(2
)
 
(5
)
 
(18
)
Non-cash Venezuela currency devaluation
 

 
—

 
—

 
12

Effect of exchange rate changes on net income
 

 
(14
)
 
14

 
6

Changes in operating assets and liabilities, net of effects from purchase of subsidiaries:
 

 
 

 
 

 
 

Accounts receivable
 

 
(17
)
 
(92
)
 
(35
)
Fiduciary assets
 

 
111

 
162

 
78

Fiduciary liabilities
 

 
(111
)
 
(162
)
 
(78
)
Cash retention awards paid
3

 
(221
)
 
(210
)
 
(196
)
Funding of defined benefit pension plans
 
 
(143
)
 
(135
)
 
(130
)
Other assets
 

 
12

 
69

 
(93
)
Other liabilities
 

 
215

 
5

 
96

Movement on provisions
 

 
(20
)
 
16

 
(45
)
Net cash provided by continuing operating activities
 

 
525

 
441

 
491

Net cash used in discontinued operating activities
 

 
—

 
(2
)
 
(2
)
Total net cash provided by operating activities
 

 
525

 
439

 
489

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
 

 
5

 
13

 
10

Additions to fixed assets
 

 
(135
)
 
(111
)
 
(83
)
Additions to intangible assets
 
 
(2
)
 
—

 
—

Acquisitions of subsidiaries, net of cash acquired
 

 
(33
)
 
(10
)
 
(21
)
Acquisition of investments in associates
 

 
—

 
(2
)
 
(1
)
Payments to acquire other investments
 

 
(7
)
 
(5
)
 
(1
)
Proceeds from sale of continuing operations, net of cash disposed
 

 
—

 
—

 
2

Proceeds from sale of discontinued operations, net of cash disposed
 

 
—

 
14

 
—

Net cash used in continuing investing activities
 

 
(172
)
 
(101
)
 
(94
)
(Continued on next page)


7
Table of Contents
Financial statements

CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
 
 
 
Years ended December 31,
 
Note
 
2012
 
2011
 
2010
 
 
 
(millions)
INCREASE IN CASH AND CASH EQUIVALENTS FROM OPERATING AND INVESTING ACTIVITIES
 

 
$
353

 
$
338

 
$
395

CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

(Repayment on) proceeds from draw down of revolving credit facility
20

 
—

 
(90
)
 
90

Senior notes issued
 

 
—

 
794

 
—

Debt issuance costs
 

 
—

 
(12
)
 
—

Repayments of debt
20

 
(15
)
 
(911
)
 
(209
)
Proceeds from issue of term loan
 

 
—

 
300

 
—

Proceeds from issue of other debt
 
 
1

 
—

 
—

Make-whole on repurchase and redemption of senior notes
 

 
—

 
(158
)
 
—

Repurchase of shares
 
 
(100
)
 
—

 
—

Proceeds from issue of shares
 

 
53

 
60

 
36

Excess tax benefits from share-based payment arrangements
 

 
2

 
5

 
2

Dividends paid
 

 
(185
)
 
(180
)
 
(176
)
Proceeds from sale of noncontrolling interests
 
 
3

 
—

 
—

Acquisition of noncontrolling interests
 

 
(39
)
 
(9
)
 
(10
)
Dividends paid to noncontrolling interests
 

 
(11
)
 
(13
)
 
(26
)
Net cash used in continuing financing activities
 

 
(291
)
 
(214
)
 
(293
)
INCREASE IN CASH AND CASH EQUIVALENTS
 

 
62

 
124

 
102

Effect of exchange rate changes on cash and cash equivalents
 

 
2

 
(4
)
 
(7
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
 

 
436

 
316

 
221

CASH AND CASH EQUIVALENTS, END OF YEAR
 

 
$
500

 
$
436

 
$
316


The accompanying notes are an integral part of these consolidated financial statements.


8
Table of Contents

Willis Group Holdings plc


CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
 
 
 
December 31,
 
Note
 
2012
 
2011
 
2010
 
 
 
(millions, except share data)
SHARES OUTSTANDING (thousands)
 
 
 

 
 

 
 

Balance, beginning of year
 
 
173,830

 
170,884

 
168,661

Shares issued
 
 
24

 
—

 
14

Shares repurchased
 
 
(2,797
)
 
—

 
—

Exercise of stock options and release of non-vested shares
 
 
2,122

 
2,946

 
2,209

Balance, end of year
 
 
173,179

 
173,830

 
170,884

 
 
 
 
 
 
 
 
ADDITIONAL PAID-IN CAPITAL
 
 
 

 
 

 
 

Balance, beginning of year
 
 
$
1,073

 
$
985

 
$
918

Issue of shares under employee stock compensation plans and related tax benefits
 
 
50

 
49

 
37

Issue of shares for acquisitions
 
 
1

 
—

 
1

Share-based compensation
 
 
32

 
39

 
47

Acquisition of noncontrolling interests
 
 
(31
)
 
—

 
(18
)
Disposal of noncontrolling interests
 
 
2

 
—

 
—

Foreign currency translation
 
 
(2
)
 
—

 
—

Balance, end of year
 
 
1,125

 
1,073

 
985

 
 
 
 
 
 
 
 
RETAINED EARNINGS
 
 
 

 
 

 
 

Balance, beginning of year
 
 
2,160

 
2,136

 
1,859

Net (loss) income attributable to Willis Group Holdings
 
 
(446
)
 
204

 
455

Dividends
 
 
(187
)
 
(180
)
 
(178
)
Repurchase of shares
 
 
(100
)
 
—

 
—

Balance, end of year
 
 
1,427

 
2,160

 
2,136

 
 
 
 
 
 
 
 
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX
 
 
 
 
 
 
 
Balance, beginning of year
 
 
(744
)
 
(541
)
 
(594
)
Other comprehensive (loss) income
23
 
(106
)
 
(203
)
 
53

Balance, end of year
 
 
(850
)
 
(744
)
 
(541
)
 
 
 
 
 
 
 
 
TREASURY SHARES
 
 
 

 
 

 
 

Balance, beginning of year
 
 
(3
)
 
(3
)
 
(3
)
Balance, end of year
 
 
(3
)
 
(3
)
 
(3
)
TOTAL WILLIS GROUP HOLDINGS SHAREHOLDERS’ EQUITY
 
 
$
1,699

 
$
2,486

 
$
2,577

 
 
 
 
 
 
 
 

(Continued on next page)
9
Table of Contents

Financial Statements

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (Continued)

 
 
 
December 31,
 
Note
 
2012
 
2011
 
2010
 
 
 
(millions, except share data)
NONCONTROLLING INTERESTS
 
 
 

 
 

 
 

Balance, beginning of year
 
 
$
31

 
$
31

 
$
49

Net income
 
 
13

 
16

 
15

Dividends
 
 
(11
)
 
(15
)
 
(26
)
Purchase of subsidiary shares from noncontrolling interests, net
 
 
(8
)
 
—

 
(5
)
Additional noncontrolling interests
 
 
1

 
—

 
—

Foreign currency translation
 
 
—

 
(1
)
 
(2
)
Balance, end of year
 
 
26

 
31

 
31

TOTAL EQUITY
 
 
$
1,725

 
$
2,517

 
$
2,608



The accompanying notes are an integral part of these consolidated financial statements.


10
Table of Contents

Willis Group Holdings plc



1.  
NATURE OF OPERATIONS
Willis provides a broad range of insurance and reinsurance broking and risk management consulting services to its clients worldwide, both directly and indirectly through its associates. The Company provides both specialized risk management advisory and consulting services on a global basis to clients engaged in specific industrial and commercial activities, and services to small, medium and large corporations through its retail operations.
In its capacity as an advisor and insurance broker, the Company acts as an intermediary between clients and insurance carriers by advising clients on risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance risk with insurance carriers through the Company’s global distribution network.

2.
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Recent Accounting Pronouncements
Fair Value Measurement and Disclosure
In May 2011, the Financial Accounting Standards Board ('FASB') issued Accounting Standards Update ('ASU') No. 2011-04, Fair Value Measurement: Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs. The new guidance was issued to provide a consistent definition of fair value and ensure that fair value measurements and disclosure requirements are similar between US GAAP and International Financial Reporting Standards ('IFRS'). The guidance changes certain fair value measurement principles and enhances the disclosure requirements for fair value measurements.This guidance is effective for interim and annual periods beginning after December 15, 2011 and has been applied prospectively.

Other Comprehensive Income
In June 2011, the FASB issued ASU No. 2011-05, Presentation of Comprehensive Income to revise the manner in which entities present comprehensive income in their financial statements. These changes require that components of comprehensive income be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments do not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income.This guidance is effective for interim and annual periods beginning after December 15, 2011 and has been applied retrospectively.

ASU No. 2011-05 also requires entities to present on the face of the financial statements reclassification adjustments for items that are reclassified from other comprehensive income to net income in the statement(s) where the components of net income and the components of other comprehensive income are presented. In December 2011, the FASB issued ASU No. 2011-12 in order to defer those changes in ASU No. 2011-05 that relate to the presentation of reclassification adjustments. In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive (ASU 2013-02). This guidance is the culmination of the FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income but do require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012. The Company is evaluating the effect the adoption of ASU 2013-02 will have on its consolidated financial statements effective from first quarter 2013.


11
Table of Contents

Notes to the financial statements

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill impairment testing
In September 2011, the FASB issued ASU No. 2011-08, Intangibles — Goodwill and Other: Testing Goodwill for Impairment. The new guidance was issued to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit.
This guidance is effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011.
The adoption of this guidance did not have a material impact on the financial statements.
Significant Accounting Policies
These consolidated financial statements conform to accounting principles generally accepted in the United States of America (‘US GAAP’). Presented below are summaries of significant accounting policies followed in the preparation of the consolidated financial statements.
Certain reclassifications have been made to prior year amounts to conform to current year presentation.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of Willis Group Holdings and its subsidiaries, which are controlled through the ownership of a majority voting interest. Intercompany balances and transactions have been eliminated on consolidation.
Foreign Currency Translation
Transactions in currencies other than the functional currency of the entity are recorded at the rates of exchange prevailing at the date of the transaction. Monetary assets and liabilities in currencies other than the functional currency are translated at the rates of exchange prevailing at the balance sheet date and the related transaction gains and losses are reported in the statements of operations. Certain intercompany loans are determined to be of a long-term investment nature. The Company records transaction gains and losses from remeasuring such loans as a component of other comprehensive income.
Upon consolidation, the results of operations of subsidiaries and associates whose functional currency is other than the US dollar are translated into US dollars at the average exchange rate and assets and liabilities are translated at year-end exchange rates. Translation adjustments are presented as a separate component of other comprehensive income in the financial statements and are included in net income only upon sale or liquidation of the underlying foreign subsidiary or associated company.
Use of Estimates
The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the dates of the financial statements and the reported amounts of revenues and expenses during the year. In the preparation of these consolidated financial statements, estimates and assumptions have been made by management concerning: the valuation of intangible assets and goodwill (including those acquired through business combinations); the selection of useful lives of fixed and intangible assets; impairment testing; provisions necessary for accounts receivable, commitments and contingencies and accrued liabilities; long-term asset returns, discount rates and mortality rates in order to estimate pension liabilities and pension expense; income tax valuation allowances; and other similar evaluations. Actual results could differ from the estimates underlying these consolidated financial statements.
Cash and Cash Equivalents
Cash and cash equivalents primarily consist of time deposits with original maturities of three months or less.
Fiduciary Assets and Fiduciary Liabilities
In its capacity as an insurance agent or broker, the Company collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers which it then remits to insureds.

12
Table of Contents

Willis Group Holdings plc

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fiduciary Receivables
Fiduciary receivables represent uncollected premiums from insureds and uncollected claims or refunds from insurers.
Fiduciary Funds
Fiduciary funds represent unremitted premiums received from insureds and unremitted claims or refunds received from insurers. Fiduciary funds are generally required to be kept in certain regulated bank accounts subject to guidelines which emphasize capital preservation and liquidity. Such funds are not available to service the Company’s debt or for other corporate purposes. Notwithstanding the legal relationships with insureds and insurers, the Company is entitled to retain investment income earned on fiduciary funds in accordance with industry custom and practice and, in some cases, as supported by agreements with insureds.
In certain instances, the Company advances premiums, refunds or claims to insurance underwriters or insureds prior to collection. Such advances are made from fiduciary funds and are reflected in the accompanying consolidated balance sheets as fiduciary assets.
Fiduciary Liabilities
The obligations to remit these funds to insurers or insureds are recorded as fiduciary liabilities on the Company’s consolidated balance sheets. The period for which the Company holds such funds is dependent upon the date the insured remits the payment of the premium to the Company and the date the Company is required to forward such payment to the insurer. Balances arising from insurance brokerage transactions are reported as separate assets or liabilities.
Accounts Receivable
Accounts receivable are stated at estimated net realizable values. Allowances are recorded, when necessary, in an amount considered by management to be sufficient to meet probable future losses related to uncollectible accounts.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation. Expenditures for improvements are capitalized; repairs and maintenance are charged to expenses as incurred. Depreciation is computed using the straight-line method based on the estimated useful lives of assets.
Depreciation on buildings and long leaseholds is calculated over the lesser of 50 years or the lease term. Depreciation on leasehold improvements is calculated over the lesser of the useful life of the assets or the remaining lease term. Depreciation on furniture and equipment is calculated based on a range of 3 to 10 years. Freehold land is not depreciated.
Recoverability of Fixed Assets
Long-lived assets are tested for recoverability whenever events or changes in circumstance indicate that their carrying amounts may not be recoverable. An impairment loss is recognized if the carrying amount of a long-lived asset is not recoverable and exceeds its fair value. Recoverability is determined based on the undiscounted cash flows expected to result from the use and eventual disposition of the asset or asset group. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.
Operating Leases
Rentals payable on operating leases are charged straight line to expenses over the lease term as the rentals become payable.

13
Table of Contents

Notes to the financial statements

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Goodwill and Other Intangible Assets
Goodwill represents the excess of the cost of businesses acquired over the fair value of identifiable net assets at the dates of acquisition. The Company reviews goodwill for impairment annually and whenever facts or circumstances indicate that the carrying amounts may not be recoverable. In testing for impairment, the fair value of each reporting unit is compared with its carrying value, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, the amount of an impairment loss, if any, is calculated by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill. An impairment charge of $492 million was recorded in the fourth quarter of 2012 as further disclosed in Note 13 to the consolidated financial statements.
Acquired intangible assets are amortized over the following periods:
 
 
Expected
 
Amortization basis
life (years)
Acquired intangible assets
Straight line
10
Acquired client relationships
In line with underlying cashflows
10 to 20
Acquired non-compete agreements
Straight line
5
Acquired trade names
Straight line
3 to 4
Amortizable intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable.
Investments in Associates
Investments are accounted for using the equity method of accounting if the Company has the ability to exercise significant influence, but not control, over the investee. Significant influence is generally deemed to exist if the Company has an equity ownership in the voting stock of the investee between 20 and 50 percent, although other factors, such as representation on the Board of Directors and the impact of commercial arrangements, are considered in determining whether the equity method of accounting is appropriate. Under the equity method of accounting the investment is carried at cost of acquisition, plus the Company’s equity in undistributed net income since acquisition, less any dividends received since acquisition.
The Company periodically reviews its investments in associates for which fair value is less than cost to determine if the decline in value is other than temporary. If the decline in value is judged to be other than temporary, the cost basis of the investment is written down to fair value. The amount of any write-down is included in the statements of operations as a realized loss.
All other equity investments where the Company does not have the ability to exercise significant influence are accounted for by the cost method. Such investments are not publicly traded.
Derivative Financial Instruments
The Company uses derivative financial instruments for other than trading purposes to alter the risk profile of an existing underlying exposure. Interest rate swaps are used to manage interest risk exposures. Forward foreign currency exchange contracts are used to manage currency exposures arising from future income and expenses. The fair values of derivative contracts are recorded in other assets and other liabilities. The effective portions of changes in the fair value of derivatives that qualify for hedge accounting as cash flow hedges are recorded in other comprehensive income. Amounts are reclassified from other comprehensive income into earnings when the hedged exposure affects earnings. If the derivative is designated as and qualifies as an effective fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are both recognized in earnings. The amount of hedge ineffectiveness recognized in earnings is based on the extent to which an offset between the fair value of the derivative and hedged item is not achieved. Changes in fair value of derivatives that do not qualify for hedge accounting, together with any hedge ineffectiveness on those that do qualify, are recorded in other operating expenses or interest expense as appropriate.
Income Taxes
The Company recognizes deferred tax assets and liabilities for the estimated future tax consequences of events attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating and capital loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted rates in

14
Table of Contents

Willis Group Holdings plc

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

effect for the year in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of changes in tax rates is recognized in the statement of operations in the period in which the enactment date changes. Deferred tax assets are reduced through the establishment of a valuation allowance at such time as, based on available evidence, it is more likely than not that the deferred tax assets will not be realized. The Company adjusts valuation allowances to measure deferred tax assets at the amount considered realizable in future periods if the Company’s facts and assumptions change. In making such determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent financial operations.
Positions taken in the Company’s tax returns may be subject to challenge by the taxing authorities upon examination. The Company recognizes the benefit of uncertain tax positions in the financial statements when it is more likely than not that the position will be sustained on examination by the tax authorities upon lapse of the relevant statute of limitations, or when positions are effectively settled. The benefit recognized is the largest amount of tax benefit that is greater than 50 percent likely to be realized on settlement with the tax authority, assuming full knowledge of the position and all relevant facts. The Company adjusts its recognition of these uncertain tax benefits in the period in which new information is available impacting either the recognition or measurement of its uncertain tax positions. These differences will be reflected as increases or decreases to income tax expense in the period in which they are determined.
Changes in tax laws and rates could also affect recorded deferred tax assets and liabilities in the future. Management is not aware of any such changes that would have a material effect on the Company’s results of operations, cash flows or financial position.
The Company recognizes interest and penalties relating to unrecognized tax benefits within income taxes.
Provisions for Liabilities
The Company is subject to various actual and potential claims, lawsuits and other proceedings. The Company records liabilities for such contingencies including legal costs when it is probable that a liability has been incurred before the balance sheet date and the amount can be reasonably estimated. To the extent such losses can be recovered under the Company’s insurance programs, estimated recoveries are recorded when losses for insured events are recognized and the recoveries are likely to be realized. Significant management judgment is required to estimate the amounts of such contingent liabilities and the related insurance recoveries. The Company analyzes its litigation exposure based on available information, including consultation with outside counsel handling the defense of these matters, to assess its potential liability. Contingent liabilities are not discounted.
Pensions
The Company has two principal defined benefit pension plans which cover approximately half of employees in the United States and United Kingdom. Both these plans are now closed to new entrants. New employees in the United Kingdom are offered the opportunity to join a defined contribution plan and in the United States are offered the opportunity to join a 401(k) plan. In addition, there are smaller plans in certain other countries in which the Company operates, including a non-qualified plan in the US.. Elsewhere, pension benefits are typically provided through defined contribution plans.
Defined benefit plans
The net periodic cost of the Company’s defined benefit plans are measured on an actuarial basis using the projected unit credit method and several actuarial assumptions the most significant of which are the discount rate and the expected long-term rate of return on plan assets. Other material assumptions include rates of participant mortality, the expected long-term rate of compensation and pension increases and rates of employee termination. Gains and losses occur when actual experience differs from actuarial assumptions. If such gains or losses exceed ten percent of the greater of plan assets or plan liabilities the Company amortizes those gains or losses over the average remaining service period or average remaining life expectancy as appropriate of the plan participants.
In accordance with US GAAP the Company records on the balance sheet the funded status of its pension plans based on the projected benefit obligation.



15
Table of Contents

Notes to the financial statements

2. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued)

Defined contribution plans
Contributions to the Company’s defined contribution plans are recognized as they fall due. Differences between contributions payable in the year and contributions actually paid are shown as either other assets or other liabilities in the consolidated balance sheets.
Share-Based Compensation
The Company accounts for share-based compensation as follows:
•
the cost resulting from all equity awards is recognized in the financial statements at fair value estimated at the grant date;
•
the fair value is recognized (generally as compensation cost) over the requisite service period for all awards that vest; and
•
compensation cost is not recognized for awards that do not vest because service or performance conditions are not satisfied.

Revenue Recognition
Revenue includes insurance commissions, fees for services rendered, certain commissions receivable from insurance carriers, investment income and other income.
Brokerage income and fees negotiated in lieu of brokerage are recognized at the later of policy inception date or when the policy placement is complete. Commissions on additional premiums and adjustments are recognized when approved by or agreed between the parties and collectability is reasonably assured.
Fees for risk management and other services are recognized as the services are provided. Consideration for negotiated fee arrangements for an agreed period covering multiple insurance placements, the provision of risk management and/or other services are allocated to all deliverables on the basis of their relative selling prices. The Company establishes contract cancellation reserves where appropriate: at December 31, 2012, 2011 and 2010, such amounts were not material.
Investment income is recognized as earned.
Other income comprises gains on disposal of intangible assets, which primarily arise on the disposal of books of business. Although the Company is not in the business of selling intangible assets, from time to time the Company will dispose of a book of business (a customer list) or other intangible assets that do not produce adequate margins or fit with the Company’s strategy.

3.  
EMPLOYEES
The average number of persons, including Executive Directors, employed by the Company is as follows:
 
Years ended December 31,
 
2012
 
2011
 
2010
Global
4,304

 
4,042

 
3,931

 
 
 
 
 
 
North America
6,323

 
6,479

 
6,710

International
6,843

 
6,634

 
6,460

Total Retail
13,166

 
13,113

 
13,170

Total average number of employees for the year
17,470

 
17,155

 
17,101



16
Table of Contents

Willis Group Holdings plc

3. EMPLOYEES (Continued)

Salaries and benefits expense comprises the following:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Salaries and other compensation awards including amortization and write-off of cash retention awards of $416 million, $185 million and $119 million (see below)
$
2,258

 
$
1,776

 
$
1,618

Share-based compensation
32

 
41

 
47

Severance costs
6

 
89

 
15

Social security costs
133

 
130

 
119

Retirement benefits — defined benefit plan expense
2

 
11

 
35

Retirement benefits — defined contribution plan expense
44

 
40

 
34

Total salaries and benefits expense
$
2,475

 
$
2,087

 
$
1,868


Severance Costs
Severance costs arise in the normal course of business and these charges amounted to $6 million in the year ended December 31, 2012 (2011: $nil; 2010: $15 million). During 2011, the Company incurred additional severance costs of $89 million relating to the Company's 2011 Operational Review. These costs relate to approximately 1,200 positions that were eliminated.
At December 31, 2012, the Company’s severance liability under the 2011 Operational Review was:
 
Severance
 
(millions)
Balance at January 1, 2011
$
—

Severance costs accrued
89

Cash payments
(64
)
Foreign exchange
(1
)
Balance at December 31, 2011
$
24

Cash payments
(20
)
Balance at December 31, 2012
$
4


Cash Retention Awards
For the past several years, certain cash retention awards under the Company's annual incentive programs included a feature which required the recipient to repay a proportionate amount of the annual award if the employee voluntarily left the Company before a specified date, which was generally three years following the award. As previously disclosed, the Company made the cash payment to the recipient in the year of grant and recognized the payment in expense ratably over the period it was subject to repayment, beginning in the quarter in which the award was made. The unamortized portion of cash retention awards was recorded within 'other current assets' and 'other non-current assets' in the consolidated balance sheet.  

The following table sets out the amount of cash retention awards made and the related amortization of those awards for the years ended December 31, 2012, 2011 and 2010:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Cash retention awards made
$
221

 
$
210

 
$
196

Amortization of cash retention awards included in salaries and benefits
216

 
185

 
119


17
Table of Contents

Notes to the financial statements
3. EMPLOYEES (Continued)

In December 2012, the Company decided to eliminate the repayment requirement from the past annual cash retention awards and, as a result, recognized a one-time, non-cash, pre-tax charge of $200 million which represents the write-off of the unamortized balance of past awards.  

There were however, a number of off-cycle awards with a fixed guarantee attached, for which the Company has not waived the repayment requirement. The unamortized portion of these awards amounted to $9 million at December 31, 2012.

In addition, the Company has replaced annual cash retention awards with annual cash bonuses which will not include a repayment requirement. The Company has accrued an additional $252 million for these 2012 cash bonuses to be paid in 2013.
Unamortized cash retention awards totaled $9 million as of December 31, 2012 (2011: $196 million; 2010: $173 million).

4.  
SHARE-BASED COMPENSATION
On December 31, 2012, the Company had a number of open share-based compensation plans, which provide for the grant of time-based options and performance-based options, restricted stock units and various other share-based grants to employees. All of the Company’s share-based compensation plans under which any options, restricted stock units or other share-based grants are outstanding as at December 31, 2012 are described below. The compensation cost that has been recognized for those plans for the year ended December 31, 2012 was $32 million (2011: $41 million; 2010: $47 million). The total income tax benefit recognized in the statement of operations for share-based compensation arrangements for the year ended December 31, 2012 was $9 million (2011: $11 million; 2010: $14 million).

2012 Equity Incentive Plan

This plan, which was established on April 25, 2012, provides for the granting of ISOs, time-based or performance-based non-statutory stock options, share appreciation rights ('SARs'), restricted shares, time-based or performance-based restricted share units ('RSUs'), performance-based awards and other share-based grants or any combination thereof (collectively referred to as 'Awards') to employees, officers, directors and consultants ('Eligible Individuals') of the Company and any of its subsidiaries (the 'Willis Group'). The Board of Directors also adopted a sub-plan under the 2012 plan to provide an employee sharesave scheme in the UK.
There are 13,776,935 shares available for grant under this plan. In addition, Shares subject to awards that were granted under the Willis Group Holdings 2008 Share Purchase and Option Plan, that terminate, expire or lapse for any reason will be made available for future Awards under this Plan. Options are exercisable on a variety of dates, including from the second, third, fourth or fifth anniversary of grant. Unless terminated sooner by the Board of Directors, the 2012 Plan will expire 10 years after the date of its adoption. That termination will not affect the validity of any grants outstanding at that date.
2008 Share Purchase and Option Plan
This plan, which was established on April 23, 2008, provides for the granting of time and performance-based options, restricted stock units and various other share-based grants at fair market value to employees of the Company. The 2008 plan was terminated as at 25 April 2012 and no further grants will be made under this plan. Any shares available for grant under the 2008 plan were included in the 2012 Equity Incentive Plan availability.
Options are exercisable on a variety of dates, including from the third, fourth or fifth anniversary of grant.
2001 Share Purchase and Option Plan
This plan, which was established on May 3, 2001, provides for the granting of time-based options, restricted stock units and various other share-based grants at fair market value to employees of the Company. The Board of Directors has adopted several sub-plans under the 2001 plan to provide employee sharesave schemes in the UK, Ireland and internationally. The 2001 Plan (and all sub-plans) expired on May 3, 2011 and no further grants will be made under the plan. Options are exercisable on a variety of dates, including from the first, second, third, sixth or eighth anniversary of grant, although for certain options the exercisable date may accelerate depending on the achievement of certain performance goals.

18
Table of Contents

Willis Group Holdings plc


HRH Option Plans
Options granted under the Hilb Rogal and Hamilton Company 2000 Stock Incentive Plan (‘HRH 2000 Plan’) and the Hilb Rogal & Hobbs Company 2007 Stock Incentive Plan (the ‘HRH 2007 Plan’) were converted into options to acquire shares of Willis Group Holdings. No further grants are to be made under the HRH 2000 Plan. Willis is authorized to grant equity awards under the HRH 2007 Plan until 2017 to employees who were formerly employed by HRH and to new employees who have joined Willis or one of its subsidiaries since October 1, 2008, the date that the acquisition of HRH was completed.
Employee Stock Purchase Plans
The Company has adopted the Willis Group Holdings 2001 North America Employee Share Purchase Plan, which expired on May 31, 2011 and the Willis Group Holdings 2010 North America Employee Stock Purchase Plan, which expires on 31 May, 2020. They provide certain eligible employees to the Company’s subsidiaries in the US and Canada the ability to contribute payroll deductions to the purchase of Willis Shares at the end of each offering period.

Option Valuation Assumptions
The fair value of each option is estimated on the date of grant using the Black-Scholes option pricing model that uses the assumptions noted in the following table. Expected volatility is based on historical volatility of the Company’s stock. The Company uses the simplified method set out in Accounting Standard Codification (‘ASC’) 718-10-S99 to derive the expected term of options granted. The risk-free rate for periods within the expected life of the option is based on the US Treasury yield curve in effect at the time of grant.
 
Years ended December 31,
 
2012
 
2011
 
2010
Expected volatility
32.1
%
 
31.4
%
 
30.4
%
Expected dividends
3.2
%
 
2.5
%
 
3.4
%
Expected life (years)
5

 
6

 
5

Risk-free interest rate
0.9
%
 
2.2
%
 
2.2
%


19
Table of Contents

Notes to the financial statements

4. SHARE-BASED COMPENSATION (Continued)

A summary of option activity under the plans at December 31, 2012, and changes during the year then ended is presented below:
 
 
 
Weighted
Average
Exercise
 
Weighted
Average
Remaining
Contractual
 
Aggregate
Intrinsic
(Options in thousands)
Options
 
Price(i)
 
Term
 
Value
 
 
 
 
 
 
 
(millions)
Time-based stock options
 

 
 

 
 
 
 

Balance, beginning of year
9,174

 
$
33.35

 
 
 
 

Granted
2,399

 
$
32.17

 
 
 
 

Exercised
(1,203
)
 
$
30.80

 
 
 
 

Forfeited
(141
)
 
$
31.26

 
 
 
 

Expired
(77
)
 
$
28.38

 
 
 
 

Balance, end of year
10,152

 
$
33.44

 
3 years
 
$
1

Options vested or expected to vest at December 31, 2012
9,935

 
$
33.61

 
3 years
 
$
16

Options exercisable at December 31, 2012
9,055

 
$
34.18

 
3 years
 
$
9

Performance-based stock options
 

 
 

 
 
 
 

Balance, beginning of year
7,283

 
$
32.09

 
 
 
 

Granted
25

 
$
34.74

 
 
 
 

Exercised
(511
)
 
$
27.08

 
 
 
 

Forfeited
(280
)
 
$
38.41

 
 
 
 

Balance, end of year
6,517

 
$
32.19

 
5 years
 
$
9

Options vested or expected to vest at December 31, 2012
5,489

 
$
32.09

 
5 years
 
$
21

Options exercisable at December 31, 2012
2,470

 
$
32.00

 
4 years
 
$
8

_________________________________
(i) 
Certain options are exercisable in pounds sterling and are converted to dollars using the exchange rate at December 31, 2012.

The weighted average grant-date fair value of time-based options granted during the year ended December 31, 2012 was $6.98 (2011: $9.49; 2010: $5.25). The total intrinsic value of options exercised during the year ended December 31, 2012 was $8 million (2011: $17 million; 2010: $8 million). At December 31, 2012 there was $17 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements under time-based stock option plans; that cost is expected to be recognized over a weighted average period of 3 years.
The weighted average grant-date fair value of performance-based options granted during the year ended December 31, 2012 was $7.61 (2011: $10.26; 2010: $7.11). The total intrinsic value of options exercised during the year ended December 31, 2012 was $5 million (2011: $1 million; 2010: $nil). At December 31, 2012 there was $14 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements under performance-based stock option plans; that cost is expected to be recognized over a weighted-average period of 2 years.

20
Table of Contents

Willis Group Holdings plc

4. SHARE-BASED COMPENSATION (Continued)

A summary of restricted stock unit activity under the Plans at December 31, 2012, and changes during the year then ended is presented below:
 
 
 
Weighted
Average
Grant Date
(Units awarded in thousands)
Shares
 
Fair Value
Nonvested shares (restricted stock units)
 

 
 

Balance, beginning of year
1,192

 
$
31.96

Granted
1,756

 
$
34.13

Vested
(408
)
 
$
29.61

Forfeited
(15
)
 
$
36.28

Balance, end of year
2,525

 
$
33.80


The total number of restricted stock units vested during the year ended December 31, 2012 was 408,005 shares at an average share price of $35.82 (2011: 918,480 shares at an average share price of $39.52). At December 31, 2012 there was $52 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements under the plan; that cost is expected to be recognized over a weighted average period of 3 years.
Cash received from option exercises under all share-based payment arrangements for the year ended December 31, 2012 was $53 million (2011: $60 million; 2010: $37 million). The actual tax benefit realized for the tax deductions from option exercises of the share-based payment arrangements totaled $8 million for the year ended December 31, 2012 (2011: $18 million; 2010: $10 million).

5.  
AUDITORS’ REMUNERATION
An analysis of auditors’ remuneration is as follows:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Audit of group consolidated financial statements
$
4

 
$
4

 
$
4

Other assurance services
3

 
3

 
3

Other non-audit services
1

 
1

 
1

Total auditors’ remuneration
$
8

 
$
8

 
$
8


6.  
NET (LOSS) GAIN ON DISPOSAL OF OPERATIONS

A loss on disposal of $3 million is recorded in the consolidated statements of operations for the year ended December 31, 2012. This principally relates to the termination of a joint venture arrangement in India.
A gain on disposal of $4 million is recorded in the consolidated statements of operations for the year ended December 31, 2011 following conclusion of the accounting for the Gras Savoye December 2009 leveraged transaction — see Note 15 — 'Investments in Associates'.
A loss on disposal of $2 million is recorded in the consolidated statements of operations for the year ended December 31, 2010.


21
Table of Contents

Notes to the financial statements

7.  
INCOME TAXES
An analysis of income from continuing operations before income taxes and interest in earnings of associates by location of the taxing jurisdiction is as follows:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Ireland
$
(47
)
 
$
(39
)
 
$
3

US
(615
)
 
(25
)
 
84

UK
25

 
(58
)
 
183

Other jurisdictions
300

 
361

 
317

(Loss) income from continuing operations before income taxes and interest in earnings of associates
$
(337
)
 
$
239

 
$
587

The provision for income taxes by location of the taxing jurisdiction consisted of the following:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Current income taxes:
 

 
 

 
 

Irish corporation tax
$
—

 
$
—

 
$
1

US federal tax
—

 
—

 
(30
)
US state and local taxes
1

 
1

 
—

UK corporation tax
(2
)
 
(33
)
 
54

Other jurisdictions
41

 
42

 
41

Total current taxes
40

 
10

 
66

Non-current taxes:
 

 
 

 
 

US federal tax
3

 
5

 
(3
)
US state and local taxes
—

 
—

 
(3
)
UK corporation tax
4

 
(4
)
 
—

Other jurisdictions
—

 
4

 
3

Total non-current taxes
7

 
5

 
(3
)
Deferred taxes:
 

 
 

 
 

US federal tax
(44
)
 
(6
)
 
57

US state and local taxes
(41
)
 
1

 
9

Effect of additional US valuation allowance
113

 
—

 
—

UK corporation tax
27

 
20

 
3

Other jurisdictions
(1
)
 
2

 
8

Total deferred taxes
54

 
17

 
77

Total income taxes
$
101

 
$
32

 
$
140


22
Table of Contents

Willis Group Holdings plc

7. INCOME TAXES (Continued)

The reconciliation between US federal income taxes at the statutory rate and the Company’s provision for income taxes on continuing operations is as follows:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions, except percentages)
(Loss) income from continuing operations before income taxes and interest in earnings of associates
$
(337
)
 
$
239

 
$
587

US federal statutory income tax rate
35
%
 
35
%
 
35
%
Income tax expense at US federal tax rate
(118
)
 
84

 
205

Adjustments to derive effective rate:
 

 
 

 
 

Non-deductible expenditure
15

 
15

 
7

Movement in provision for non-current taxes
6

 
3

 
(3
)
Impairment of non-qualifying goodwill
137

 
—

 
—

Impact of change in tax rate on deferred tax balances
(3
)
 
(3
)
 
(4
)
Adjustment in respect of prior periods
6

 
(13
)
 
(22
)
Non-deductible Venezuelan foreign exchange loss
—

 
—

 
4

Non-taxable profit on disposal of Gras Savoye
—

 
—

 
1

Effect of foreign exchange and other differences
2

 
1

 
11

Changes in valuation allowances applied to deferred tax assets
114

 
5

 
—

Net tax effect of intra-group items
(31
)
 
(31
)
 
(26
)
Tax differentials of foreign earnings:
 

 
 

 
 

UK earnings
(3
)
 
6

 
(13
)
Other jurisdictions and US state taxes
(24
)
 
(35
)
 
(20
)
Provision for income taxes
$
101

 
$
32

 
$
140


Willis Group Holdings plc is a non-trading holding company tax resident in Ireland where it is taxed at the statutory rate of 25%. The provision for income tax on continuing operations has been reconciled above to the US federal statutory tax rate of 35% to be consistent with prior periods.
The net tax effect of intra-group items principally relates to transactions, the pre-tax effect of which has been eliminated in arriving at the Company’s consolidated income from continuing operations before income taxes.


23
Table of Contents

Notes to the financial statements

7. INCOME TAXES (Continued)

The significant components of deferred income tax assets and liabilities and their balance sheet classifications are as follows:
 
December 31,
 
2012
 
2011
 
(millions)
Deferred tax assets:
 

 
 

Accrued expenses not currently deductible
$
120

 
$
116

US state net operating losses
64

 
56

US federal net operating losses
28

 
23

UK net operating losses
—

 
1

Other net operating losses
8

 
7

UK capital losses
42

 
45

Accrued retirement benefits
101

 
105

Deferred compensation
48

 
45

Stock options
40

 
34

Gross deferred tax assets
451

 
432

Less: valuation allowance
(221
)
 
(102
)
Net deferred tax assets
$
230

 
$
330

Deferred tax liabilities:
 

 
 

Cost of intangible assets, net of related amortization
$
118

 
$
149

Cost of tangible assets, net of related amortization
51

 
42

Prepaid retirement benefits
35

 
36

Accrued revenue not currently taxable
29

 
26

Cash retention award
2

 
63

Tax-leasing transactions
1

 
2

Financial derivative transactions
2

 
4

Deferred tax liabilities
238

 
322

Net deferred tax (liability) asset
$
(8
)
 
$
8


 
December 31,
 
2012
 
2011
 
(millions)
Balance sheet classifications:
 

 
 

Current:
 

 
 

Deferred tax assets
$
13

 
$
44

Deferred tax liabilities
(21
)
 
(26
)
Net current deferred tax assets
(8
)
 
18

Non-current:
 

 
 

Deferred tax assets
18

 
22

Deferred tax liabilities
(18
)
 
(32
)
Net non-current deferred tax liabilities
—

 
(10
)
Net deferred tax (liability) asset
$
(8
)
 
$
8



24
Table of Contents

Willis Group Holdings plc

7. INCOME TAXES (Continued)

At December 31, 2012 the Company had valuation allowances of $221 million (2011: $102 million) to reduce its deferred tax assets to estimated realizable value. The valuation allowances at December 31, 2012 relate to deferred tax assets arising from UK capital loss carryforwards ($42 million) and other net operating losses ($7 million), which have no expiration date, and to the deferred tax assets in the US ($125 million) and deferred tax assets arising from specific US State net operating losses ($47 million). US Federal net operating losses will expire between 2028 and 2031 and US State net operating losses will expire by 2030. Capital loss carryforwards can only be offset against future UK capital gains.
 
Balance at
beginning of year
 
Additions/
(releases)
charged to
costs and expenses
 
Other movements
 
Foreign
exchange differences
 
Balance
at
end of year
Description
 
 
 
 
 
(millions)
Year Ended December 31, 2012
 

 
 

 
 

 
 

 
 

Deferred tax valuation allowance
102

 
110

 
12

 
(3
)
 
221

Year Ended December 31, 2011
 

 
 

 
 

 
 

 
 

Deferred tax valuation allowance
87

 
—

 
15

 
—

 
102

Year Ended December 31, 2010
 

 
 

 
 

 
 

 
 

Deferred tax valuation allowance
92

 
—

 
(4
)
 
(1
)
 
87


At December 31, 2012 the Company had deferred tax assets of $230 million (2011: $330 million), net of the valuation allowance. Management believes, based upon the level of historical taxable income and projections for future taxable income, it is more likely than not that the Company will realize the benefits of these deductible differences, net of the valuation allowance. However, the amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of taxable income are revised.
The Company recognizes deferred tax balances related to the undistributed earnings of subsidiaries when the Company expects that it will recover those undistributed earnings in a taxable manner, such as through receipt of dividends or sale of the investments. The Company does not, however, provide for income taxes on the unremitted earnings of certain other subsidiaries where, in management’s opinion, such earnings have been indefinitely reinvested in those operations, or will be remitted either in a tax free liquidation or as dividends with taxes substantially offset by foreign tax credits. It is not practical to determine the amount of unrecognized deferred tax liabilities for temporary differences related to these investments.
Unrecognized tax benefits
Total unrecognized tax benefits as at December 31, 2012, totaled $37 million. During the next 12 months it is reasonably possible that the Company will recognize approximately $7 million of tax benefits related to the release of provisions for potential inter company pricing adjustments no longer required due to either settlement through negotiation or closure of the statute of limitations on assessment.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
 
2012
 
2011
 
2010
 
(millions)
Balance at January 1
$
16

 
$
13

 
$
17

Reductions due to a lapse of the applicable statute of limitation
(3
)
 
—

 
(7
)
Increases for positions taken in current period
8

 
—

 
—

Increases for positions taken in prior periods
16

 
—

 
—

Other movements
—

 
3

 
3

Balance at December 31
$
37

 
$
16

 
$
13


$21 million of the unrecognized tax benefits at December 31, 2012 would, if recognized, favorably affect the effective tax rate in future periods.

25
Table of Contents

Notes to the financial statements

7. INCOME TAXES (Continued)

The Company files tax returns in the various tax jurisdictions in which it operates. The 2008 US tax year closed in 2012 upon the expiration of the statute of limitations on assessment. US tax returns have been filed timely. The Company has not extended the federal statute of limitations for assessment in the US.
All UK tax returns have been filed timely and are in the normal process of being reviewed, with HM Revenue & Customs making inquiries to obtain additional information. There are no material ongoing inquiries in relation to filed UK returns. In other jurisdictions the Company is no longer subject to examinations prior to 2003.


8.  
DISCONTINUED OPERATIONS
On December 31, 2011, the Company disposed of Global Special Risks, LLC, Faber & Dumas Canada Ltd and the trade and assets of Maclean, Oddy & Associates, Inc.. The gain (net of tax) on this disposal was $2 million.



9.  
EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing net income attributable to Willis Group Holdings by the average number of shares outstanding during each period. The computation of diluted earnings per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue shares were exercised or converted into shares or resulted in the issue of shares that then shared in the net income of the Company.
In periods where losses are reported the weighted average shares outstanding excludes potentially issuable shares described above, because their inclusion would be antidilutive.
For the year ended December 31, 2012, time-based and performance-based options to purchase 10.2 million and 6.5 million shares (2011: 9.2 million and 7.3 million; 2010: 11.5 million and 9.4 million), respectively, and 2.5 million restricted stock units (2011: 1.2 million; 2010: 1.8 million), were outstanding.
Basic and diluted earnings per share are as follows:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions, except per share data)
Net (loss) income attributable to Willis Group Holdings
$
(446
)
 
$
204

 
$
455

Basic average number of shares outstanding
173

 
173

 
170

Dilutive effect of potentially issuable shares
—

 
3

 
1

Diluted average number of shares outstanding
173

 
176

 
171

Basic earnings per share:
 

 
 

 
 

Continuing operations
$
(2.58
)
 
$
1.17

 
$
2.68

Discontinued operations
—

 
0.01

 
—

Net (loss) income attributable to Willis Group Holdings shareholders
$
(2.58
)
 
$
1.18

 
$
2.68

Dilutive effect of potentially issuable shares
—

 
(0.02
)
 
(0.02
)
Diluted earnings per share:
 

 
 

 
 

Continuing operations
$
(2.58
)
 
$
1.15

 
$
2.66

Discontinued operations
—

 
0.01

 
—

Net (loss) income attributable to Willis Group Holdings shareholders
$
(2.58
)
 
$
1.16

 
$
2.66



26
Table of Contents

Willis Group Holdings plc

9. EARNINGS PER SHARE (Continued)

Options to purchase 10.0 million shares and 2.5 million restricted stock units for the year ended December 31, 2012 were not included in the computation of the dilutive effect of stock options because the effect was antidilutive (2011: 4.1 million shares; 2010: 13.9 million shares).

10.
ACQUISITIONS

On December 31, 2012 the Company acquired Avalon Actuarial Inc., a Canadian actuarial consulting firm for cash consideration of $25 million. Additional consideration of up to approximately $5 million is payable in 2016 based on the achievement of certain revenue targets.
The Company recognized acquired intangible assets of $20 million of which $17 million was in respect of customer relationships, which are being amortized over an expected life of 14 years. The remaining intangible assets relate to non-compete agreements and the Avalon trade name which are being amortized over five years and three years, respectively. Goodwill of $10 million was recognized on the transaction.

11.
FIDUCIARY ASSETS
The Company collects premiums from insureds and, after deducting its commissions, remits the premiums to the respective insurers; the Company also collects claims or refunds from insurers which it then remits to insureds. Uncollected premiums from insureds and uncollected claims or refunds from insurers (‘fiduciary receivables’) are recorded as fiduciary assets on the Company’s consolidated balance sheet. Unremitted insurance premiums, claims or refunds (‘fiduciary funds’) are also recorded within fiduciary assets.
Fiduciary assets therefore comprise both receivables and funds held in a fiduciary capacity.
Fiduciary funds, consisting primarily of time deposits with original maturities of less than or equal to three months, were $1,796 million as of December 31, 2012 (2011: $1,688 million). Accrued interest on funds is recorded as other assets.


27
Table of Contents

Notes to the financial statements

12.
FIXED ASSETS, NET
An analysis of fixed asset activity for the years ended December 31, 2012 and 2011 are as follows:
 
Land and
buildings(i)
 
Leasehold
improvements
 
Furniture and
equipment
 
Total
 
(millions)
Cost: at January 1, 2011
$
73

 
$
192

 
$
488

 
$
753

Additions
—

 
24

 
87

 
111

Disposals
—

 
(13
)
 
(52
)
 
(65
)
Foreign exchange
—

 
7

 
(14
)
 
(7
)
Cost: at December 31, 2011
73

 
210

 
509

 
792

Additions
3

 
16

 
116

 
135

Disposals
—

 
(4
)
 
(59
)
 
(63
)
Foreign exchange
2

 
5

 
10

 
17

Cost: at December 31, 2012
$
78

 
$
227

 
$
576

 
$
881

Depreciation: at January 1, 2011
$
(25
)
 
$
(56
)
 
$
(291
)
 
$
(372
)
Depreciation expense provided(ii)
(3
)
 
(15
)
 
(58
)
 
(76
)
Disposals
—

 
13

 
45

 
58

Foreign exchange
—

 
(3
)
 
7

 
4

Depreciation: at December 31, 2011
(28
)
 
(61
)
 
(297
)
 
(386
)
Depreciation expense provided
(3
)
 
(17
)
 
(59
)
 
(79
)
Disposals
—

 
4

 
56

 
60

Foreign exchange
(1
)
 
(1
)
 
(6
)
 
(8
)
Depreciation: at December 31, 2012
$
(32
)
 
$
(75
)
 
$
(306
)
 
$
(413
)
Net book value:
 

 
 

 
 

 
 

At December 31, 2011
$
45

 
$
149

 
$
212

 
$
406

At December 31, 2012
$
46

 
$
152

 
$
270

 
$
468

_________________________________
(i) 
Included within land and buildings are assets held under capital leases: At December 31, 2012, cost and accumulated depreciation were $25 million and $4 million respectively (2011: $23 million and $2 million, respectively; 2010: $23 million and $1 million, respectively); Depreciation in the year ended December 31, 2012 was $1 million (2011: $1 million; 2010: $1 million).
(ii) 
The depreciation charge for the year ended December 31, 2011 includes an element that is disclosed in salaries and benefits, separate to the depreciation charge line, of $2 million (2010: $nil).


28
Table of Contents

Willis Group Holdings plc


13.
GOODWILL
Goodwill represents the excess of the cost of businesses acquired over the fair value of identifiable net assets at the dates of acquisition. Goodwill is not amortized but is subject to impairment testing annually and whenever facts or circumstances indicate that the carrying amounts may not be recoverable.
 
The Company has determined that its reporting units are consistent with its operating segments: North America; International and Global. Goodwill is allocated to these reporting units based on the original purchase price allocation for acquisitions within the reporting units. When a business entity is sold, goodwill is allocated to the disposed entity based on the fair value of that entity compared to the fair value of the reporting unit in which it is included.

The changes in the carrying amount of goodwill by segment for the years ended December 31, 2012 and 2011 are as follows:
 
Global
 
North
America
 
International
 
Total
 
(millions)
Balance at January 1, 2011
$
1,063

 
$
1,783

 
$
448

 
$
3,294

Purchase price allocation adjustments
—

 
—

 
2

 
2

Goodwill acquired during the period
—

 
—

 
10

 
10

Goodwill disposed of during the year
—

 
(3
)
 
—

 
(3
)
Other movements (i) (ii)
60

 
2

 
(61
)
 
1

Foreign exchange
(1
)
 
—

 
(8
)
 
(9
)
Balance at December 31, 2011
$
1,122

 
$
1,782

 
$
391

 
$
3,295

Purchase price allocation adjustments
—

 
—

 
2

 
2

Goodwill acquired during the period
—

 
10

 
2

 
12

Goodwill disposed of during the year
—

 
—

 
(1
)
 
(1
)
Goodwill impairment charge (see below)
—

 
(492
)
 
—

 
(492
)
Foreign exchange
5

 
—

 
6

 
11

Balance at December 31, 2012
$
1,127

 
$
1,300

 
$
400

 
$
2,827

_________________________________
(i) 
North America — $nil (2011: $(1) million) tax benefit arising on the exercise of fully vested HRH stock options which were issued as part of the acquisition of HRH in 2008.
(ii) 
Effective January 1, 2011, the Company changed its internal reporting structure: Global Markets International, previously reported within the International segment, is now reported in the Global segment; and Mexico Retail, which was previously reported within the International segment, is now reported in the North America segment. As a result of these changes, goodwill of $60 million has been reallocated from the International segment into the Global segment for Global Markets International, and $1 million has been reallocated from the International segment into the North America segment for Mexico Retail. Goodwill has been reallocated between segments using the relative fair value allocation approach.

The table above shows goodwill at December 31, 2012 net of accumulated impairment losses of $492 million. The gross balance and accumulated impairment losses (which relate to our North American reporting unit) were $3,319 million and $492 million, and $3,295 million and $nil at December 31, 2012 and 2011, respectively. The net accumulated impairment losses for Global and International were both $nil at December 31, 2012 (2011: $nil).

2012 Impairment Review
The Company reviews goodwill for impairment annually. In the first step of the impairment test, the fair value of each reporting unit is compared with its carrying value, including goodwill. If the carrying value of a reporting unit exceeds its fair value, the amount of an impairment loss, if any, is calculated in the second step of the impairment test by comparing the implied fair value of reporting unit goodwill with the carrying amount of that goodwill.
The Company completed its annual goodwill impairment test as of October 1, 2012 and concluded that an impairment charge was required to reduce the carrying value of the goodwill associated with the Company's North America reporting unit. The

29
Table of Contents

Notes to the financial statements

13. GOODWILL (Continued)

goodwill impairment charge for the North America reporting unit amounted to $492 million . There was no impairment for the Global and International reporting units, as the fair values of these units were significantly in excess of their carrying value.

North America Impairment Review
Under the income approach, the fair value of the North America reporting unit was determined based on the present value of estimated future cash flows. The fair value measurements used unobservable inputs in a discounted cash flow model based on the Company's most recent forecasts. Such projections were based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions, and the uncertainty related to the business's ability to realise the projected cash flows. The discount rate was based on the weighted-average cost of capital adjusted for the relevant risk associated with market participant expectations and characteristics of the individual reporting unit.
As the fair value of the reporting unit was less than its carrying value, the second step of the impairment test was performed to measure the amount of any impairment loss. In the second step, the North America reporting unit's fair value was allocated to all of the assets and liabilities of the reporting unit, including any unrecognized intangible assets. The fair value of intangible assets associated with the North America reporting unit included customer relationship intangible assets, which were valued using a multiple period excess earnings approach involving discounted future projections of associated revenue streams.
The decline in the fair value of the North America reporting unit, as well as differences between fair values and carrying values for other assets and liabilities in the second step of the goodwill impairment test, resulted in an implied fair value of goodwill substantially below the carrying value of the goodwill for the reporting unit. As a result, the Company recorded a goodwill impairment charge of $492 million as of October 1, 2012.
As previously disclosed, the North America reporting unit had been hampered by the declining Loan Protector business results, the effect of the soft economy in the U.S., which has significantly impacted the Construction and Human Capital sectors, and declining retention rates primarily related to merger and acquisition activity and lost legacy HRH businesses.
The decline in the estimated fair value of the reporting unit resulted from lower projected revenue growth rates and profitability levels as well as an increase in the discount rate used to calculate the discounted cash flows. The increase in the discount rate was due to increases in the risk-free rate and small company premium offset by a reduction to the expected market rate of return. The lower projected profitability levels reflect changes in assumptions related to organic revenue growth and cost rates which can be attributed to the declines discussed above and also includes consideration of the uncertainty related to the business's ability to execute on the projected cash flows.


14.
OTHER INTANGIBLE ASSETS, NET
Other intangible assets are classified into the following categories:
•
'Customer and Marketing Related', including:
•
client relationships
•
client lists
•
trade names
•
‘Contract based, Technology and Other’ includes all other purchased intangible assets.
The major classes of amortizable intangible assets are as follows:

30
Willis Group Holdings plc

14. OTHER INTANGIBLE ASSETS, NET (Continued)

 
December 31, 2012
 
December 31, 2011
 
Gross carrying
amount
 
Accumulated
amortization
 
Net carrying amount
 
Gross carrying
amount
 
Accumulated
amortization
 
Net carrying amount
 
(millions)
Customer and Marketing Related:
 

 
 

 
 

 
 

 
 

 
 

Client Relationships
$
717

 
$
(340
)
 
$
377

 
$
686

 
$
(269
)
 
$
417

Client Lists
3

 
(1
)
 
2

 
8

 
(7
)
 
1

Non-compete Agreements
3

 
—

 
3

 
—

 
—

 
—

Trade Names
11

 
(10
)
 
1

 
11

 
(10
)
 
1

Total Customer and Marketing Related
734

 
(351
)
 
383

 
705

 
(286
)
 
419

Contract based, Technology and Other
4

 
(2
)
 
2

 
4

 
(3
)
 
1

Total amortizable intangible assets
$
738

 
$
(353
)
 
$
385

 
$
709

 
$
(289
)
 
$
420

The aggregate amortization of intangible assets for the year ended December 31, 2012 was $59 million (2011: $68 million; 2010: $82 million). The estimated aggregate amortization of intangible assets for each of the next five years ended December 31 is as follows:
 
(millions)
2013
$
55

2014
47

2015
40

2016
35

2017
30

Thereafter
178

Total
$
385


15.
INVESTMENTS IN ASSOCIATES
The Company holds a number of investments which it accounts for using the equity method. The Company’s approximate interest in the outstanding stock of the more significant associates is as follows:
 
 
 
December 31,
 
Country
 
2012
 
2011
Al-Futtaim Willis Co. L.L.C. 
Dubai
 
49
%
 
49
%
GS & Cie Groupe
France
 
30
%
 
30
%
The Company’s principal investment as of December 31, 2012 and 2011 is GS & Cie Groupe (‘Gras Savoye’), France’s leading insurance broker.
The Company’s original investment in Gras Savoye was made in 1997, when it acquired a 33 percent ownership interest. Between 1997 and December 2009 this interest was increased by a series of incremental investments to 49 percent.
On December 17, 2009, the Company completed a leveraged transaction with the original family shareholders of Gras Savoye and Astorg Partners, a private equity fund, to reorganize the capital of Gras Savoye (‘December 2009 leveraged transaction’). The Company, the original family shareholders and Astorg now own equal stakes of 30 percent in the capital structure of Gras Savoye and have equal representation of one third of the voting rights on its board. The remaining shareholding is held by a large pool of Gras Savoye managers and minority shareholders.
A put option that was in place prior to the December 2009 leveraged transaction, and which could have increased the Company’s interest to 90 percent, has been canceled and the Company now has a new call option to purchase 100 percent of the capital of Gras Savoye. If the Company does not waive the new call option before April 30, 2014, then it must exercise the new

31
Table of Contents

Notes to the financial statements
 
15. INVESTMENTS IN ASSOCIATES (Continued)

call option in 2015 or the other shareholders may initiate procedures to sell Gras Savoye. Except with the unanimous consent of the supervisory board and other customary exceptions, the parties are prohibited from transferring any shares of Gras Savoye until 2015. At the end of this period, shareholders are entitled to pre-emptive and tag-along rights.
In 2011 the Company’s ownership of Gras Savoye reduced from 31 percent to 30 percent following issuance of additional share capital as part of an employee share incentive scheme.
The carrying amount of the Gras Savoye investment as of December 31, 2012 includes goodwill of $83 million (2011: $82 million) and interest bearing vendor loans and convertible bonds issued by Gras Savoye of $47 million and $96 million respectively (2011: $43 million and $85 million, respectively).
A gain of $4 million was recorded in 2011 following conclusion of the accounting for the December 2009 leveraged transaction.
As of December 31, 2012 and 2011, the Company’s other investments in associates, individually and in the aggregate, were not material to the Company’s operations.
Condensed financial information for associates, in the aggregate, as of and for the three years ended December 31, 2012, is presented below. For convenience purposes: (i) balance sheet data has been translated to US dollars at the relevant year-end exchange rate, and (ii) condensed statements of operations data has been translated to US dollars at the relevant average exchange rate.
 
2012
 
2011
 
2010
 
(millions)
Condensed statements of operations data (i):
 

 
 

 
 

Total revenues
$
497

 
$
527

 
$
510

(Loss) income before income taxes
(17
)
 
5

 
61

Net (loss) income
(14
)
 
(2
)
 
43

Condensed balance sheets data (i):
 

 
 

 
 

Total assets
1,670

 
1,882

 
2,043

Total liabilities
1,559

 
1,736

 
1,825

Stockholders’ equity
111

 
146

 
218

_________________________________
(i) 
Disclosure is based on the Company’s best estimate of the results of its associates and is subject to change upon receipt of their financial statements for 2012.
For the year ended December 31, 2012, the Company recognized $3 million (2011: $4 million; 2010: $5 million) in respect of dividends received from associates.


32
Table of Contents

Willis Group Holdings plc


16.
OTHER ASSETS
An analysis of other assets is as follows:
 
December 31,
 
2012
 
2011
 
(millions)
Other current assets
 

 
 

Unamortized cash retention awards
$
7

 
$
120

Prepayments and accrued income
61

 
45

Income taxes receivable
50

 
30

Derivatives
14

 
14

Debt issuance costs
3

 
3

Other receivables
46

 
47

Total other current assets
$
181

 
$
259

Other non-current assets
 

 
 

Unamortized cash retention awards
$
2

 
$
76

Prepayments and accrued income
24

 
45

Deferred compensation plan assets
97

 
89

Derivatives
17

 
38

Debt issuance costs
12

 
15

Other receivables
54

 
20

Total other non-current assets
$
206

 
$
283

Total other assets
$
387

 
$
542


17.
OTHER LIABILITIES
An analysis of other liabilities is as follows:
 
December 31,
 
2012
 
2011
 
(millions)
Other current liabilities
 

 
 

Accounts payable
$
88

 
$
59

Accrued dividends payable
47

 
46

Other taxes payable
44

 
45

Accrued interest payable
34

 
37

Derivatives
—

 
7

Other payables
114

 
88

Total other current liabilities
$
327

 
$
282

Other non-current liabilities
 

 
 

Incentives from lessors
$
173

 
$
165

Deferred compensation plan liability
101

 
106

Capital lease obligation
28

 
26

Other payables
73

 
66

Total other non-current liabilities
$
375

 
$
363

Total other liabilities
$
702

 
$
645



33
Table of Contents

Notes to the financial statements

18.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Accounts receivable are stated at estimated net realizable values. The allowances shown below as at the end of each period, are recorded as the amounts considered by management to be sufficient to meet probable future losses related to uncollectible accounts.
 
Balance at
beginning of year
 
Additions/
(releases)
charged to
costs and expenses
 
Deductions
/ Other movements
 
Foreign
exchange differences
 
Balance at
end of year
Description
 
 
 
 
 
 
 
 
 
 
(millions)
Year Ended December 31, 2012
 

 
 

 
 

 
 

 
 

Allowance for doubtful accounts
$
13

 
$
16

 
$
(15
)
 
$
—

 
$
14

Year Ended December 31, 2011
 

 
 

 
 

 
 

 
 

Allowance for doubtful accounts
$
12

 
$
4

 
$
(3
)
 
$
—

 
$
13

Year Ended December 31, 2010
 

 
 

 
 

 
 

 
 

Allowance for doubtful accounts
$
16

 
$
—

 
$
(4
)
 
$
—

 
$
12



34
Table of Contents

Willis Group Holdings plc


19.
PENSION PLANS
The Company maintains two principal defined benefit pension plans that cover the majority of our employees in the United States and United Kingdom. Both of these plans are now closed to new entrants and with effect from May 15, 2009, the Company closed the US defined benefit plan to future accrual. New employees in the United Kingdom are offered the opportunity to join a defined contribution plan and in the United States are offered the opportunity to join a 401(k) plan. In addition to the Company’s UK and US defined benefit pension plans, the Company has several smaller defined benefit pension plans in certain other countries in which it operates including a US non-qualified plan. Elsewhere, pension benefits are typically provided through defined contribution plans. It is the Company’s policy to fund pension costs as required by applicable laws and regulations.
At December 31, 2012, the Company recorded, on the Consolidated Balance Sheets:

•
a pension benefit asset of $136 million (2011: $145 million) representing:

•
$134 million (2011: $136 million) in respect of the UK defined benefit pension plan; and

•
$2 million (2011: $9 million) in respect of the international defined benefit pension plans.

•
a total liability for pension benefits of $282 million (2011: $270 million) representing:

•
$250 million (2011: $258 million) in respect of the US defined benefit pension plan; and

•
$32 million (2011: $12 million) in respect of the international and US non-qualified defined benefit pension plans.

35
Table of Contents

Notes to the financial statements

19. PENSION PLANS (Continued)

UK and US defined benefit plans
The following schedules provide information concerning the Company’s UK and US defined benefit pension plans as of and for the years ended December 31:
 
UK Pension Benefits
 
US Pension Benefits
 
2012
 
2011
 
2012
 
2011
 
(millions)
Change in benefit obligation:
 

 
 

 
 

 
 

Benefit obligation, beginning of year
$
2,217

 
$
1,906

 
$
895

 
$
756

Service cost
35

 
36

 
—

 
—

Interest cost
108

 
106

 
41

 
41

Employee contributions
2

 
2

 
—

 
—

Actuarial loss
186

 
272

 
71

 
127

Benefits paid
(77
)
 
(72
)
 
(49
)
 
(29
)
Foreign currency changes
111

 
(23
)
 
—

 
—

Plan amendments
—

 
(10
)
 
—

 
—

Benefit obligations, end of year
2,582

 
2,217

 
958

 
895

Change in plan assets:
 

 
 

 
 

 
 

Fair value of plan assets, beginning of year
2,353

 
2,085

 
637

 
602

Actual return on plan assets
226

 
269

 
80

 
34

Employee contributions
2

 
2

 
—

 
—

Employer contributions
92

 
92

 
40

 
30

Benefits paid
(77
)
 
(72
)
 
(49
)
 
(29
)
Foreign currency changes
120

 
(23
)
 
—

 
—

Fair value of plan assets, end of year
2,716

 
2,353

 
708

 
637

Funded status at end of year
$
134

 
$
136

 
$
(250
)
 
$
(258
)
Components on the Consolidated Balance Sheets:
 

 
 

 
 

 
 

Pension benefits asset
$
134

 
$
136

 
$
—

 
$
—

Liability for pension benefits
—

 
—

 
(250
)
 
(258
)

Amounts recognized in accumulated other comprehensive loss consist of:
 
UK Pension Benefits
 
US Pension Benefits
 
2012
 
2011
 
2012
 
2011
 
 
 
(millions)
 
 
Net actuarial loss
$
831

 
$
698

 
$
332

 
$
303

Prior service gain
(29
)
 
(35
)
 
—

 
—


The accumulated benefit obligations for the Company’s UK and US defined benefit pension plans were $2,519 million and $958 million, respectively (2011: $2,154 million and $895 million, respectively).

36
Table of Contents

Willis Group Holdings plc

19. PENSION PLANS (Continued)

The components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the UK and US defined benefit plans are as follows:
 
Years ended December 31,
 
UK Pension Benefits
 
US Pension Benefits
 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
 
 
 
 
 
(millions)
 
 
 
 
Components of net periodic benefit cost:
 

 
 

 
 

 
 

 
 

 
 

Service cost
$
35

 
$
36

 
$
37

 
$
—

 
$
—

 
$
—

Interest cost
108

 
106

 
100

 
41

 
41

 
40

Expected return on plan assets
(181
)
 
(161
)
 
(141
)
 
(46
)
 
(44
)
 
(42
)
Amortization of unrecognized prior service gain
(6
)
 
(5
)
 
(5
)
 
—

 
—

 
—

Amortization of unrecognized actuarial loss
39

 
30

 
37

 
8

 
3

 
3

Net periodic benefit (income) cost
$
(5
)
 
$
6

 
$
28

 
$
3

 
$
—

 
$
1

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
 

 
 

 
 

 
 

 
 

 
 

Net actuarial loss (gain)
$
141

 
$
164

 
$
(20
)
 
$
37

 
$
137

 
$
29

Amortization of unrecognized actuarial loss
(39
)
 
(30
)
 
(37
)
 
(8
)
 
(3
)
 
(3
)
Prior service gain
—

 
(10
)
 
—

 
—

 
—

 
—

Amortization of unrecognized prior service gain
6

 
5

 
5

 
—

 
—

 
—

Total recognized in other comprehensive income (loss)
$
108

 
$
129

 
$
(52
)
 
$
29

 
$
134

 
$
26

Total recognized in net periodic benefit cost and other comprehensive income
$
103

 
$
135

 
$
(24
)
 
$
32

 
$
134

 
$
27


The estimated net loss and prior service cost for the UK and US defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year are:
 
UK Pension
Benefits
 
US Pension
Benefits
 
(millions)
Estimated net loss
$
47

 
$
9

Prior service gain
(6
)
 
—



37
Table of Contents

Notes to the financial statements

19. PENSION PLANS (Continued)

The following schedule provides other information concerning the Company’s UK and US defined benefit pension plans:
 
Years ended December 31,
 
UK Pension Benefits
 
US Pension Benefits
 
2012
 
2011
 
2012
 
2011
Weighted-average assumptions to determine benefit obligations:
 

 
 

 
 

 
 

Discount rate
4.4
%
 
4.8
%
 
4.1
%
 
4.6
%
Rate of compensation increase
2.3
%
 
2.1
%
 
N/A

 
N/A

Weighted-average assumptions to determine net periodic benefit cost:
 

 
 

 
 

 
 

Discount rate
4.8
%
 
5.5
%
 
4.6
%
 
5.6
%
Expected return on plan assets
7.5
%
 
7.5
%
 
7.3
%
 
7.5
%
Rate of compensation increase
2.1
%
 
2.6
%
 
N/A

 
N/A

The expected return on plan assets was determined on the basis of the weighted-average of the expected future returns of the various asset classes, using the target allocations shown below. The expected returns on UK plan assets are: UK and foreign equities 9.03 percent, debt securities 4.57 percent and real estate 6.53 percent. The expected returns on US plan assets are: US and foreign equities 10.40 percent and debt securities 4.10 percent.
The Company’s pension plan asset allocations based on fair values were as follows:
 
 
Years ended December 31,
 
 
UK Pension Benefits
 
US Pension Benefits
Asset Category
 
2012
 
2011
 
2012
 
2011
Equity securities
 
41
%
 
42
%
 
49
%
 
44
%
Debt securities
 
37
%
 
35
%
 
50
%
 
54
%
Hedge funds
 
17
%
 
18
%
 
—
%
 
—
%
Real estate
 
3
%
 
4
%
 
—
%
 
—
%
Cash
 
2
%
 
1
%
 
—
%
 
—
%
Other
 
—
%
 
—
%
 
1
%
 
2
%
Total
 
100
%
 
100
%
 
100
%
 
100
%

In the UK the pension trustees in consultation with the Company maintain a diversified asset portfolio and this together with contributions made by the Company is expected to meet the pension scheme’s liabilities as they become due. The UK plan’s assets are divided into 13 separate portfolios according to asset class and managed by 10 investment managers. The broad target allocations are UK and foreign equities (44 percent), debt securities (27 percent), hedge funds (24 percent) and real estate (5 percent). In the US the Company’s investment policy is to maintain a diversified asset portfolio, which together with contributions made by the Company is expected to meet the pension scheme’s liabilities as they become due. The US plan’s assets are currently invested in 16 funds representing most standard equity and debt security classes. The broad target allocations are US and foreign equities (50 percent) and debt securities (50 percent).
Fair Value Hierarchy
The fair value hierarchy has three levels based on the reliability of the inputs used to determine fair value:
•
Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;
•
Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are corroborated by market data; and
•
Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.

38
Table of Contents

Willis Group Holdings plc

19. PENSION PLANS (Continued)

The following tables present, at December 31, 2012 and 2011, for each of the fair value hierarchy levels, the Company’s UK pension plan assets that are measured at fair value on a recurring basis.
 
 
UK Pension Plan
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
(millions)
 
 
Equity securities:
 
 

 
 

 
 

 
 

US equities
 
$
492

 
$
108

 
$
—

 
$
600

UK equities
 
317

 
59

 
—

 
376

Other equities
 
28

 
97

 
—

 
125

Fixed income securities:
 
 

 
 

 
 

 
 

US Government bonds
 
11

 
—

 
—

 
11

UK Government bonds
 
625

 
—

 
—

 
625

Other Government bonds
 
13

 
—

 
—

 
13

UK corporate bonds
 
112

 
—

 
—

 
112

Other corporate bonds
 
29

 
—

 
—

 
29

Derivatives
 
—

 
217

 
—

 
217

Real estate
 
—

 
—

 
76

 
76

Cash
 
53

 
—

 
—

 
53

Other investments:
 
 

 
 

 
 

 
 

Hedge funds
 
—

 
27

 
431

 
458

Other
 
8

 
13

 
—

 
21

Total
 
$
1,688

 
$
521

 
$
507

 
$
2,716


 
 
UK Pension Plan
December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
(millions)
 
 
Equity securities:
 
 

 
 

 
 

 
 

US equities
 
$
422

 
$
93

 
$
—

 
$
515

UK equities
 
278

 
41

 
—

 
319

Other equities
 
15

 
137

 
—

 
152

Fixed income securities:
 
 

 
 

 
 

 
 

US Government bonds
 
—

 
—

 
—

 
—

UK Government bonds
 
599

 
—

 
—

 
599

Other Government bonds
 
1

 
—

 
—

 
1

UK corporate bonds
 
63

 
—

 
—

 
63

Other corporate bonds
 
23

 
—

 
—

 
23

Derivatives
 
—

 
158

 
—

 
158

Real estate
 
—

 
—

 
86

 
86

Cash
 
28

 
—

 
—

 
28

Other investments:
 
 

 
 

 
 

 
 

Hedge funds
 
—

 
26

 
388

 
414

Other
 
—

 
(7
)
 
2

 
(5
)
Total
 
$
1,429

 
$
448

 
$
476

 
$
2,353


39
Table of Contents

Notes to the financial statements

19. PENSION PLANS (Continued)

The UK plan’s real estate investment comprises UK property and infrastructure investments which are valued by the fund manager taking into account cost, independent appraisals and market based comparable data. The UK plan’s hedge fund investments are primarily invested in various ‘fund of funds’ and are valued based on net asset values calculated by the fund and are not publicly available. Liquidity is typically monthly and is subject to liquidity of the underlying funds.
The following tables present, at December 31, 2012 and 2011, for each of the fair value hierarchy levels, the Company’s US pension plan assets that are measured at fair value on a recurring basis.
 
 
US Pension Plan
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
(millions)
 
 
Equity securities:
 
 

 
 

 
 

 
 

US equities
 
$
144

 
$
78

 
$
—

 
$
222

Non US equities
 
98

 
27

 
—

 
125

Fixed income securities:
 
 

 
 

 
 

 
 

US Government bonds
 
—

 
69

 
—

 
69

US corporate bonds
 
—

 
144

 
—

 
144

International fixed income securities
 
52

 
39

 
—

 
91

Municipal & Non US government bonds
 
—

 
35

 
—

 
35

Other investments:
 
 

 
 

 
 

 
 

Mortgage backed securities
 
—

 
13

 
—

 
13

Other
 
3

 
6

 
—

 
9

Total
 
$
297

 
$
411

 
$
—

 
$
708


 
 
US Pension Plan
December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
(millions)
 
 
Equity securities:
 
 

 
 

 
 

 
 

US equities
 
$
176

 
$
—

 
$
—

 
$
176

Non US equities
 
101

 
—

 
—

 
101

Fixed income securities:
 
 

 
 

 
 

 
 

US Government bonds
 
—

 
92

 
—

 
92

US corporate bonds
 
—

 
130

 
—

 
130

International fixed income securities
 
48

 
33

 
—

 
81

Municipal & Non US government bonds
 
—

 
32

 
—

 
32

Other investments:
 
 

 
 

 
 

 
 

Mortgage backed securities
 
—

 
10

 
—

 
10

Other
 
5

 
10

 
—

 
15

Total
 
$
330

 
$
307

 
$
—

 
$
637


Equity securities comprise:
•
common stock and preferred stock which are valued using quoted market prices; and
•
pooled investment vehicles which are valued at their net asset values as calculated by the investment manager and typically have daily or weekly liquidity.
Fixed income securities comprise US, UK and other Government Treasury Bills, loan stock, index linked loan stock and UK and other corporate bonds which are typically valued using quoted market prices.

40
Table of Contents

Willis Group Holdings plc

19. PENSION PLANS (Continued)

As a result of the inherent limitations related to the valuations of the Level 3 investments, due to the unobservable inputs of the underlying funds, the estimated fair value may differ significantly from the values that would have been used had a market for those investments existed.
The following table summarizes the changes in the UK pension plan’s Level 3 assets for the years ended December 31, 2012 and 2011:
 
UK Pension
 
Plan
 
Level 3
 
(millions)
Balance at January 1, 2011
$
483

Purchases, sales, issuances and settlements, net
2

Unrealized and realized gains relating to instruments still held at end of year
(7
)
Foreign exchange
(2
)
Balance at December 31, 2011
$
476

Purchases, sales, issuances and settlements, net
(2
)
Unrealized and realized gains relating to instruments still held at end of year
17

Foreign exchange
16

Balance at December 31, 2012
$
507


In 2013, the Company expects to make contributions to the UK plan of approximately $91 million and $40 million to the US plan. In addition, approximately $12 million will be paid in 2013 into the UK defined benefit plan related to employee's salary sacrifice contributions.
The following benefit payments, which reflect expected future service, as appropriate, are estimated to be paid by the UK and US defined benefit pension plans:
Expected future benefit payments
 
UK Pension Benefits
 
US Pension Benefits
 
 
(millions)
2013
 
81

 
33

2014
 
83

 
35

2015
 
86

 
38

2016
 
88

 
41

2017
 
91

 
43

2018-2022
 
497

 
267


Willis North America has a 401(k) plan covering all eligible employees of Willis North America and its subsidiaries. The plan allows participants to make pre-tax contributions which the Company, at its discretion may match. During 2009, the Company had decided not to make any matching contributions other than for former HRH employees whose contributions were matched up to 75 percent under the terms of the acquisition. In January 2011, 401(k) matching was reinstated for our US associates. All investment assets of the plan are held in a trust account administered by independent trustees. The Company’s 401(k) matching contributions for 2012 were $10 million (2011: $10 million; 2010: $nil).


41
Table of Contents

Notes to the financial statements

19. PENSION PLANS (Continued)

International and US non-qualified defined benefit pension plans
In addition to the Company’s UK and US defined benefit pension plans, the Company has several smaller defined benefit pension plans in certain other countries in which it operates and non-qualified defined benefit pension plan in the US.
During the year ended December 31, 2011, the Company reported the US non-qualified plan within other non-current liabilities. As at December 31, 2012, the Company has incorporated this plan with its other International pension benefits.
In total, a $30 million net pension benefit liability (2011: $3 million) has been recognized in respect of these schemes.
The following schedules provide information concerning the Company’s international and US non-qualified defined benefit pension plans:
 
International and US non-qualified Pension Plans
 
2012
 
2011
 
(millions)
Change in benefit obligation:
 

 
 

Benefit obligation, beginning of year
$
131

 
$
135

Service cost
3

 
4

Interest cost
7

 
7

Actuarial loss (gain)
30

 
(4
)
Benefits paid
(6
)
 
(6
)
Employee contributions
1

 
—

Curtailment
—

 
(1
)
Reclassification from other non-current liabilities (i)
9

 
—

Foreign currency changes
5

 
(4
)
Benefit obligations, end of year
180

 
131

Change in plan assets:
 

 
 

Fair value of plan assets, beginning of year
128

 
125

Actual return on plan assets
11

 
1

Employer contributions
11

 
13

Employee contributions
1

 
—

Benefits paid
(6
)
 
(6
)
Foreign currency changes
5

 
(5
)
Fair value of plan assets, end of year
150

 
128

Funded status at end of year
$
(30
)
 
$
(3
)
Components on the Consolidated Balance Sheets:
 

 
 

Pension benefits asset
$
2

 
$
9

Liability for pension benefits
$
(32
)
 
$
(12
)
_________________________________
(i) Transfer in of benefit obligation for US non-qualified plan as at December 31, 2011.
Amounts recognized in accumulated other comprehensive loss consist of a net actuarial loss of $35 million (2011: $10 million).
The accumulated benefit obligation for the Company’s international and US non-qualified defined benefit pension plans was $177 million (2011: $128 million).

42
Table of Contents

Willis Group Holdings plc

19. PENSION PLANS (Continued)

The components of the net periodic benefit cost and other amounts recognized in other comprehensive loss for the international and US non-qualified defined benefit plans are as follows:
 
International and US non-qualified Pension Benefits
 
2012
 
2011
 
2010
 
(millions)
Components of net periodic benefit cost:
 

 
 

 
 

Service cost
$
3

 
$
4

 
$
4

Interest cost
7

 
7

 
7

Expected return on plan assets
(6
)
 
(6
)
 
(6
)
Amortization of unrecognized actuarial loss
—

 
1

 
—

Curtailment (gain) loss
—

 
(1
)
 
1

Net periodic benefit cost
$
4

 
$
5

 
$
6

Other changes in plan assets and benefit obligations recognized in other comprehensive income (loss):
 

 
 

 
 

Amortization of unrecognized actuarial loss
$
—

 
$
(1
)
 
$
—

Net actuarial loss (gain)
25

 
2

 
(13
)
Total recognized in other comprehensive loss (income)
25

 
1

 
(13
)
Total recognized in net periodic benefit cost and other comprehensive loss (income)
$
29

 
$
6

 
$
(7
)

The estimated net loss for the international and US non-qualified defined benefit plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $1 million.
The following schedule provides other information concerning the Company’s international and US non-qualified defined benefit pension plans:
 
International and US non-qualified
Pension Benefits
 
2012
 
2011
Weighted-average assumptions to determine benefit obligations:
 
 
 
Discount rate
2.50% - 3.75%
 
3.30% – 5.30%
Rate of compensation increase
2.00% - 2.00%
 
2.50% – 3.00%
Weighted-average assumptions to determine net periodic benefit cost:
 
 
 
Discount rate
3.30% - 5.30%
 
4.00% – 5.10%
Expected return on plan assets
2.00% - 5.73%
 
4.80% – 5.73%
Rate of compensation increase
2.50% - 3.00%
 
2.50% – 3.00%


The determination of the expected long-term rate of return on the international and US non-qualified pension plan assets is dependent upon the specific circumstances of each individual plan. The assessment may include analyzing historical investment performance, investment community forecasts and current market conditions to develop expected returns for each asset class used by the plans.
The Company’s international and US non-qualified pension plan asset allocations at December 31, 2012 based on fair values were as follows:

43
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Notes to the financial statements

19. PENSION PLANS (Continued)

 
 
International and US non-qualified
Pension Benefits
Asset Category
 
2012
 
2011
Equity securities
 
35
%
 
35
%
Debt securities
 
55
%
 
58
%
Real estate
 
3
%
 
4
%
Other
 
7
%
 
3
%
Total
 
100
%
 
100
%
The investment policies for the international plans vary by jurisdiction but are typically established by the local pension plan trustees, where applicable, and seek to maintain the plans’ ability to meet liabilities of the plans as they fall due and to comply with local minimum funding requirements.
Fair Value Hierarchy
The following tables present, at December 31, 2012 and 2011, for each of the fair value hierarchy levels, the Company’s international and US non-qualified pension plan assets that are measured at fair value on a recurring basis.
 
 
International and US non-qualified Pension Plans
December 31, 2012
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
(millions)
 
 
Equity securities:
 
 

 
 

 
 

 
 

US equities
 
$
24

 
$
—

 
$
—

 
$
24

UK equities
 
5

 
—

 
—

 
5

Overseas equities
 
22

 
—

 
1

 
23

Fixed income securities:
 
 

 
 

 
 

 
 

Other Government bonds
 
49

 
—

 
—

 
49

Corporate bonds
 
—

 
9

 
—

 
9

Derivative instruments
 
—

 
24

 
—

 
24

Real estate
 
—

 
—

 
5

 
5

Cash
 
5

 
—

 
—

 
5

Other investments:
 
 

 
 

 
 

 
 

Other investments
 
—

 
1

 
5

 
6

Total
 
$
105

 
$
34

 
$
11

 
$
150



44
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Willis Group Holdings plc

19. PENSION PLANS (Continued)

 
 
International and US non-qualified Pension Plans
December 31, 2011
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
 
(millions)
 
 
Equity securities:
 
 

 
 

 
 

 
 

US equities
 
$
20

 
$
—

 
$
—

 
$
20

UK equities
 
4

 
—

 
—

 
4

Overseas equities
 
18

 
—

 
1

 
19

Fixed income securities:
 
 

 
 

 
 

 
 

Other Government bonds
 
48

 
1

 
—

 
49

Derivative instruments
 
—

 
22

 
—

 
22

Real estate
 
—

 
—

 
5

 
5

Cash
 
4

 
—

 
—

 
4

Other investments:
 
 

 
 

 
 

 
 

Other investments
 
—

 
—

 
5

 
5

Total
 
$
94

 
$
23

 
$
11

 
$
128


Equity securities comprise:
•
common stock which are valued using quoted market prices; and
•
unit linked funds which are valued at their net asset values as calculated by the investment manager and typically have daily liquidity.
Fixed income securities comprise overseas Government loan stock which is typically valued using quoted market prices. Real estate investment comprises overseas property and infrastructure investments which are valued by the fund manager taking into account cost, independent appraisals and market based comparable data. Derivative instruments are valued using an income approach typically using swap curves as an input.
Assets classified as Level 3 investments did not materially change during the year ended December 31, 2012.
In 2013, the Company expects to contribute $11 million to the international and US non-qualified plans.
The following benefit payments, which reflect expected future service, as appropriate, are estimated to be paid by the international and US non-qualified defined benefit pension plans:
 
 
International and US non-qualified
 
 
Pension
Expected future benefit payments
 
Benefits
 
 
(millions)
2013
 
$
5

2014
 
5

2015
 
6

2016
 
6

2017
 
6

2018-2022
 
34



45
Table of Contents

Notes to the financial statements

20.
DEBT
Short-term debt and current portion of the long-term debt consists of the following:
 
December 31,
 
2012
 
2011
 
(millions)
Current portion of 5-year term loan facility expires 2016
$
15

 
$
11

6.000% loan notes due 2012
—

 
4

 
$
15

 
$
15


Long-term debt consists of the following:
 
December 31,
 
2012
 
2011
 
(millions)
5-year term loan facility expires 2016
$
274

 
$
289

5.625% senior notes due 2015
350

 
350

Fair value adjustment on 5.625% senior notes due 2015
18

 
20

4.125% senior notes due 2016
299

 
299

6.200% senior notes due 2017
600

 
600

7.000% senior notes due 2019
300

 
300

5.750% senior notes due 2021
496

 
496

3-year term loan facility expires 2015
1

 
—

 
$
2,338

 
$
2,354

All direct obligations under the 5.625%, 6.200% and 7.000% senior notes are guaranteed by Willis Group Holdings, Willis Netherlands B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc and Willis Group Limited.
Debt issuance

On July 11, 2012, a new revolving credit facility of 15 million Chinese Yuan Renminbi 'RMB' ($2 million) was put in place which bears interest at 110 percent of the applicable short term interest rate an RMB loan having a term equal to the tenor of that drawing as published by the People's Bank of China 'PBOC' prevailing as at the drawdown date of that drawing. The facility expires on July 11, 2013. As at December 31, 2012 ¥nil ($nil) had been drawn down on the facility. This facility is solely for the use of our Chinese subsidiary and is available for general working capital purposes.
In December 2011 we refinanced our bank facility, comprising a 5-year $300 million term loan and a 5-year $500 million revolving credit facility. The $300 million term loan replaced the remaining $328 million balance on our $700 million 5-year term loan facility and the $500 million revolving facility replaced our $300 million and our $200 million revolving credit facilities. Unamortized debt issuance costs of $10 million relating to these facilities were written off in December 2011 following completion of the refinancing.
The 5-year term loan facility expiring 2016 bears interest at LIBOR plus 1.50% and is repayable in quarterly installments and a final repayment of $225 million is due in the fourth quarter of 2016. In 2012, we made $11 million of mandatory repayments against this 5-year term loan.
Drawings under the revolving $500 million credit facility bear interest at LIBOR plus 1.50% and the facility expires on December 16, 2016. These margins apply while the Company’s debt rating remains BBB-/Baa3. As of December 31, 2012 $nil was outstanding under the revolving credit facility (December 31, 2011: $nil).

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Willis Group Holdings plc
  
20. DEBT (Continued)

The agreements relating to our 5-year term loan facility expiring 2016 and the revolving $500 million credit facility contain requirements to maintain maximum levels of consolidated funded indebtedness in relation to consolidated EBITDA and minimum level of consolidated EBITDA to consolidated cash interest expense, subject to certain adjustments. In addition, the agreements relating to our credit facilities and senior notes include, in the aggregate covenants relating to the delivery of financial statements, reports and notices, limitations on liens, limitations on sales and other disposals of assets, limitations on indebtedness and other liabilities, limitations on sale and leaseback transactions, limitations on mergers and other fundamental changes, maintenance of property, maintenance of insurance, nature of business, compliance with applicable laws, maintenance of corporate existence and rights, payment of taxes and access to information and properties. At December 31, 2012, the Company was in compliance with all covenants.
In 2011, the Company issued $300 million of 4.125% senior notes due 2016 and $500 million of 5.750% senior notes due 2021. The effective interest rates of these senior notes are 4.240% and 5.871% respectively, which include the impact of the discount upon issuance. The proceeds were used to repurchase and redeem $500 million of 12.875% senior notes due 2016 including a make-whole payment (representing a slight discount to the contractual make-whole amount) of $158 million. Following the repurchase the Company wrote off $13 million of unamortized debt issuance costs.
During the year ended December 31, 2010, the Company entered into a series of interest rate swaps for a total notional amount of $350 million to receive a fixed rate and pay a variable rate on a semi-annual basis, with a maturity date of July 15, 2015. The Company has designated and accounts for these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015. The fair values of the interest rate swaps are included within other assets or other liabilities and the fair value of the hedged element of the senior notes is included within long-term debt.
On November 7, 2012, a further revolving facility of $20 million was renewed which bears interest at LIBOR plus 1.55% until 2014 and LIBOR plus 1.700% thereafter. The facility expires on November 6, 2015. As at December 31, 2012 no drawings had been made on the facility. This facility is solely for the use of our main UK regulated entity and would be available in certain exceptional circumstances. The facility is secured against the freehold of the UK regulated entity’s freehold property in Ipswich.
Lines of credit
The Company also has available $4 million (2011: $3 million) in lines of credit, of which $nil was drawn as of December 31, 2012 (2011: $nil).
Analysis of interest expense
The following table shows an analysis of the interest expense for the years ended December 31:
 
Year ended December 31,
 
2012
 
2011
 
2010
 
(millions)
5-year term loan facility repaid 2011
$
—

 
$
14

 
$
17

5-year term loan facility expires 2016
6

 
—

 
—

Revolving $300 million credit facility
—

 
4

 
3

Revolving $500 million credit facility
1

 
—

 
—

5.625% senior notes due 2015
12

 
12

 
14

12.875% senior notes due 2016
—

 
15

 
67

4.125% senior notes due 2016
13

 
10

 
—

6.200% senior notes due 2017
38

 
38

 
38

7.000% senior notes due 2019
21

 
21

 
21

5.125% senior notes due 2010
—

 
—

 
3

5.750% senior notes due 2021
29

 
23

 
—

Other(i)
8

 
19

 
3

Total interest expense
$
128

 
$
156

 
$
166

_________________________________
(i) 
In 2011, Other includes $10 million relating to the write-off of unamortized debt issuance fees.

47
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Notes to the financial statements

21.
PROVISIONS FOR LIABILITIES
An analysis of movements on provisions for liabilities is as follows:
 
Claims,
lawsuits and
other
proceedings(i)
 
Other
provisions(ii)
 
Total
 
 
(millions)
 
Balance at January 1, 2011
$
145

 
$
34

 
$
179

Net provisions made during the year
45

 
11

 
56

Utilized in the year
(31
)
 
(7
)
 
(38
)
Foreign currency translation adjustment
(1
)
 
—

 
(1
)
Balance at December 31, 2011
$
158

 
$
38

 
$
196

Net provisions made during the year
23

 
(2
)
 
21

Utilized in the year
(31
)
 
(10
)
 
(41
)
Foreign currency translation adjustment
2

 
2

 
4

Balance at December 31, 2012
$
152

 
$
28

 
$
180

_________________________________
(i) 
The claims, lawsuits and other proceedings provision includes E&O cases which represents management’s assessment of liabilities that may arise from asserted and unasserted claims for alleged errors and omissions that arise in the ordinary course of the Group’s business. Where some of the potential liability is recoverable under the Group’s external insurance arrangements, the full assessment of the liability is included in the provision with the associated insurance recovery shown separately as an asset. Insurance recoveries recognized at December 31, 2012 amounted to $6 million (2011: $6 million).
(ii) 
The ‘Other’ category includes amounts relating to vacant property provisions of $13 million (2011: $20 million).


48
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Willis Group Holdings plc



22.
COMMITMENTS AND CONTINGENCIES
The Company’s contractual obligations as at December 31, 2012 are presented below:
 
 
 
 
 
Payments due by
 
 
 
 
Obligations
Total
 
2013
 
2014-2015
 
2016-2017
 
After 2017
 
(millions)
5-year term loan facility expires 2016
$
289

 
$
15

 
$
32

 
$
242

 
$
—

Interest on term loan
18

 
5

 
9

 
4

 
—

Revolving $500 million credit facility commitment fees
5

 
1

 
3

 
1

 
—

5.625% senior notes due 2015
350

 
—

 
350

 
—

 
—

Fair value adjustments on 5.625% senior notes due 2015
18

 
—

 
18

 
—

 
—

4.125% senior notes due 2016
300

 
—

 
—

 
300

 
—

6.200% senior notes due 2017
600

 
—

 
—

 
600

 
—

7.000% senior notes due 2019
300

 
—

 
—

 
—

 
300

5.750% senior notes due 2021
500

 
—

 
—

 
—

 
500

Interest on senior notes
625

 
119

 
229

 
148

 
129

Total debt and related interest
3,005

 
140

 
641

 
1,295

 
929

Operating leases(i)
1,274

 
127

 
222

 
166

 
759

Pensions
662

 
142

 
245

 
245

 
30

Other contractual obligations(ii)
99

 
31

 
23

 
10

 
35

Total contractual obligations
$
5,040

 
$
440

 
$
1,131

 
$
1,716

 
$
1,753

_________________________________
(i) 
Presented gross of sublease income.
(ii) 
Other contractual obligations include capital lease commitments, put option obligations and investment fund capital call obligations, the timing of which are included at the earliest point they may fall due.
(iii) 
The above excludes $34 million of liabilities for unrecognized tax benefits as the Company is unable to reasonably predict the timing of settlement of these liabilities.

Debt obligations and facilities
The Company’s debt and related interest obligations at December 31, 2012 are shown in the above table.
During 2011, the Company entered into a new revolving credit facility agreement under which $500 million is available. As at December 31, 2012 $nil was outstanding under the revolving credit facility.
This facility is in addition to the remaining availability of $20 million under the Company’s previously existing $20 million revolving credit facility and an additional $2 million under the Company's new $2 million facility that was entered into during the year.
The only mandatory repayments of debt over the next 12 months are the scheduled repayment of $15 million current portion of the Company’s 5-year term loan. We also have the right, at our option, to prepay indebtedness under the credit facility without further penalty and to redeem the senior notes at our option by paying a ‘make-whole’ premium as provided under the applicable debt instrument.
Operating leases
The Company leases certain land, buildings and equipment under various operating lease arrangements. Original non-cancellable lease terms typically are between 10 and 20 years and may contain escalation clauses, along with options that permit early withdrawal. The total amount of the minimum rent is expensed on a straight-line basis over the term of the lease.

49
Table of Contents

Notes to the financial statements

22. COMMITMENTS AND CONTINGENCIES (Continued)

As of December 31, 2012, the aggregate future minimum rental commitments under all non-cancellable operating lease agreements are as follows:
 
Gross rental
commitments
 
Rentals from
subleases
 
Net rental
commitments
 
 
 
(millions)
 
 
2013
$
127

 
$
(15
)
 
$
112

2014
119

 
(14
)
 
105

2015
103

 
(13
)
 
90

2016
87

 
(13
)
 
74

2017
79

 
(11
)
 
68

Thereafter
759

 
(23
)
 
736

Total
$
1,274

 
$
(89
)
 
$
1,185


The Company leases its main London building under a 25-year operating lease, which expires in 2032. The Company’s contractual obligations in relation to this commitment included in the table above total $730 million (2011: $715 million). Annual rentals are $32 million (2011: $30 million) per year and the Company has subleased approximately 29 percent (2011: 29 percent) of the premises under leases up to 15 years. The amounts receivable from subleases, included in the table above, total $76 million (2011: $82 million; 2010: $87 million).
Rent expense amounted to $135 million for the year ended December 31, 2012 (2011: $127 million; 2010: $131 million). The Company’s rental income from subleases was $17 million for the year ended December 31, 2012 (2011: $18 million; 2010: $22 million).
Pensions
Contractual obligations for our pension plans reflect the contributions we expect to make over the next five years into our US and UK plans. These contributions are based on current funding positions and may increase or decrease dependent on the future performance of the two plans.
In the UK, we are required to agree a funding strategy for our UK defined benefit plan with the plan's trustees. In March 2012, the Company agreed to a revised schedule of contributions towards on-going accrual of benefits and deficit funding contributions the Company will make to the UK plan over the six years ended December 31, 2017. Contributions in each of the next five years are expected to total approximately $81 million, of which approximately $23 million relates to on-going contributions calculated as 15.9 percent of active plan members' pensionable salary and approximately $58 million that relates to contributions towards the funding deficit.
In addition, further contributions will be payable based on a profit share calculation (equal to 20 percent of EBITDA in excess of $900 million per annum as defined by the revised schedule of contributions) and an exceptional return calculation (equal to 10 percent of any exceptional returns made to shareholders, for example, share buybacks, and special dividends). Upon finalization of these calculations the Company expects to make a further contribution in 2013 of $10 million, calculated as 10 percent of the $100 million share buy-back program completed during 2012. Aggregate contributions under the deficit funding contribution and the profit share calculation are capped at £312 million ($507 million) over the six years ended December 31, 2017.
The schedule of contributions is automatically renegotiated after three years and at any earlier time jointly agreed by the Company and the Trustee.
In addition, approximately $12 million will be paid annually into the UK defined benefit plan related to employee's salary sacrifice contributions.
The total contracted contributions for all plans in 2013 are expected to be approximately $142 million, excluding approximately $12 million in respect of the salary sacrifice scheme.


50
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Willis Group Holdings plc
  
22. COMMITMENTS AND CONTINGENCIES (Continued)


Guarantees
Guarantees issued by certain of Willis Group Holdings’ subsidiaries with respect to the senior notes and revolving credit facilities are discussed in Note 20 — Debt in these consolidated financial statements.
Certain of Willis Group Holdings’ subsidiaries have given the landlords of some leasehold properties occupied by the Company in the United Kingdom and the United States guarantees in respect of the performance of the lease obligations of the subsidiary holding the lease. The operating lease obligations subject to such guarantees amounted to $829 million and $828 million at December 31, 2012 and 2011, respectively.
In addition, the Company has given guarantees to bankers and other third parties relating principally to letters of credit amounting to $10 million and $7 million at December 31, 2012 and 2011, respectively. Willis Group Holdings also guarantees certain of its UK and Irish subsidiaries’ obligations to fund the UK and Irish defined benefit plans.
Other contractual obligations
For certain subsidiaries and associates, the Company has the right to purchase shares (a call option) from co-shareholders at various dates in the future. In addition, the co-shareholders of certain subsidiaries and associates have the right to sell their shares (a put option) to the Company at various dates in the future. Generally, the exercise price of such put options and call options is formula-based (using revenues and earnings) and is designed to reflect fair value. Based on current projections of profitability and exchange rates and assuming the put options are exercised, the potential amount payable from these options is not expected to exceed $19 million (2011: $72 million).
In July 2010, the Company made a capital commitment of $25 million to Trident V Parallel Fund, LP, an investment fund managed by Stone Point Capital. This replaced a capital commitment of $25 million that had been made to Trident V, LP in December 2009. As at December 31, 2012 there have been approximately $10 million of capital contributions.
In May 2011, the Company made a capital commitment of $10 million to Dowling Capital Partners I, LP. As at December 31, 2012 there had been $2 million capital contributions.
Other contractual obligations at December 31, 2012 also include the capital lease on the Company’s Nashville property of $53 million, payable from 2013 onwards.
Claims, Lawsuits and Other Proceedings

In the ordinary course of business, the Company is subject to various actual and potential claims, lawsuits, and other proceedings relating principally to alleged errors and omissions in connection with the placement of insurance and reinsurance. Similar to other corporations, the Company is also subject to a variety of other claims, including those relating to the Company's employment practices. Some of the claims, lawsuits and other proceedings seek damages in amounts which could, if assessed, be significant.

Errors and omissions claims, lawsuits, and other proceedings arising in the ordinary course of business are covered in part by professional indemnity or other appropriate insurance. The terms of this insurance vary by policy year and self-insured risks have increased significantly in recent years. Regarding self-insured risks, the Company has established provisions which are believed to be adequate in the light of current information and legal advice, and the Company adjusts such provisions from time to time according to developments.

On the basis of current information, the Company does not expect that the actual claims, lawsuits and other proceedings, to which the Company is subject, or potential claims, lawsuits, and other proceedings relating to matters of which it is aware, will ultimately have a material adverse effect on the Company's financial condition, results of operations or liquidity. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation and disputes with insurance companies, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company's results of operations or cash flows in particular quarterly or annual periods.

The material actual or potential claims, lawsuits and other proceedings, of which the Company is currently aware, are:

51
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Notes to the financial statements

22. COMMITMENTS AND CONTINGENCIES (Continued)

Stanford Financial Group Litigation
The Company has been named as a defendant in 12 similar lawsuits relating to the collapse of The Stanford Financial Group ('Stanford'), for which Willis of Colorado, Inc. acted as broker of record on certain lines of insurance. The complaints in these actions generally allege that the defendants actively and materially aided Stanford's alleged fraud by providing Stanford with certain letters regarding coverage that they knew would be used to help retain or attract actual or prospective Stanford client investors. The complaints further allege that these letters, which contain statements about Stanford and the insurance policies that the defendants placed for Stanford, contained untruths and omitted material facts and were drafted in this manner to help Stanford promote and sell its allegedly fraudulent certificates of deposit.
The 12 actions are as follows:
•
Troice, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:09-CV-01274-N, was filed on July 2, 2009 in the U.S. District Court for the Northern District of Texas against Willis Group Holdings plc, Willis of Colorado, Inc. and a Willis associate, among others. On April 1, 2011, plaintiffs filed the operative Third Amended Class Action Complaint individually and on behalf of a putative, worldwide class of Stanford investors, adding Willis Limited as a defendant and alleging claims under Texas statutory and common law and seeking damages in excess of $1 billion, punitive damages and costs. On May 2, 2011, the defendants filed motions to dismiss the Third Amended Class Action Complaint, arguing, inter alia, that the plaintiffs’ claims are precluded by the Securities Litigation Uniform Standards Act of 1998 (‘SLUSA’).

On May 10, 2011, the court presiding over the Stanford-related actions in the Northern District of Texas entered an order providing that it would consider the applicability of SLUSA to the Stanford-related actions based on the decision in a separate Stanford action not involving a Willis entity, Roland v. Green, Civil Action No. 3:10-CV-0224-N. On August 31, 2011, the court issued its decision in Roland, dismissing that action with prejudice under SLUSA.
On October 27, 2011, the court in Troice entered an order (i) dismissing with prejudice those claims asserted in the Third Amended Class Action Complaint on a class basis on the grounds set forth in the Roland decision discussed above and (ii) dismissing without prejudice those claims asserted the Third Amended Class Action Complaint on an individual basis. Also on October 27, 2011, the court entered a final judgment in the action.
On October 28, 2011, the plaintiffs in Troice filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit. Subsequently, Troice, Roland and a third action captioned Troice, et al. v. Proskauer Rose LLP, Civil Action No. 3:09-CV-01600-N, which also was dismissed on the grounds set forth in the Roland decision discussed above and on appeal to the U.S. Court of Appeals for the Fifth Circuit, were consolidated for purposes of briefing and oral argument. Following the completion of briefing and oral argument, on March 19, 2012, the Fifth Circuit reversed and remanded the actions. On April 2, 2012, the defendants-appellees filed petitions for rehearing en banc.  On April 19, 2012, the petitions for rehearing en banc were denied. On July 18, 2012, defendants-appellees filed a petition for writ of certiorari with the United States Supreme Court regarding the Fifth Circuit's reversal in Troice. On January 18, 2013, the Supreme Court granted our petition and will hear our appeal. Opening briefs are due in early May 2013, and we expect oral argument in October and a decision in late 2013 or early 2014.
•
Ranni v. Willis of Colorado, Inc., et al., C.A. No. 09-22085, was filed on July 17, 2009 against Willis Group Holdings plc and Willis of Colorado, Inc. in the U.S. District Court for the Southern District of Florida. The complaint was filed on behalf of a putative class of Venezuelan and other South American Stanford investors and alleges claims under Section 10(b) of the Securities Exchange Act of 1934 (and Rule 10b-5 thereunder) and Florida statutory and common law and seeks damages in an amount to be determined at trial. On October 6, 2009, Ranni was transferred, for consolidation or coordination with other Stanford-related actions (including Troice), to the Northern District of Texas by the U.S. Judicial Panel on Multidistrict Litigation (the ‘JPML’). The defendants have not yet responded to the complaint in Ranni.

•
Canabal, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:09-CV-01474-D, was filed on August 6, 2009 against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate named as a defendant in Troice, among others, also in the Northern District of Texas. The complaint was filed individually and on behalf of a putative class of Venezuelan Stanford investors, alleged claims under Texas statutory and common law and sought damages in excess of $1 billion, punitive damages, attorneys’ fees and costs. On December 18, 2009, the parties in Troice and Canabal stipulated to the consolidation of those actions (under the Troice civil action number), and, on December 31, 2009, the plaintiffs in Canabal filed a notice of dismissal, dismissing the action without prejudice.


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Willis Group Holdings plc
  
22. COMMITMENTS AND CONTINGENCIES (Continued)


•
Rupert, et al. v. Winter, et al., Case No. 2009C115137, was filed on September 14, 2009 on behalf of 97 Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under the Securities Act of 1933, Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $300 million, attorneys’ fees and costs. On October 20, 2009, certain defendants, including Willis of Colorado, Inc., (i) removed Rupert to the U.S. District Court for the Western District of Texas, (ii) notified the JPML of the pendency of this related action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. On April 1, 2010, the JPML issued a final transfer order for the transfer of Rupert to the Northern District of Texas. On January 24, 2012, the Court remanded Rupert to Texas State Court (Bexar County), but stayed the case until further order of the Court. The defendants have not yet responded to the complaint in Rupert.

•
Casanova, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:10-CV-01862-O, was filed on September 16, 2010 on behalf of seven Stanford investors against Willis Group Holdings plc, Willis Limited, Willis of Colorado, Inc. and the same Willis associate, among others, also in the Northern District of Texas. The complaint alleges claims under Texas statutory and common law and seeks actual damages in excess of $5 million, punitive damages, attorneys’ fees and costs. The defendants have not yet responded to the complaint in Casanova.

•
Rishmague, et ano. v. Winter, et al., Case No. 2011CI02585, was filed on March 11, 2011 on behalf of two Stanford investors, individually and as representatives of certain trusts, against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $37 million and attorneys’ fees and costs. On April 11, 2011, certain defendants, including Willis of Colorado, Inc., (i) removed Rishmague to the Western District of Texas, (ii) notified the JPML of the pendency of this related action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. On August 8, 2011, the JPML issued a final transfer order for the transfer of Rishmague to the Northern District of Texas, where it is currently pending. The defendants have not yet responded to the complaint in Rishmague.

•
MacArthur v. Winter, et al., Case No. 2013-07840, was filed on February 8, 2013 on behalf of two Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Harris County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks actual, special, consequential and treble damages of approximately $4 million and attorneys' fees and costs. The defendants have not yet responded to the complaint in MacArthur.

•
Barbar, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05666CA27, was filed on February 14, 2013 on behalf of 35 Stanford investors against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County). The complaint alleges claims under Florida common law and seeks compensatory damages in excess of $30 million. The defendants have not yet responded to the complaint in Barbar.

•
de Gadala-Maria, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05669CA30, was filed on February 14, 2013 on behalf of 64 Stanford investors against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County). The complaint alleges claims under Florida common law and seeks compensatory damages in excess of $83.5 million. The defendants have not yet responded to the complaint in de Gadala-Maria.

•
Ranni, et ano. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05673CA06, was filed on February 14, 2013 on behalf of two Stanford investors against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County). The complaint alleges claims under Florida common law and seeks compensatory damages in excess of $3 million. The defendants have not yet responded to the complaint in Ranni.
•
Tisminesky, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05676CA09, was filed on February 14, 2013 on behalf of 11 Stanford investors against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County). The complaint alleges claims under Florida common law and

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Notes to the financial statements

22. COMMITMENTS AND CONTINGENCIES (Continued)

seeks compensatory damages in excess of $6.5 million. The defendants have not yet responded to the complaint in Tisminesky.
•
Zacarias, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05678CA11, was filed on February 14, 2013 on behalf of 10 Stanford investors against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County). The complaint alleges claims under Florida common law and seeks compensatory damages in excess of $12.5 million. The defendants have not yet responded to the complaint in Zacarias.

Additional actions could be brought in the future by other investors in certificates of deposit issued by Stanford and its affiliates. The Company disputes these allegations and intends to defend itself vigorously against these actions. The outcomes of these actions, however, including any losses or other payments that may occur as a result, cannot be predicted at this time.

European Commission Sector Inquiry

In 2006, the European Commission ('EC') issued questionnaires pursuant to its Sector Inquiry (or, in respect of Norway, the European Free Trade Association Surveillance Authority ('EFTAS')), related to insurance business practices, including compensation arrangements for brokers, to at least 150 European brokers including our operations in nine European countries. The Company filed responses to the questionnaires. On September 25, 2007, the EC and EFTAS issued a joint report expressing concerns over potential conflicts of interest in the industry relating to remuneration and binding authorities and also over the nature of the coinsurance market.

The Company cooperated with both the EC and the EFTAS to resolve issues raised in their final joint report regarding coinsurance. In 2012, the EC appointed Ernst & Young to conduct a review of the coinsurance market and Ernst & Young approached one broking firm in each Member State. Three of our European subsidiaries (UK, Spain and the Netherlands) recently either met with Ernst & Young or received questionnaires from them on this matter in 2012. The EC published Ernst & Young's report on February 11, 2013, which described the nature and benefits of the coinsurance and subscription markets. The EC intends to consult further on these findings during 2013 before determining next steps.
Regulatory Investigation
In 2011, we and the UK Financial Services Authority (the 'FSA') announced a settlement for lapses by Willis Limited, our UK brokerage subsidiary, in its implementation and documentation of its controls to counter the risks of improper payments being made to non-FSA authorized overseas third parties engaged to help win business, particularly in high risk jurisdictions.

As a result of a FSA settlement in 2011, we are conducting a further internal review of certain high-risk payments made by our UK subsidiary between 2005 and 2009. We do not believe that this further internal review will result in any material fines or sanctions, but there can be no assurance that any resolution will not have an adverse impact on our ability to conduct our business in certain jurisdictions. While we believe that our current systems and controls are adequate and in accordance with all applicable laws and regulations, we cannot assure that such systems and controls will prevent any violations of applicable laws and regulations.



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Willis Group Holdings plc


23.
ACCUMULATED OTHER COMPREHENSIVE LOSS, NET OF TAX
The components of other comprehensive income (loss) are as follows:
 
December 31, 2012
 
December 31, 2011
 
December 31, 2010
 
Before tax amount
 
Tax
 
Net of tax amount
 
Before tax amount
 
Tax
 
Net of tax amount
 
Before tax amount
 
Tax
 
Net of tax amount
 
(millions)
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
46

 
$
—

 
$
46

 
$
(29
)
 
$
—

 
$
(29
)
 
$
(8
)
 
$
—

 
$
(8
)
Unrealized holding gain
—

 
—

 
—

 
—

 
—

 
—

 
2

 
—

 
2

Pension funding adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation on pension funding adjustments
(31
)
 
9

 
(22
)
 
8

 
—

 
8

 
26

 
(9
)
 
17

Net actuarial (loss) gain
(203
)
 
36

 
(167
)
 
(303
)
 
95

 
(208
)
 
4

 
5

 
9

Prior service gain
—

 
—

 
—

 
10

 
(3
)
 
7

 
—

 
—

 
—

Amortization of unrecognized actuarial loss
47

 
(9
)
 
38

 
34

 
(9
)
 
25

 
40

 
(11
)
 
29

Amortization of unrecognized prior service gain
(6
)
 
1

 
(5
)
 
(5
)
 
1

 
(4
)
 
(5
)
 
1

 
(4
)
 
(193
)
 
37

 
(156
)
 
(256
)
 
84

 
(172
)
 
65

 
(14
)
 
51

Derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gain on interest rate swaps (effective element)
3

 
(1
)
 
2

 
13

 
(3
)
 
10

 
15

 
(4
)
 
11

Interest rate reclassification adjustment
(5
)
 
1

 
(4
)
 
(14
)
 
4

 
(10
)
 
(26
)
 
7

 
(19
)
Gain on forward exchange contracts (effective element)
11

 
(2
)
 
9

 
3

 
(1
)
 
2

 
—

 
—

 
—

Forward exchange contract reclassification adjustment
(4
)
 
1

 
(3
)
 
(7
)
 
2

 
(5
)
 
20

 
(6
)
 
14

 
5

 
(1
)
 
4

 
(5
)
 
2

 
(3
)
 
9

 
(3
)
 
6

Other comprehensive (loss) income
(142
)
 
36

 
(106
)
 
(290
)
 
86

 
(204
)
 
68

 
(17
)
 
51

Less: Other comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
1

 
—

 
1

 
2

 
—

 
2

Other comprehensive (loss) income attributable to Willis Group Holdings
$
(142
)
 
$
36

 
$
(106
)
 
$
(289
)
 
$
86

 
$
(203
)
 
$
70

 
$
(17
)
 
$
53

The components of accumulated other comprehensive loss, net of tax, are as follows:
 
December 31,
 
2012
 
2011
 
2010
 
(millions)
Net foreign currency translation adjustment
$
(37
)
 
$
(83
)
 
$
(54
)
Pension funding adjustment
(831
)
 
(675
)
 
(503
)
Net unrealized gain on derivative instruments
15

 
11

 
14

Accumulated other comprehensive loss, net of tax
(853
)
 
(747
)
 
(543
)
Less: accumulated other comprehensive loss attributable to noncontrolling interests
3

 
3

 
2

Accumulated other comprehensive loss, attributable to Willis Group Holdings, net of tax
$
(850
)
 
$
(744
)
 
$
(541
)

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Notes to the financial statements

24.
EQUITY AND NONCONTROLLING INTEREST
The components of equity and noncontrolling interests are as follows:
 
December 31, 2012
 
December 31, 2011
 
December 31, 2010
 
Willis
Group
Holdings’
stockholders
 
Noncontrolling
interests
 
Total
equity
 
Willis
Group
Holdings’
stockholders
 
Noncontrolling
interests
 
Total
equity
 
Willis
Group
Holdings’
stockholders
 
Noncontrolling
interests
 
Total
equity
 
(millions)
Balance at January 1,
$
2,486

 
$
31

 
$
2,517

 
$
2,577

 
$
31

 
$
2,608

 
$
2,180

 
$
49

 
$
2,229

Comprehensive income:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Net (loss) income
(446
)
 
13

 
(433
)
 
204

 
16

 
220

 
455

 
15

 
470

Other comprehensive (loss) income, net of tax
(106
)
 
—

 
(106
)
 
(203
)
 
(1
)
 
(204
)
 
53

 
(2
)
 
51

Comprehensive (loss) income
(552
)
 
13

 
(539
)
 
1

 
15

 
16

 
508

 
13

 
521

Dividends
(187
)
 
(11
)
 
(198
)
 
(180
)
 
(15
)
 
(195
)
 
(178
)
 
(26
)
 
(204
)
Additional paid-in capital
81

 
—

 
81

 
88

 
—

 
88

 
67

 
—

 
67

Repurchase of shares (i)
(100
)
 
—

 
(100
)
 
—

 
—

 
—

 
—

 
—

 
—

Purchase of subsidiary shares from noncontrolling interests
(31
)
 
(8
)
 
(39
)
 
—

 
—

 
—

 
—

 
(5
)
 
(5
)
Additional noncontrolling interests
2

 
1

 
3

 
—

 
—

 
—

 
—

 
—

 
—

Balance at December 31,
$
1,699

 
$
26

 
$
1,725

 
$
2,486

 
$
31

 
$
2,517

 
$
2,577

 
$
31

 
$
2,608

_________________________________
(i) 
Based on settlement date the Company repurchased 2,796,546 shares at an average price of $35.87 in 2012.

The effects on equity of changes in Willis Group Holdings, ownership interest in its subsidiaries are as follows:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
 
 
(millions)
 
 
Net (loss) income attributable to Willis Group Holdings
$
(446
)
 
$
204

 
$
455

Transfers from noncontrolling interest:
 

 
 

 
 

Decrease in Willis Group Holdings’ paid-in capital for purchase of noncontrolling interest
(31
)
 
—

 
(19
)
Increase in Willis Group Holdings’ paid-in capital for sale of noncontrolling interest
2

 
—

 
—

Net transfers from noncontrolling interest
(29
)
 
—

 
(19
)
Change from net (loss) income attributable to Willis Group Holdings and transfers from noncontrolling interests
$
(475
)
 
$
204

 
$
436



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Willis Group Holdings plc


25.
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Supplemental disclosures regarding cash flow information and non-cash flow investing and financing activities are as follows:
 
Years Ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Supplemental disclosures of cash flow information:
 

 
 

 
 

Cash payments for income taxes, net
$
63

 
$
15

 
$
99

Cash payments for interest
118

 
128

 
163

Supplemental disclosures of non-cash flow investing and financing activities:
 

 
 

 
 

Write-off of unamortized debt issuance costs
$
—

 
$
(23
)
 
$
—

Assets acquired under capital leases
2

 
—

 
23

Deferred payments on acquisitions of subsidiaries
4

 
6

 
—

Deferred payments on acquisitions of noncontrolling interests
—

 
—

 
13

Acquisitions:
 

 
 

 
 

Fair value of assets acquired
$
23

 
$
6

 
$
12

Less:
 

 
 

 
 

Liabilities assumed
(3
)
 
(3
)
 
(18
)
Cash acquired
—

 
(3
)
 
—

Net assets (liabilities assumed) acquired, net of cash acquired
$
20

 
$
—

 
$
(6
)

26.
DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Fair value of derivative financial instruments
In addition to the note below, see Note 27 - Fair Value Measurements for information about the fair value hierarchy of derivatives.
Primary risks managed by derivative financial instruments
The main risks managed by derivative financial instruments are interest rate risk and foreign currency risk. The Company’s board of directors reviews and approves policies for managing each of these risks as summarized below.
The Company enters into derivative transactions (principally interest rate swaps and forward foreign currency contracts) in order to manage interest rate and foreign currency risks arising from the Company’s operations and its sources of finance. The Company does not hold financial or derivative instruments for trading purposes.
Interest Rate Risk — Investment Income
As a result of the Company’s operating activities, the Company receives cash for premiums and claims which it deposits in short-term investments denominated in US dollars and other currencies. The Company earns interest on these funds, which is included in the Company’s financial statements as investment income. These funds are regulated in terms of access and the instruments in which they may be invested, most of which are short-term in maturity.

In order to manage interest rate risk arising from these financial assets, the Company entered into interest rate swaps to receive a fixed rate of interest and pay a variable rate of interest denominated in the various currencies related to the short-term investments. The use of interest rate contracts essentially converted groups of short-term variable rate investments to fixed rate investments. The fair value of these contracts was recorded in other assets and other liabilities. For contracts that qualified as cash flow hedges for accounting purposes, the effective portions of changes in fair value were recorded as a component of other comprehensive income, to the extent that the hedge relationships were highly effective.

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Notes to the financial statements

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

From the fourth quarter of 2011, the Company stopped entering into any new hedging transactions relating to interest rate risk from investments, given the flat yield curve environment at that time. Further to this, during second quarter 2012, the Company closed out its legacy position for these interest rate swap contracts.
The fair value of these swaps at the close out date was $16 million, representing a cash settlement amount on termination. In connection with the terminated swaps, the Company retained a gain of $15 million in other comprehensive income as the forecasted short-term investment transactions in relation to which the swaps qualified as cash flow hedges are still considered probable. These amounts will be reclassified into earnings consistent with when the forecasted transactions affect earnings. We expect approximately $5 million of the gain to be recognized in the income statement in 2013.
At December 31, 2012 and 2011, the Company had the following derivative financial instruments that were designated as cash flow hedges of interest rate risk:
 
 
 
December 31,
 
 
 
Notional
 
Termination
 
Weighted Average
Interest Rates
 
 
 
Amount (i)
 
Dates
 
Receive
 
Pay
 
 
 
(millions)
 
 
 
%
 
%
2012
 
 
 

 
 

 
 
 
 
US dollar
Receive fixed-pay variable
 
$
—

 
—

 
—
 
—
Pounds sterling
Receive fixed-pay variable
 
—

 
—

 
—
 
—
Euro
Receive fixed-pay variable
 
—

 
—

 
—
 
—
2011
 
 
 

 
 

 
 
 
 
US dollar
Receive fixed-pay variable
 
$
740

 
2012-2015

 
2.20
 
0.88
Pounds sterling
Receive fixed-pay variable
 
241

 
2012-2015

 
3.00
 
1.35
Euro
Receive fixed-pay variable
 
143

 
2012-2015

 
2.31
 
1.33
_________________________________
(i) 
Notional amounts represent US dollar equivalents translated at the spot rate as of December 31.

Interest Rate Risk — Interest Expense
The Company’s operations are financed principally by $2,050 million fixed rate senior notes and $289 million under a 5-year term loan facility.
During the year ended December 31, 2010, the Company entered into a series of interest rate swaps for a total notional amount of $350 million to receive a fixed rate and pay a variable rate on a semi-annual basis, with a maturity date of July 15, 2015. At the year end the weighted average fixed rate was 2.71% and variable rate was 0.75% . The Company has designated and accounts for these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015. The fair values of the interest rate swaps are included within other assets or other liabilities and the fair value of the hedged element of the senior notes is included within long-term debt.
The Company also has access to $522 million under three revolving credit facilities; as of December 31, 2012 $nil was drawn on these facilities. The 5-year term loan facility bears interest at LIBOR plus 1.50%. Drawings under the revolving $500 million credit facility bear interest at LIBOR plus 1.50%. These margins apply while the Company’s debt rating remains BBB-/Baa3. Should the Company’s debt rating change, then the margin will change in accordance with the credit facilities agreements.
At December 31, 2012 and 2011, the Company’s interest rate swaps were all designated as hedging instruments.


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Willis Group Holdings plc

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Foreign Currency Risk
The Company’s primary foreign exchange risks arise:

•
from changes in the exchange rate between US dollars and pounds sterling as its London market operations earn the majority of their revenues in US dollars and incur expenses predominantly in pounds sterling, and may also hold a significant net sterling asset or liability position on the balance sheet. In addition, the London market operations earn significant revenues in Euros and Japanese yen; and
•
from the translation into US dollars of the net income and net assets of its foreign subsidiaries, excluding the London market operations which are US dollar denominated.

The foreign exchange risks in its London market operations are hedged as follows:

•
to the extent that forecast pound sterling expenses exceed pound sterling revenues, the Company limits its exposure to this exchange rate risk by the use of forward contracts matched to specific, clearly identified cash outflows arising in the ordinary course of business; and
•
to the extent the UK operations earn significant revenues in Euros and Japanese yen, the Company limits its exposure to changes in the exchange rate between the US dollar and these currencies by the use of forward contracts matched to a percentage of forecast cash inflows in specific currencies and periods. In addition, we are also exposed to foreign exchange risk on any net sterling asset or liability position in our London market operations.
The fair value of foreign currency contracts is recorded in other assets and other liabilities. For contracts that qualify as accounting hedges, changes in fair value resulting from movements in the spot exchange rate are recorded as a component of other comprehensive income whilst changes resulting from a movement in the time value are recorded in interest expense. For contracts that do not qualify for hedge accounting, the total change in fair value is recorded in interest expense. Amounts held in comprehensive income are reclassified into earnings when the hedged exposure affects earnings.
At December 31, 2012 and 2011, the Company’s foreign currency contracts were all designated as hedging instruments except for those relating to short-term cash flows and hedges of certain intercompany loans.
The table below summarizes by major currency the contractual amounts of the Company’s forward contracts to exchange foreign currencies for pounds sterling in the case of US dollars and US dollars for Euro and Japanese yen. Foreign currency notional amounts are reported in US dollars translated at contracted exchange rates.
 
December 31,
 
Sell
2012(i)
 
Sell
2011
 
(millions)
US dollar
$
255

 
$
235

Euro
55

 
129

Japanese yen
32

 
50

_________________________________
(i) 
Forward exchange contracts range in maturity from 2013 to 2014.

In addition to forward exchange contracts we undertake short-term foreign exchange swaps for liquidity purposes, these are not designated as hedges and do not qualify for hedge accounting. Both the fair value and the year to date gain/loss at December 31, 2012 and 2011 were immaterial.

During the year ended December 31, 2012, the Company entered into foreign currency hedges of certain intercompany loan balances.  These derivatives were not designated as hedging instruments and were for a total notional amount of $63 million, principally representing pound sterling sales.  In respect of these transactions, a nominal amount has been recognized as an asset within other current assets and a nominal gain has been recognized in income within other operating expenses for 2012.

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Notes to the financial statements

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Derivative financial instruments
The table below presents the fair value of the Company’s derivative financial instruments and their balance sheet classification at December 31:
 
 
 
Fair value
 
Balance sheet
 
December 31,
 
December 31,
Derivative financial instruments designated as hedging instruments:
classification
 
2012
 
2011
 
 
 
(millions)
Assets:
 
 
 

 
 

Interest rate swaps (cash flow hedges)
Other assets
 
$
—

 
$
15

Interest rate swaps (fair value hedges)
Other assets
 
22

 
26

Forward exchange contracts
Other assets
 
9

 
11

Total derivatives designated as hedging instruments
 
 
$
31

 
$
52

Liabilities:
 
 
 

 
 

Interest rate swaps (cash flow hedges)
Other liabilities
 
$
—

 
$
—

Forward exchange contracts
Other liabilities
 
—

 
11

Total derivatives designated as hedging instruments
 
 
$
—

 
$
11

Cash Flow Hedges
The table below presents the effects of derivative financial instruments in cash flow hedging relationships on the consolidated statements of operations and the consolidated statements of equity for years ended December 31, 2012 and 2011:
Derivatives in cash flow hedging relationships
Amount of
gain (loss)
recognized
in OCI(i)on derivative (effective element)
 
Location of gain (loss)
reclassified from accumulated OCI(i) into income (effective element)
 
Amount of
gain (loss)
reclassified
from
accumulated
OCI(i) into
income(effective element)
 
Location of gain (loss)
recognized in income
on derivative (ineffective hedges and ineffective element of effective hedges)
 
Amount of
gain (loss)
recognized
in income
on derivative
(ineffective
hedges and
ineffective
element of effective hedges)
 
(millions)
 
 
 
(millions)
 
 
 
(millions)
Year Ended December 31, 2012
 

 
 
 
 

 
 
 
 

Interest rate swaps
$
3

 
Investment income
 
$
(5
)
 
Other operating expenses
 
$
—

Forward exchange contracts
11

 
Other operating expenses
 
(4
)
 
Interest expense
 
1

Total
$
14

 
 
 
$
(9
)
 
 
 
$
1

Year Ended December 31, 2011
 

 
 
 
 

 
 
 
 

Interest rate swaps
$
13

 
Investment income
 
$
(14
)
 
Other operating expenses
 
$
—

Forward exchange contracts
3

 
Other operating expenses
 
(7
)
 
Interest expense
 
(2
)
Total
$
16

 
 
 
$
(21
)
 
 
 
$
(2
)
Year Ended December 31, 2010
 

 
 
 
 

 
 
 
 

Interest rate swaps
$
15

 
Investment income
 
$
(26
)
 
Other operating expenses
 
$
—

Forward exchange contracts
—

 
Other operating expenses
 
20

 
Interest expense
 
—

Total
$
15

 
 
 
$
(6
)
 
 
 
$
—

_________________________________
Amounts above shown gross of tax.
(i) 
OCI means other comprehensive income.

For interest rate swaps all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For foreign exchange contracts only the changes in fair value resulting from movements in the spot exchange rate are included

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Willis Group Holdings plc

26. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

in this assessment. In instances where the timing of expected cash flows can be matched exactly to the maturity of the foreign exchange contract, then changes in fair value attributable to movement in the forward points are also included.
At December 31, 2012 the Company estimates there will be $13 million of net derivative gains reclassified from accumulated comprehensive income into earnings within the next twelve months.
Fair Value Hedges
The table below presents the effects of derivative financial instruments in fair value hedging relationships on the consolidated statements of operations for the years ended December 31, 2012, 2011 and 2010.
Derivatives in fair value hedging relationships
Hedged item in fair value hedging relationship
 
(Loss) gain
recognized for derivative
 
Gain (loss)
recognized
for hedged item
 
Ineffectiveness
recognized in
interest expense
 
 
 
(millions)
Year Ended December 31, 2012
 
 
 

 
 

 
 

Interest rate swaps
5.625% senior notes due 2015
 
$
(3
)
 
$
2

 
$
1

Year Ended December 31, 2011
 
 
 

 
 

 
 

Interest rate swaps
5.625% senior notes due 2015
 
$
7

 
$
(8
)
 
$
1

Year Ended December 31, 2010
 
 
 

 
 

 
 

Interest rate swaps
5.625% senior notes due 2015
 
$
14

 
$
(12
)
 
$
2

All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.

Credit Risk and Concentrations of Credit Risk
Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform as contracted and from movements in interest rates and foreign exchange rates. The Company currently does not anticipate non-performance by its counterparties. The Company generally does not require collateral or other security to support financial instruments with credit risk; however, it is the Company's policy to enter into master netting arrangements with counterparties as practical.
Concentrations of credit risk that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Financial instruments on the balance sheet that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and derivatives which are recorded at fair value.
The Company maintains a policy providing for the diversification of cash and cash equivalent investments and places such investments in an extensive number of financial institutions to limit the amount of credit risk exposure. These financial institutions are monitored on an ongoing basis for credit quality predominantly using information provided by credit agencies.
Concentrations of credit risk with respect to receivables are limited due to the large number of clients and markets in which the Company does business, as well as the dispersion across many geographic areas. Management does not believe significant risk exists in connection with the Company's concentrations of credit as of December 31, 2012.

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Notes to the financial statements

27.
FAIR VALUE MEASUREMENTS

The Company has categorized its assets and liabilities that are measured at fair value on a recurring and non-recurring basis into a three-level fair value hierarchy, based on the reliability of the inputs used to determine fair value as follows:

•
    Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;
•
    Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are corroborated by market data; and
•
    Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.

The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:

Long-term debt excluding the fair value hedge-Fair values are based on quoted market values and so classified as Level 1 measurements.

Derivative financial instruments-Market values have been used to determine the fair value of interest rate swaps and forward foreign exchange contracts based on estimated amounts the Company would receive or have to pay to terminate the agreements, taking into account the current interest rate environment or current foreign currency forward rates.

Recurring basis

The following table presents, for each of the fair-value hierarchy levels, the Company's assets and liabilities that are measured at fair value on a recurring basis.
 
December 31, 2012
 
Quoted
prices in
active
markets
for
identical
assets
 
Significant
other
observable
inputs
 
Significant
other
unobservable
inputs
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
(millions)
 
 
Assets at fair value:
 

 
 

 
 

 
 

Cash and cash equivalents
$
500

 
$
—

 
$
—

 
$
500

Fiduciary funds (included within Fiduciary assets)
1,796

 
—

 
—

 
1,796

Derivative financial instruments
—

 
31

 
—

 
31

Total assets
$
2,296

 
$
31

 
$
—

 
$
2,327

Liabilities at fair value:
 

 
 

 
 

 
 

Changes in fair value of hedged debt(i)
$
—

 
$
18

 
$
—

 
$
18

Total liabilities
$
—

 
$
18

 
$
—

 
$
18

_________________________________
(i) 
Changes in the fair value of the underlying hedged debt instrument since inception of the hedging relationship are included in long-term debt.


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Willis Group Holdings plc
  
27. FAIR VALUE MEASUREMENTS (Continued)

 
December 31, 2011
 
Quoted
prices in
active
markets
for
identical
assets
 
Significant
other
observable
inputs
 
Significant
other
unobservable
inputs
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
 
 
(millions)
 
 
Assets at fair value:
 

 
 

 
 

 
 

Cash and cash equivalents
$
436

 
$
—

 
$
—

 
$
436

Fiduciary funds (included within Fiduciary assets)
1,688

 
—

 
—

 
1,688

Derivative financial instruments
—

 
52

 
—

 
52

Total assets
$
2,124

 
$
52

 
$
—

 
$
2,176

Liabilities at fair value:
 

 
 

 
 

 
 

Derivative financial instruments
$
—

 
$
11

 
$
—

 
$
11

Changes in fair value of hedged debt(i)
—

 
20

 
—

 
20

Total liabilities
$
—

 
$
31

 
$
—

 
$
31

_________________________________
(i) 
Changes in the fair value of the underlying hedged debt instrument since inception of the hedging relationship are included in long-term debt.

The estimated fair value of the Company’s financial instruments held or issued to finance the Company’s operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that the Company would realize upon disposition nor do they indicate the Company’s intent or ability to dispose of the financial instrument.
 
December 31,
 
2012
 
2011
 
Carrying
amount
 
Fair
value
 
Carrying
amount
 
Fair
value
 
 
 
(millions)
 
 
Assets:
 

 
 

 
 

 
 

Derivative financial instruments
$
31

 
$
31

 
$
52

 
$
52

Liabilities:
 

 
 

 
 

 
 

Short-term debt
$
15

 
$
15

 
$
15

 
$
15

Long-term debt
2,338

 
2,576

 
2,354

 
2,499

Derivative financial instruments
—

 
—

 
11

 
11



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Notes to the financial statements
  
27. FAIR VALUE MEASUREMENTS (Continued)

Non-recurring basis

The remeasurement of goodwill is classified as non-recurring level 3 fair value assessment due to the significance of unobservable inputs developed using company-specific information. The Company recognized an impairment charge in its North America reporting unit during 2012. The pre-tax impairment charge of $492 million was recognized as a result of the Company's annual goodwill impairment testing performed as of October 1, 2012, which reduced the carrying value of the North America reporting unit goodwill as of that date of $1,782 million to its implied fair value of $1,290 million.

The Company used the income approach to measure the fair value of the North America reporting unit which involves calculating the fair value of a reporting unit based on the present value of the estimated future cash flows. Cash flow projections were based on management's estimates of revenue growth rates and operating margins, taking into consideration industry and market conditions and the uncertainty related to the business's ability to execute on the projected cash flows. The discount rate used was based on the weighted-average cost of capital adjusted for the relevant risk associated with the market participant expectations of characteristics of the individual reporting units. The unobservable inputs used to fair value this reporting unit include projected revenue growth rates, profitability and the market participant assumptions within the discount rate.

The inputs used to measure the fair value of the intangibles assets of the North America reporting unit in step two of the impairment test were largely unobservable, and accordingly, are also classified as Level 3. The fair value was estimated using a multiple period excess earnings method, which is based on management's cash flow projections of revenue growth rates, operating margins and expected customer attrition, taking into consideration industry and market conditions. The discount rate used in the fair value calculations for the intangibles was based on a weighted average cost of capital adjusted for the relevant risk associated with those assets. The unobservable inputs used in these valuations include projected revenue growth rates, and the market participant assumptions within the discount rate. For more information on this impairment measured as a nonrecurring fair value adjustment, see Note 13 - Goodwill.

28.
SEGMENT INFORMATION
During the periods presented, the Company operated through three segments: Global, North America and International. Global provides specialist brokerage and consulting services to clients worldwide for specific industrial and commercial activities and is organized by specialism. North America and International predominantly comprise our retail operations which provide services to small, medium and large corporations, accessing Global’s specialist expertise when required.
The Company evaluates the performance of its segments based on organic commissions and fees growth and operating income. For internal reporting and segmental reporting, the following items for which segmental management are not held accountable are excluded from segmental expenses:

(i)
costs of the holding company;

(ii)
foreign exchange loss from the devaluation of the Venezuelan currency;

(iii)
foreign exchange hedging activities, foreign exchange movements on the UK pension plan asset, foreign exchange gains and losses from currency purchases and sales, and foreign exchange movements on internal exposures;

(iv)
amortization of intangible assets;

(v)
gains and losses on the disposal of operations;

(vi)
significant legal and regulatory settlements which are managed centrally; 

(vii)
costs associated with the 2011 Operational Review;

(viii)
write-off of uncollectible accounts receivable balance and associated legal fees arising in Chicago due to fraudulent overstatement of commissions and fees;


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Willis Group Holdings plc


(ix)
additional accrual recognized following the change in remuneration policy;
 
(x)
write-off of unamortized cash retention awards following decision to eliminate repayment requirement on past awards; and
 
(xi)
goodwill impairment charge.
The accounting policies of the segments are consistent with those described in Note 2 — 'Basis of Presentation and Significant Accounting Policies'. There are no inter-segment revenues, with segments operating on a revenue-sharing basis equivalent to that used when sharing business with other third-party brokers.
Selected information regarding the Company’s segments is as follows:
 
Commissions
and fees
 
Investment
income
 
Other
income
 
Total
revenues
 
Depreciation
and
amortization
 
Operating
income (loss)
 
Interest in
earnings of
associates,
net of tax
 
 
 
 
 
 
 
(millions)
 
 
 
 
 
 
Year Ended December 31, 2012
 

 
 

 
 

 
 

 
 

 
 

 
 

Global
$
1,124

 
$
5

 
$
—

 
$
1,129

 
$
27

 
$
372

 
$
—

North America
1,306

 
3

 
4

 
1,313

 
31

 
240

 
—

International
1,028

 
10

 
—

 
1,038

 
21

 
183

 
5

Total Retail
2,334

 
13

 
4

 
2,351

 
52

 
423

 
5

Total Operating Segments
3,458

 
18

 
4

 
3,480

 
79

 
795

 
5

Corporate and Other(i)
—

 
—

 
—

 
—

 
59

 
(1,004
)
 
—

Total Consolidated
$
3,458

 
$
18

 
$
4

 
$
3,480

 
$
138

 
$
(209
)
 
$
5

Year Ended December 31, 2011
 

 
 

 
 

 
 

 
 

 
 

 
 

Global
$
1,073

 
$
9

 
$
—

 
$
1,082

 
$
23

 
$
352

 
$
—

North America
1,314

 
7

 
2

 
1,323

 
28

 
271

 
—

International
1,027

 
15

 
—

 
1,042

 
18

 
221

 
12

Total Retail
2,341

 
22

 
2

 
2,365

 
46

 
492

 
12

Total Operating Segments
3,414

 
31

 
2

 
3,447

 
69

 
844

 
12

Corporate and Other(i)
—

 
—

 
—

 
—

 
73

 
(278
)
 
—

Total Consolidated
$
3,414

 
$
31

 
$
2

 
$
3,447

 
$
142

 
$
566

 
$
12

Year Ended December 31, 2010
 

 
 

 
 

 
 

 
 

 
 

 
 

Global
$
987

 
$
9

 
$
—

 
$
996

 
$
18

 
$
320

 
$
—

North America
1,369

 
15

 
1

 
1,385

 
23

 
320

 
—

International
937

 
14

 
—

 
951

 
22

 
226

 
23

Total Retail
2,306

 
29

 
1

 
2,336

 
45

 
546

 
23

Total Operating Segments
3,293

 
38

 
1

 
3,332

 
63

 
866

 
23

Corporate and Other(i)
—

 
—

 
—

 
—

 
82

 
(113
)
 
—

Total Consolidated
$
3,293

 
$
38

 
$
1

 
$
3,332

 
$
145

 
$
753

 
$
23

_________________________________
(i) 
See the following table for an analysis of the ‘Corporate and other’ line.


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Notes to the financial statements
  
28. SEGMENT INFORMATION (Continued)

 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Amortization of intangible assets
$
(59
)
 
$
(68
)
 
$
(82
)
Additional incentive accrual for change in remuneration policy (a)
(252
)
 
—

 
—

Write-off of unamortized cash retention awards debtor (b)
(200
)
 
—

 
—

Goodwill impairment charge (c)
(492
)
 
—

 
—

India joint venture settlement (d)
(11
)
 
—

 
—

Insurance recovery (e)
10

 
—

 
—

Write-off of uncollectible accounts receivable balance in Chicago (f)
(13
)
 
(22
)
 
—

Net gain (loss) on disposal of operations (d)
(3
)
 
4

 
(2
)
Foreign exchange hedging
8

 
5

 
(16
)
Foreign exchange gain (loss) on the UK pension plan asset
(1
)
 
—

 
3

2011 Operational Review
—

 
(180
)
 
—

FSA regulatory settlement
—

 
(11
)
 
—

Venezuela currency devaluation
—

 
—

 
(12
)
Other(g)
9

 
(6
)
 
(4
)
Total Corporate and Other
$
(1,004
)
 
$
(278
)
 
$
(113
)
_________________________________
(a) 
Additional incentive accrual recognized following the replacement of annual incentive awards with annual cash bonuses which will not feature a repayment requirement.

(b) 
Write-off of unamortized cash retention awards following decision to eliminate the repayment requirement on past awards.

(c) 
Non-cash charge recognized related to the impairment of the carrying value of the North America reporting unit's goodwill.
 
(d) 
$11 million settlement with former partners related to the termination of a joint venture arrangement in India. In addition, a $1 million loss on disposal of operations was recorded related to the termination.

(e) 
Insurance recovery, recorded in Other operating expenses, related to a previously disclosed fraudulent activity in Chicago, discussed above.

(f) 
In early 2012 the Company identified an uncollectible accounts receivable balance of approximately $28 million in Chicago due to fraudulent overstatements of Commissions and fees.  For the year ended December 31, 2011, the Company recorded an estimate of the misstatement of Commissions and fees from prior periods by recognizing in the fourth quarter of 2011 a $22 million charge to Other operating expenses to write off the uncollectible receivable at January 1, 2011.

The Company concluded its internal investigation into these matters in the three months ended March 31, 2012 and identified an additional $12 million in fraudulent overstatement of Commissions and fees, and has corrected the additional misstatement by recognizing a $13 million charge (including legal expenses) to Other operating expenses in the first quarter of 2012. The above amount represents the additional charge taken.

(g) 
Other includes $7 million (2011: $12 million, 2010: $7 million) from the release of funds and reserves related to potential legal liabilities.
The following table reconciles total consolidated operating income, as disclosed in the operating segment tables above, to consolidated income from continuing operations before income taxes and interest in earnings of associates.
 
Years ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Total consolidated operating income
$
(209
)
 
$
566

 
$
753

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

 
(171
)
 
—

Interest expense
(128
)
 
(156
)
 
(166
)
(Loss) income from continuing operations before income taxes and interest in earnings of associates
$
(337
)
 
$
239

 
$
587


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Willis Group Holdings plc
  
28. SEGMENT INFORMATION (Continued)

The Company does not currently provide asset information by reportable segment as it does not routinely evaluate the total asset position by segment, and as such, no segmental analysis of assets has been disclosed. Segments are evaluated on organic commissions and fees growth and operating margin.
Segment revenue by product is as follows:
 
Years ended December 31,
 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
 
2012
 
2011
 
2010
 
Global
 
North America
 
International
 
Total
 
(millions)
Commissions and fees:
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

 
 

Retail insurance services
$
—

 
$
—

 
$
—

 
$
1,306

 
$
1,314

 
$
1,369

 
$
1,028

 
$
1,027

 
$
937

 
$
2,334

 
$
2,341

 
$
2,306

Specialty insurance services
1,124

 
1,073

 
987

 
—

 
—

 
—

 
—

 
—

 
—

 
1,124

 
1,073

 
987

Total commissions and fees
1,124

 
1,073

 
987

 
1,306

 
1,314

 
1,369

 
1,028

 
1,027

 
937

 
3,458

 
3,414

 
3,293

Investment income
5

 
9

 
9

 
3

 
7

 
15

 
10

 
15

 
14

 
18

 
31

 
38

Other income
—

 
—

 
—

 
4

 
2

 
1

 
—

 
—

 
—

 
4

 
2

 
1

Total Revenues
$
1,129

 
$
1,082

 
$
996

 
$
1,313

 
$
1,323

 
$
1,385

 
$
1,038

 
$
1,042

 
$
951

 
$
3,480

 
$
3,447

 
$
3,332


None of the Company’s customers represented more than 10 percent of the Company’s consolidated commissions and fees for the years ended December 31, 2012, 2011 and 2010.
Information regarding the Company’s geographic locations is as follows:
 
Years Ended December 31,
 
2012
 
2011
 
2010
 
(millions)
Commissions and fees(i)
 

 
 

 
 

UK
$
980

 
$
963

 
$
902

US
1,484

 
1,461

 
1,503

Other(ii)
994

 
990

 
888

Total
$
3,458

 
$
3,414

 
$
3,293


 
December 31,
 
2012
 
2011
 
(millions)
Fixed assets
 

 
 

UK
$
218

 
$
171

US
207

 
194

Other(ii)
43

 
41

Total
$
468

 
$
406

_________________________________
(i) 
Commissions and fees are attributed to countries based upon the location of the subsidiary generating the revenue.
(ii) 
Other than in the United Kingdom and the United States, the Company does not conduct business in any country in which its commissions and fees and/or fixed assets exceed 10 percent of consolidated commissions and fees and/or fixed assets, respectively.

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Notes to the financial statements

29.
SUBSIDIARY UNDERTAKINGS
The Company has investments in the following subsidiary undertakings which principally affect the net income or net assets of the Group.
A full list of the Group’s subsidiary undertakings is included within the Company’s annual return.
Subsidiary name
Country of registration
Class of share
Percentage ownership
Holding companies
 
 
 

TAI Limited
England and Wales
Ordinary shares
100
%
Trinity Acquisition plc
England and Wales
Ordinary shares
100
%
Willis Faber Limited
England and Wales
Ordinary shares
100
%
Willis Group Limited
England and Wales
Ordinary shares
100
%
Willis Investment UK Holdings Limited
England and Wales
Ordinary shares
100
%
Willis Netherlands Holdings B.V.
Netherlands
Ordinary shares
100
%
Willis Europe B.V.
England and Wales
Ordinary shares
100
%
Insurance broking companies
 
 
 

Willis HRH, Inc. 
USA
Common shares
100
%
Willis Limited
England and Wales
Ordinary shares
100
%
Willis North America, Inc. 
USA
Common shares
100
%
Willis Re, Inc. 
USA
Common shares
100
%


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Willis Group Holdings plc


30.
FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
Willis North America Inc. (‘Willis North America’) has $350 million senior notes outstanding that were issued on July 1, 2005. Willis North America issued a further $600 million of senior notes on March 28, 2007 and another $300 million on September 29, 2009.
All direct obligations under the senior notes are jointly and severally, irrevocably and fully and unconditionally guaranteed by Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc and Willis Group Limited, collectively the 'Other Guarantors', and with Willis Group Holdings, the 'Guarantor Companies'. 
The debt securities that were issued by Willis North America and guaranteed by the entities described above, and for which the disclosures set forth below relate and are required under applicable SEC rules, were issued under an effective registration statement.
Presented below is condensed consolidating financial information for:

(i)
Willis Group Holdings, which is a guarantor, on a parent company only basis;

(ii)
the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent and are all direct or indirect parents of the issuer;

(iii)
the Issuer, Willis North America;

(iv)
Other, which are the non-guarantor subsidiaries, on a combined basis;

(v)
Consolidating adjustments; and

(vi)
the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets for the year ended December 31, 2012 of Willis Group Holdings, the Other Guarantors and the Issuer. Investments in subsidiaries in the condensed consolidating balance sheet for Other represents the cost of investment in subsidiaries recorded in the parent companies of the non-guarantor subsidiaries.
The entities included in the Other Guarantors column for the year ended December 31, 2012 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, Trinity Acquisition plc, TA I Limited and Willis Group Limited.


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Notes to the financial statements

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
REVENUES
 

 
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
—

 
$
3,458

 
$
—

 
$
3,458

Investment income
—

 
11

 
1

 
17

 
(11
)
 
18

Other income
—

 
—

 
—

 
97

 
(93
)
 
4

Total revenues
—

 
11

 
1

 
3,572

 
(104
)
 
3,480

EXPENSES
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
(2
)
 
—

 
(96
)
 
(2,377
)
 
—

 
(2,475
)
Other operating expenses
(4
)
 
(82
)
 
(79
)
 
(419
)
 
3

 
(581
)
Depreciation expense
—

 
(1
)
 
(15
)
 
(63
)
 
—

 
(79
)
Amortization of intangible assets
—

 
—

 
—

 
(71
)
 
12

 
(59
)
Goodwill impairment charge
—


—

 


 
(492
)
 
—

 
(492
)
Net loss on disposal of operations
—

 
—

 
—

 
(28
)
 
25

 
(3
)
Total expenses
(6
)
 
(83
)
 
(190
)
 
(3,450
)
 
40

 
(3,689
)
OPERATING (LOSS) INCOME
(6
)
 
(72
)
 
(189
)
 
122

 
(64
)
 
(209
)
Investment income from Group undertakings
6

 
1,078

 
254

 
220

 
(1,558
)
 
—

Interest expense
(43
)
 
(239
)
 
(155
)
 
(277
)
 
586

 
(128
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(43
)
 
767

 
(90
)
 
65

 
(1,036
)
 
(337
)
Income taxes
—

 
28

 
34

 
(166
)
 
3

 
(101
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(43
)
 
795

 
(56
)
 
(101
)
 
(1,033
)
 
(438
)
Interest in earnings of associates, net of tax
—

 
—

 
—

 
(4
)
 
9

 
5

Equity account for subsidiaries
(403
)
 
(1,184
)
 
(172
)
 
—

 
1,759

 
—

LOSS FROM CONTINUING OPERATIONS
(446
)
 
(389
)
 
(228
)
 
(105
)
 
735

 
(433
)
Discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

 
—

NET LOSS
(446
)
 
(389
)
 
(228
)
 
(105
)
 
735

 
(433
)
Less: Net loss attributable to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
NET LOSS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
(446
)
 
$
(389
)
 
$
(228
)
 
$
(118
)
 
$
735

 
$
(446
)



70
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Willis Group Holdings plc

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
Comprehensive loss
$
(552
)
 
$
(486
)
 
$
(263
)
 
$
(213
)
 
$
975

 
$
(539
)
Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
Comprehensive loss attributable to Willis Group Holdings
$
(552
)
 
$
(486
)
 
$
(263
)
 
$
(226
)
 
$
975

 
$
(552
)


71
Table of Contents

Notes to the financial statements

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
REVENUES
 

 
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
—

 
$
3,414

 
$
—

 
$
3,414

Investment income
—

 
11

 
2

 
29

 
(11
)
 
31

Other income
—

 
—

 
—

 
24

 
(22
)
 
2

Total revenues
—

 
11

 
2

 
3,467

 
(33
)
 
3,447

EXPENSES
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
(3
)
 
—

 
(69
)
 
(2,015
)
 
—

 
(2,087
)
Other operating expenses
(17
)
 
32

 
(98
)
 
(571
)
 
(2
)
 
(656
)
Depreciation expense
—

 
—

 
(14
)
 
(60
)
 
—

 
(74
)
Amortization of intangible assets
—

 
—

 
—

 
(74
)
 
6

 
(68
)
Net gain on disposal of operations
—

 
—

 
—

 
7

 
(3
)
 
4

Total expenses
(20
)
 
32

 
(181
)
 
(2,713
)
 
1

 
(2,881
)
OPERATING (LOSS) INCOME
(20
)
 
43

 
(179
)
 
754

 
(32
)
 
566

Investment income from Group undertakings
35

 
406

 
341

 
(157
)
 
(625
)
 
—

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

 
(171
)
 
—

 
—

 
—

 
(171
)
Interest expense
(34
)
 
(251
)
 
(159
)
 
(332
)
 
620

 
(156
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(19
)
 
27

 
3

 
265

 
(37
)
 
239

Income taxes
—

 
56

 
27

 
(117
)
 
2

 
(32
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(19
)
 
83

 
30

 
148

 
(35
)
 
207

Interest in earnings of associates, net of tax
—

 
—

 
—

 
4

 
8

 
12

Equity account for subsidiaries
223

 
91

 
(66
)
 
—

 
(248
)
 
—

INCOME (LOSS) FROM CONTINUING OPERATIONS
204

 
174

 
(36
)
 
152

 
(275
)
 
219

Discontinued operations, net of tax
—

 
—

 
—

 
1

 
—

 
1

NET INCOME (LOSS)
204

 
174

 
(36
)
 
153

 
(275
)
 
220

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(16
)
 
—

 
(16
)
NET INCOME (LOSS) ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
204

 
$
174

 
$
(36
)
 
$
137

 
$
(275
)
 
$
204


72
Table of Contents

Willis Group Holdings plc

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
Comprehensive income (loss)
$
1

 
$
(24
)
 
$
(117
)
 
$
(50
)
 
$
206

 
$
16

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(15
)
 
—

 
(15
)
Comprehensive income (loss) attributable to Willis Group Holdings
$
1

 
$
(24
)
 
$
(117
)
 
$
(65
)
 
$
206

 
$
1



73
Table of Contents

Notes to the financial statements

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2010
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
REVENUES
 

 
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
—

 
$
3,293

 
$
—

 
$
3,293

Investment income
—

 
10

 
2

 
36

 
(10
)
 
38

Other income
—

 
—

 
—

 
1

 
—

 
1

Total revenues
—

 
10

 
2

 
3,330

 
(10
)
 
3,332

EXPENSES
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
—

 
—

 
(65
)
 
(1,818
)
 
15

 
(1,868
)
Other operating expenses
335

 
(10
)
 
(45
)
 
(825
)
 
(19
)
 
(564
)
Depreciation expense
—

 
—

 
(9
)
 
(54
)
 
—

 
(63
)
Amortization of intangible assets
—

 
—

 
—

 
(82
)
 
—

 
(82
)
Net (loss) gain on disposal of operations
(347
)
 
—

 
—

 
350

 
(5
)
 
(2
)
Total expenses
(12
)
 
(10
)
 
(119
)
 
(2,429
)
 
(9
)
 
(2,579
)
OPERATING (LOSS) INCOME
(12
)
 
—

 
(117
)
 
901

 
(19
)
 
753

Investment income from Group undertakings
—

 
1,683

 
356

 
952

 
(2,991
)
 
—

Interest expense
—

 
(423
)
 
(157
)
 
(374
)
 
788

 
(166
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
1,260

 
82

 
1,479

 
(2,222
)
 
587

Income taxes
—

 
16

 
29

 
(186
)
 
1

 
(140
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
1,276

 
111

 
1,293

 
(2,221
)
 
447

Interest in earnings of associates, net of tax
—

 
—

 
—

 
16

 
7

 
23

Equity account for subsidiaries
467

 
(823
)
 
(76
)
 
—

 
432

 
—

INCOME FROM CONTINUING OPERATIONS
455

 
453

 
35

 
1,309

 
(1,782
)
 
470

Discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

 
—

NET INCOME
455

 
453

 
35

 
1,309

 
(1,782
)
 
470

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(15
)
 
—

 
(15
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
455

 
$
453

 
$
35

 
$
1,294

 
$
(1,782
)
 
$
455














74
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Willis Group Holdings plc

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2010
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
Comprehensive income
$
508

 
$
501

 
$
18

 
$
1,375

 
$
(1,881
)
 
$
521

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
Comprehensive income attributable to Willis Group Holdings
$
508

 
$
501

 
$
18

 
$
1,362

 
$
(1,881
)
 
$
508














75
Table of Contents

Notes to the financial statements

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As at December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
ASSETS
 

 
 

 
 

 
 

 
 

 
 

CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
1

 
$
—

 
$
—

 
$
499

 
$
—

 
$
500

Accounts receivable, net
—

 
—

 
—

 
904

 
29

 
933

Fiduciary assets
—

 
—

 
—

 
10,071

 
(800
)
 
9,271

Deferred tax assets
1

 
—

 
—

 
18

 
(6
)
 
13

Other current assets
1

 
65

 
38

 
241

 
(164
)
 
181

Total current assets
3

 
65

 
38

 
11,733

 
(941
)
 
10,898

Investments in subsidiaries
(1,542
)
 
2,493

 
553

 
3,824

 
(5,328
)
 
—

Amounts owed by (to) Group undertakings
4,091

 
(3,959
)
 
687

 
(819
)
 
—

 
—

NON-CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Fixed assets, net
—

 
11

 
63

 
395

 
(1
)
 
468

Goodwill
—

 
—

 
—

 
1,226

 
1,601

 
2,827

Other intangible assets, net
—

 
—

 
—

 
484

 
(99
)
 
385

Investments in associates
—

 
—

 
—

 
(53
)
 
227

 
174

Deferred tax assets
—

 
—

 
—

 
42

 
(24
)
 
18

Pension benefits asset
—

 
—

 
—

 
136

 
—

 
136

Other non-current assets
5

 
134

 
41

 
157

 
(131
)
 
206

Total non-current assets
5

 
145

 
104

 
2,387

 
1,573

 
4,214

TOTAL ASSETS
$
2,557

 
$
(1,256
)
 
$
1,382

 
$
17,125

 
$
(4,696
)
 
$
15,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
10,071

 
$
(800
)
 
$
9,271

Deferred revenue and accrued expenses
2

 
—

 
—

 
543

 
(4
)
 
541

Income taxes payable
—

 
25

 
—

 
120

 
(126
)
 
19

Short-term debt and current portion of long-term debt
—

 
15

 
—

 
—

 
—

 
15

Deferred tax liabilities
1

 
—

 
—

 
25

 
(5
)
 
21

Other current liabilities
60

 
—

 
73

 
216

 
(22
)
 
327

Total current liabilities
63

 
40

 
73

 
10,975

 
(957
)
 
10,194

NON-CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Long-term debt
795

 
274

 
1,268

 
1

 
—

 
2,338

Liabilities for pension benefits
—

 
—

 
—

 
282

 
—

 
282

Deferred tax liabilities
—

 
—

 
—

 
42

 
(24
)
 
18

Provisions for liabilities
—

 
—

 
—

 
188

 
(8
)
 
180

Other non-current liabilities
—

 
5

 
7

 
363

 
—

 
375

Total non-current liabilities
795

 
279

 
1,275

 
876

 
(32
)
 
3,193

TOTAL LIABILITIES
$
858

 
$
319

 
$
1,348

 
$
11,851

 
$
(989
)
 
$
13,387

EQUITY
 

 
 

 
 

 
 

 
 

 
 

Total Willis Group Holdings stockholders’ equity
1,699

 
(1,575
)
 
34

 
5,248

 
(3,707
)
 
1,699

Noncontrolling interests
—

 
—

 
—

 
26

 
—

 
26

Total equity
1,699

 
(1,575
)
 
34

 
5,274

 
(3,707
)
 
1,725

TOTAL LIABILITIES AND EQUITY
$
2,557

 
$
(1,256
)
 
$
1,382

 
$
17,125

 
$
(4,696
)
 
$
15,112



76
Table of Contents

Willis Group Holdings plc

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As at December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
ASSETS
CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
—

 
$
—

 
$
163

 
$
273

 
$
—

 
$
436

Accounts receivable, net
2

 
—

 
3

 
877

 
28

 
910

Fiduciary assets
—

 
—

 
—

 
9,941

 
(603
)
 
9,338

Deferred tax assets
—

 
1

 
—

 
43

 
—

 
44

Other current assets
1

 
52

 
21

 
271

 
(86
)
 
259

Total current assets
3

 
53

 
187

 
11,405

 
(661
)
 
10,987

Investments in subsidiaries
(1,023
)
 
3,778

 
1,482

 
3,848

 
(8,085
)
 
—

Amounts owed by (to) Group undertakings
4,354

 
(4,716
)
 
476

 
(114
)
 
—

 
—

NON-CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Fixed assets, net
—

 
4

 
59

 
345

 
(2
)
 
406

Goodwill
—

 
—

 
—

 
1,704

 
1,591

 
3,295

Other intangible assets, net
—

 
—

 
—

 
435

 
(15
)
 
420

Investments in associates
—

 
—

 
—

 
(45
)
 
215

 
170

Deferred tax assets
—

 
—

 
—

 
22

 
—

 
22

Pension benefits asset
—

 
—

 
—

 
145

 
—

 
145

Other non-current assets
5

 
170

 
43

 
192

 
(127
)
 
283

Total non-current assets
5

 
174

 
102

 
2,798

 
1,662

 
4,741

TOTAL ASSETS
$
3,339

 
$
(711
)
 
$
2,247

 
$
17,937

 
$
(7,084
)
 
$
15,728

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
9,941

 
$
(603
)
 
$
9,338

Deferred revenue and accrued expenses
2

 
—

 
—

 
318

 
—

 
320

Income taxes payable
—

 
40

 
—

 
30

 
(55
)
 
15

Short-term debt and current portion of long-term debt
—

 
11

 
—

 
4

 
—

 
15

Deferred tax liabilities
—

 
—

 
1

 
25

 
—

 
26

Other current liabilities
56

 
11

 
57

 
185

 
(27
)
 
282

Total current liabilities
58

 
62

 
58

 
10,503

 
(685
)
 
9,996

NON-CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Long-term debt
795

 
289

 
1,270

 
—

 
—

 
2,354

Liabilities for pension benefits
—

 
—

 
—

 
270

 
—

 
270

Deferred tax liabilities
—

 
5

 
35

 
(9
)
 
1

 
32

Provisions for liabilities
—

 
—

 
—

 
198

 
(2
)
 
196

Other non-current liabilities
—

 
9

 
9

 
345

 
—

 
363

Total non-current liabilities
795

 
303

 
1,314

 
804

 
(1
)
 
3,215

TOTAL LIABILITIES
$
853

 
$
365

 
$
1,372

 
$
11,307

 
$
(686
)
 
$
13,211

EQUITY
 

 
 

 
 

 
 

 
 

 
 

Total Willis Group Holdings stockholders’ equity
2,486

 
(1,076
)
 
875

 
6,599

 
(6,398
)
 
2,486

Noncontrolling interests
—

 
—

 
—

 
31

 
—

 
31

Total equity
2,486

 
(1,076
)
 
875

 
6,630

 
(6,398
)
 
2,517

TOTAL LIABILITIES AND EQUITY
$
3,339

 
$
(711
)
 
$
2,247

 
$
17,937

 
$
(7,084
)
 
$
15,728



77
Table of Contents

Notes to the financial statements

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(42
)
 
$
780

 
$
69

 
$
431

 
$
(713
)
 
$
525

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
5

 
—

 
5

Additions to fixed assets
—

 
(7
)
 
(19
)
 
(109
)
 


 
(135
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(33
)
 
—

 
(33
)
Payments to acquire other investments
—

 
—

 
—

 
(7
)
 
—

 
(7
)
Additions to intangible assets
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Proceeds from sale of continuing operations, net of cash disposed
—

 
—

 
—

 
—

 
—

 
—

Net cash used in investing activities
—

 
(7
)
 
(19
)
 
(146
)
 
—

 
(172
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds from issue of other debt
—

 
1

 
—

 
—

 
—

 
1

Repayments of debt
—

 
(15
)
 
—

 
—

 
—

 
(15
)
Repurchase of shares
(100
)
 
—

 
—

 
—

 
—

 
(100
)
Proceeds from issue of shares
53

 
—

 
—

 
—

 
—

 
53

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
2

 
—

 
2

Amounts owed by/to Group undertakings
275

 
(759
)
 
(213
)
 
697

 
—

 
—

Dividends paid
(185
)
 
—

 
—

 
(713
)
 
713

 
(185
)
Proceeds from sale of noncontrolling interests
—

 
—

 
—

 
3

 
—

 
3

Acquisition of noncontrolling interests
—

 
—

 
—

 
(39
)
 
—

 
(39
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(11
)
 
—

 
(11
)
Net cash provided by (used in) financing activities
43

 
(773
)
 
(213
)
 
(61
)
 
713

 
(291
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1

 
—

 
(163
)
 
224

 
—

 
62

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
2

 
—

 
2

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
—

 
163

 
273

 
—

 
436

CASH AND CASH EQUIVALENTS, END OF YEAR
$
1

 
$
—

 
$
—

 
$
499

 
$
—

 
$
500



78
Table of Contents

Willis Group Holdings plc

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(41
)
 
$
184

 
$
88

 
$
1,269

 
$
(1,061
)
 
$
439

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
13

 
—

 
13

Additions to fixed assets
—

 
(4
)
 
(21
)
 
(86
)
 
—

 
(111
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(10
)
 
—

 
(10
)
Acquisitions of investments in associates
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Payments to acquire other investments
—

 
—

 
—

 
(5
)
 
—

 
(5
)
Proceeds from sale of discontinued operations, net of cash disposed
—

 
—

 
—

 
14

 
—

 
14

Net cash used in investing activities
—

 
(4
)
 
(21
)
 
(76
)
 
—

 
(101
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds from draw down of revolving credit facility
—

 
—

 
(90
)
 
—

 
—

 
(90
)
Senior notes issued
794

 
—

 
—

 
—

 
—

 
794

Debt issuance costs
(7
)
 
(5
)
 
—

 
—

 
—

 
(12
)
Proceeds from issue of term loan
—

 
300

 
—

 
—

 
—

 
300

Repayments of debt
—

 
(500
)
 
(411
)
 
—

 
—

 
(911
)
Make-whole on repurchase and redemption of senior notes
—

 
(158
)
 
—

 
—

 
—

 
(158
)
Proceeds from issue of shares
60

 
—

 
—

 
—

 
—

 
60

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
5

 
—

 
5

Amounts owed by/to Group undertakings
(626
)
 
187

 
521

 
(82
)
 
—

 
—

Dividends paid
(180
)
 
—

 
—

 
(1,061
)
 
1,061

 
(180
)
Acquisition of noncontrolling interests
—

 
(4
)
 
—

 
(5
)
 
—

 
(9
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
Net cash provided by (used in) financing activities
41

 
(180
)
 
20

 
(1,156
)
 
1,061

 
(214
)
INCREASE IN CASH AND CASH EQUIVALENTS
—

 
—

 
87

 
37

 
—

 
124

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(4
)
 
—

 
(4
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
—

 
76

 
240

 
—

 
316

CASH AND CASH EQUIVALENTS, END OF YEAR
$
—

 
$
—

 
$
163

 
$
273

 
$
—

 
$
436



79
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Notes to the financial statements

30. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2010
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(9
)
 
$
1,170

 
$
83

 
$
1,572

 
$
(2,327
)
 
$
489

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
10

 
—

 
10

Additions to fixed assets
—

 
—

 
(7
)
 
(76
)
 
—

 
(83
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(21
)
 
—

 
(21
)
Acquisitions of investments in associates
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Payments to acquire other investments
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Proceeds from sale of continuing operations, net of cash disposed
—

 
—

 
—

 
2

 
—

 
2

Net cash (used in) provided by investing activities
—

 
—

 
(7
)
 
(87
)
 
—

 
(94
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds from draw down of revolving credit facility
—

 
—

 
90

 
—

 
—

 
90

Repayments of debt
—

 
—

 
(200
)
 
(9
)
 
—

 
(209
)
Proceeds from issue of shares
36

 
—

 
—

 
—

 
—

 
36

Amounts owed by/to Group undertakings
106

 
(317
)
 
6

 
205

 
—

 
—

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
2

 
—

 
2

Dividends paid
(133
)
 
(849
)
 
—

 
(1,521
)
 
2,327

 
(176
)
Acquisition of noncontrolling interests
—

 
(4
)
 
—

 
(6
)
 
—

 
(10
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(26
)
 
—

 
(26
)
Net cash provided by (used in) financing activities
9

 
(1,170
)
 
(104
)
 
(1,355
)
 
2,327

 
(293
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
—

 
—

 
(28
)
 
130

 
—

 
102

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(7
)
 
—

 
(7
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
—

 
104

 
117

 
—

 
221

CASH AND CASH EQUIVALENTS, END OF YEAR
$
—

 
$
—

 
$
76

 
$
240

 
$
—

 
$
316



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Willis Group Holdings plc


31.
FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
On March 17, 2011, the Company issued senior notes totaling $800 million in a registered public offering. These debt securities were issued by Willis Group Holdings (‘Holdings Debt Securities’) and are guaranteed by certain of the Company’s subsidiaries. Therefore, the Company is providing the condensed consolidating financial information below. The following 100 percent directly or indirectly owned subsidiaries fully and unconditionally guarantee the Holdings Debt Securities on a joint and several basis: Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America (the ‘Guarantors’).
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by Willis North America (the ‘Willis North America Debt Securities’) (and for which condensed consolidating financial information is presented in Note 30) in that Willis Group Holdings is the Parent Issuer and Willis North America is a subsidiary guarantor.
Presented below is condensed consolidating financial information for:

(i)
Willis Group Holdings, which is the Parent Issuer;

(ii)
the Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent;

(iii)
Other, which are the non-guarantor subsidiaries, on a combined basis;

(iv)
Consolidating adjustments; and

(v)
the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets for the year ended December 31, 2012 of Willis Group Holdings and the Guarantors. Investments in subsidiaries in the condensed consolidating balance sheet for Other, represents the cost of investment in subsidiaries recorded in the parent companies of the non-guarantor subsidiaries.
The entities included in the Guarantors column for the year ended December 31, 2012 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America.


81
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Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2012
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
3,458

 
$
—

 
$
3,458

Investment income
—

 
12

 
17

 
(11
)
 
18

Other income
—

 
—

 
97

 
(93
)
 
4

Total revenues
—

 
12

 
3,572

 
(104
)
 
3,480

EXPENSES
 

 
 

 
 

 
 

 
 

Salaries and benefits
(2
)
 
(96
)
 
(2,377
)
 
—

 
(2,475
)
Other operating expenses
(4
)
 
(161
)
 
(419
)
 
3

 
(581
)
Depreciation expense
—

 
(16
)
 
(63
)
 
—

 
(79
)
Amortization of intangible assets
—

 
—

 
(71
)
 
12

 
(59
)
Goodwill impairment charge
—

 
—

 
(492
)
 
—

 
(492
)
Net loss on disposal of operations
—

 
—

 
(28
)
 
25

 
(3
)
Total expenses
(6
)
 
(273
)
 
(3,450
)
 
40

 
(3,689
)
OPERATING (LOSS) INCOME
(6
)
 
(261
)
 
122

 
(64
)
 
(209
)
Investment income from Group undertakings
6

 
1,332

 
220

 
(1,558
)
 
—

Interest expense
(43
)
 
(394
)
 
(277
)
 
586

 
(128
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(43
)
 
677

 
65

 
(1,036
)
 
(337
)
Income taxes
—

 
62

 
(166
)
 
3

 
(101
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(43
)
 
739

 
(101
)
 
(1,033
)
 
(438
)
Interest in earnings of associates, net of tax
—

 
—

 
(4
)
 
9

 
5

Equity account for subsidiaries
(403
)
 
(1,128
)
 
—

 
1,531

 
—

LOSS FROM CONTINUING OPERATIONS
(446
)
 
(389
)
 
(105
)
 
507

 
(433
)
Discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

NET LOSS
(446
)
 
(389
)
 
(105
)
 
507

 
(433
)
Less: Net income attributable to noncontrolling interests
—

 
—

 
(13
)
 
—

 
(13
)
NET LOSS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
(446
)
 
$
(389
)
 
$
(118
)
 
$
507

 
$
(446
)


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Willis Group Holdings plc

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2012
 
Willis
Group
Holdings—the Parent Issuer
 
The Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
Comprehensive loss
$
(552
)
 
$
(486
)
 
$
(213
)
 
$
712

 
$
(539
)
Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
(13
)
 
—

 
(13
)
Comprehensive loss attributable to Willis Group Holdings
$
(552
)
 
$
(486
)
 
$
(226
)
 
$
712

 
$
(552
)


83
Table of Contents

Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2011
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
3,414

 
$
—

 
$
3,414

Investment income
—

 
13

 
29

 
(11
)
 
31

Other income
—

 
—

 
24

 
(22
)
 
2

Total revenues
—

 
13

 
3,467

 
(33
)
 
3,447

EXPENSES
 

 
 

 
 

 
 

 
 

Salaries and benefits
(3
)
 
(69
)
 
(2,015
)
 
—

 
(2,087
)
Other operating expenses
(17
)
 
(66
)
 
(571
)
 
(2
)
 
(656
)
Depreciation expense
—

 
(14
)
 
(60
)
 
—

 
(74
)
Amortization of intangible assets
—

 
—

 
(74
)
 
6

 
(68
)
Net gain on disposal of operations
—

 
—

 
7

 
(3
)
 
4

Total expenses
(20
)
 
(149
)
 
(2,713
)
 
1

 
(2,881
)
OPERATING (LOSS) INCOME
(20
)
 
(136
)
 
754

 
(32
)
 
566

Investment income from Group undertakings
35

 
747

 
(157
)
 
(625
)
 
—

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

 
(171
)
 
—

 
—

 
(171
)
Interest expense
(34
)
 
(410
)
 
(332
)
 
620

 
(156
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(19
)
 
30

 
265

 
(37
)
 
239

Income taxes
—

 
83

 
(117
)
 
2

 
(32
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(19
)
 
113

 
148

 
(35
)
 
207

Interest in earnings of associates, net of tax
—

 
—

 
4

 
8

 
12

Equity account for subsidiaries
223

 
61

 
—

 
(284
)
 
—

INCOME FROM CONTINUING OPERATIONS
204

 
174

 
152

 
(311
)
 
219

Discontinued operations, net of tax
—

 
—

 
1

 
—

 
1

NET INCOME
204

 
174

 
153

 
(311
)
 
220

Less: Net income attributable to noncontrolling interests
—

 
—

 
(16
)
 
—

 
(16
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
204

 
$
174

 
$
137

 
$
(311
)
 
$
204



84
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Willis Group Holdings plc

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2011
 
Willis
Group
Holdings—the Parent Issuer
 
The Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
Comprehensive income (loss)
$
1

 
$
(24
)
 
$
(50
)
 
$
89

 
$
16

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
(15
)
 
—

 
(15
)
Comprehensive income (loss) attributable to Willis Group Holdings
$
1

 
$
(24
)
 
$
(65
)
 
$
89

 
$
1




85
Table of Contents

Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2010
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
3,293

 
$
—

 
$
3,293

Investment income
—

 
12

 
36

 
(10
)
 
38

Other income
—

 
—

 
1

 
—

 
1

Total revenues
—

 
12

 
3,330

 
(10
)
 
3,332

EXPENSES
 

 
 

 
 

 
 

 
 

Salaries and benefits
—

 
(65
)
 
(1,818
)
 
15

 
(1,868
)
Other operating expenses
335

 
(55
)
 
(825
)
 
(19
)
 
(564
)
Depreciation expense
—

 
(9
)
 
(54
)
 
—

 
(63
)
Amortization of intangible assets
—

 
—

 
(82
)
 
—

 
(82
)
Net (loss) gain on disposal of operations
(347
)
 
—

 
350

 
(5
)
 
(2
)
Total expenses
(12
)
 
(129
)
 
(2,429
)
 
(9
)
 
(2,579
)
OPERATING (LOSS) INCOME
(12
)
 
(117
)
 
901

 
(19
)
 
753

Investment income from Group undertakings
—

 
2,039

 
952

 
(2,991
)
 
—

Interest expense
—

 
(580
)
 
(374
)
 
788

 
(166
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
1,342

 
1,479

 
(2,222
)
 
587

Income taxes
—

 
45

 
(186
)
 
1

 
(140
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
1,387

 
1,293

 
(2,221
)
 
447

Interest in earnings of associates, net of tax
—

 
—

 
16

 
7

 
23

Equity account for subsidiaries
467

 
(934
)
 
—

 
467

 
—

INCOME FROM CONTINUING OPERATIONS
455

 
453

 
1,309

 
(1,747
)
 
470

NET INCOME
455

 
453

 
1,309

 
(1,747
)
 
470

Less: Net income attributable to noncontrolling interests
—

 
—

 
(15
)
 
—

 
(15
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
455

 
$
453

 
$
1,294

 
$
(1,747
)
 
$
455



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Willis Group Holdings plc

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2010
 
Willis
Group
Holdings—the Parent Issuer
 
The Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
Comprehensive income
$
508

 
$
501

 
$
1,375

 
$
(1,863
)
 
$
521

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
(13
)
 
—

 
(13
)
Comprehensive income attributable to Willis Group Holdings
$
508

 
$
501

 
$
1,362

 
$
(1,863
)
 
$
508











87
Table of Contents

Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As at December 31, 2012
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 

 
 

 
 

 
 

 
 

CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
1

 
$
—

 
$
499

 
$
—

 
$
500

Accounts receivable, net
—

 
—

 
904

 
29

 
933

Fiduciary assets
—

 
—

 
10,071

 
(800
)
 
9,271

Deferred tax assets
1

 
—

 
18

 
(6
)
 
13

Other current assets
1

 
103

 
241

 
(164
)
 
181

Total current assets
3

 
103

 
11,733

 
(941
)
 
10,898

Investments in subsidiaries
(1,542
)
 
3,012

 
3,824

 
(5,294
)
 
—

Amounts owed by (to) Group undertakings
4,091

 
(3,272
)
 
(819
)
 
—

 
—

NON-CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Fixed assets, net
—

 
74

 
395

 
(1
)
 
468

Goodwill
—

 
—

 
1,226

 
1,601

 
2,827

Other intangible assets, net
—

 
—

 
484

 
(99
)
 
385

Investments in associates
—

 
—

 
(53
)
 
227

 
174

Deferred tax assets
—

 
—

 
42

 
(24
)
 
18

Pension benefits asset
—

 
—

 
136

 
—

 
136

Other non-current assets
5

 
175

 
157

 
(131
)
 
206

Total non-current assets
5

 
249

 
2,387

 
1,573

 
4,214

TOTAL ASSETS
$
2,557

 
$
92

 
$
17,125

 
$
(4,662
)
 
$
15,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

 
 

 
 

 
 

CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Fiduciary liabilities
$
—

 
$
—

 
$
10,071

 
$
(800
)
 
$
9,271

Deferred revenue and accrued expenses
2

 
—

 
543

 
(4
)
 
541

Income taxes payable
—

 
25

 
120

 
(126
)
 
19

Short-term debt and current portion of long-term debt
—

 
15

 
—

 
—

 
15

Deferred tax liabilities
1

 
—

 
25

 
(5
)
 
21

Other current liabilities
60

 
73

 
216

 
(22
)
 
327

Total current liabilities
63

 
113

 
10,975

 
(957
)
 
10,194

NON-CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Long-term debt
795

 
1,542

 
1

 
—

 
2,338

Liabilities for pension benefits
—

 
—

 
282

 
—

 
282

Deferred tax liabilities
—

 
—

 
42

 
(24
)
 
18

Provisions for liabilities
—

 
—

 
188

 
(8
)
 
180

Other non-current liabilities
—

 
12

 
363

 
—

 
375

Total non-current liabilities
795

 
1,554

 
876

 
(32
)
 
3,193

TOTAL LIABILITIES
$
858

 
$
1,667

 
$
11,851

 
$
(989
)
 
$
13,387

EQUITY
 

 
 

 
 

 
 

 
 

Total Willis Group Holdings stockholders’ equity
1,699

 
(1,575
)
 
5,248

 
(3,673
)
 
1,699

Noncontrolling interests
—

 
—

 
26

 
—

 
26

Total equity
1,699

 
(1,575
)
 
5,274

 
(3,673
)
 
1,725

TOTAL LIABILITIES AND EQUITY
$
2,557

 
$
92

 
$
17,125

 
$
(4,662
)
 
$
15,112



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Willis Group Holdings plc

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As at December 31, 2011
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 

 
 

 
 

 
 

 
 

CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
—

 
$
163

 
$
273

 
$
—

 
$
436

Accounts receivable, net
2

 
3

 
877

 
28

 
910

Fiduciary assets
—

 
—

 
9,941

 
(603
)
 
9,338

Deferred tax assets
—

 
1

 
43

 
—

 
44

Other current assets
1

 
73

 
271

 
(86
)
 
259

Total current assets
3

 
240

 
11,405

 
(661
)
 
10,987

Investments in subsidiaries
(1,023
)
 
4,385

 
3,848

 
(7,210
)
 
—

Amounts owed by (to) Group undertakings
4,354

 
(4,240
)
 
(114
)
 
—

 
—

NON-CURRENT ASSETS
 

 
 

 
 

 
 

 
 

Fixed assets, net
—

 
63

 
345

 
(2
)
 
406

Goodwill
—

 
—

 
1,704

 
1,591

 
3,295

Other intangible assets, net
—

 
—

 
435

 
(15
)
 
420

Investments in associates
—

 
—

 
(45
)
 
215

 
170

Deferred tax assets
—

 
—

 
22

 
—

 
22

Pension benefits asset
—

 
—

 
145

 
—

 
145

Other non-current assets
5

 
213

 
192

 
(127
)
 
283

Total non-current assets
5

 
276

 
2,798

 
1,662

 
4,741

TOTAL ASSETS
$
3,339

 
$
661

 
$
17,937

 
$
(6,209
)
 
$
15,728

LIABILITIES AND STOCKHOLDERS’ EQUITY
 

 
 

 
 

 
 

 
 

CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Fiduciary liabilities
$
—

 
$
—

 
$
9,941

 
$
(603
)
 
$
9,338

Deferred revenue and accrued expenses
2

 
—

 
318

 
—

 
320

Income taxes payable
—

 
40

 
30

 
(55
)
 
15

Short-term debt and current portion of long-term debt
—

 
11

 
4

 
—

 
15

Deferred tax liabilities
—

 
1

 
25

 
—

 
26

Other current liabilities
56

 
68

 
185

 
(27
)
 
282

Total current liabilities
58

 
120

 
10,503

 
(685
)
 
9,996

NON-CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

Long-term debt
795

 
1,559

 
—

 
—

 
2,354

Liabilities for pension benefits
—

 
—

 
270

 
—

 
270

Deferred tax liabilities
—

 
40

 
(9
)
 
1

 
32

Provisions for liabilities
—

 
—

 
198

 
(2
)
 
196

Other non-current liabilities
—

 
18

 
345

 
—

 
363

Total non-current liabilities
795

 
1,617

 
804

 
(1
)
 
3,215

TOTAL LIABILITIES
$
853

 
$
1,737

 
$
11,307

 
$
(686
)
 
$
13,211

EQUITY
 

 
 

 
 

 
 

 
 

Total Willis Group Holdings stockholders’ equity
2,486

 
(1,076
)
 
6,599

 
(5,523
)
 
2,486

Noncontrolling interests
—

 
—

 
31

 
—

 
31

Total equity
2,486

 
(1,076
)
 
6,630

 
(5,523
)
 
2,517

TOTAL LIABILITIES AND EQUITY
$
3,339

 
$
661

 
$
17,937

 
$
(6,209
)
 
$
15,728



89
Table of Contents

Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2012
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(42
)
 
$
849

 
$
431

 
$
(713
)
 
$
525

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
5

 
—

 
5

Additions to fixed assets
—

 
(26
)
 
(109
)
 
—

 
(135
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
(33
)
 
—

 
(33
)
Acquisitions of investments in associates
—

 
—

 
—

 
—

 
—

Payments to acquire other investments
—

 
—

 
(7
)
 
—

 
(7
)
Additions to intangible assets
—

 
—

 
(2
)
 
—

 
(2
)
Proceeds from disposal of continuing operations, net of cash disposed
—

 
—

 
—

 
—

 
—

Net cash used in investing activities
—

 
(26
)
 
(146
)
 
—

 
(172
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

Proceeds from issue of other debt
—

 
1

 
—

 
—

 
1

Repayments of debt
—

 
(15
)
 
—

 
—

 
(15
)
Repurchase of shares
(100
)
 
—

 
—

 
—

 
(100
)
Proceeds from the issue of shares
53

 
—

 
—

 
—

 
53

Excess tax benefits from share-based payment arrangements
—

 
—

 
2

 
—

 
2

Amounts owed by/to Group undertakings
275

 
(972
)
 
697

 
—

 
—

Dividends paid
(185
)
 
—

 
(713
)
 
713

 
(185
)
Proceeds from sale of noncontrolling interests
—

 
—

 
3

 
—

 
3

Acquisition of noncontrolling interests
—

 
—

 
(39
)
 
—

 
(39
)
Dividends paid to noncontrolling interests
—

 
—

 
(11
)
 
—

 
(11
)
Net cash provided by (used in) financing activities
43

 
(986
)
 
(61
)
 
713

 
(291
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1

 
(163
)
 
224

 
—

 
62

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
2

 
—

 
2

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
163

 
273

 
—

 
436

CASH AND CASH EQUIVALENTS, END OF YEAR
$
1

 
$
—

 
$
499

 
$
—

 
$
500



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Willis Group Holdings plc

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2011
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(41
)
 
$
272

 
$
1,269

 
$
(1,061
)
 
$
439

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
13

 
—

 
13

Additions to fixed assets
—

 
(25
)
 
(86
)
 
—

 
(111
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
(10
)
 
—

 
(10
)
Acquisitions of investments in associates
—

 
—

 
(2
)
 
—

 
(2
)
Payments to acquire other investments
—

 
—

 
(5
)
 
—

 
(5
)
Proceeds from sale of discontinued operations, net of cash disposed
—

 
—

 
14

 
—

 
14

Net cash used in investing activities
—

 
(25
)
 
(76
)
 
—

 
(101
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

Repayments on revolving credit facility
—

 
(90
)
 
—

 
—

 
(90
)
Senior notes issued
794

 
—

 
—

 
—

 
794

Debt issuance costs
(7
)
 
(5
)
 
—

 
—

 
(12
)
Proceeds from issue of term loan
—

 
300

 
—

 
—

 
300

Repayments of debt
—

 
(911
)
 
—

 
—

 
(911
)
Make-whole on repurchase and redemption of senior notes
—

 
(158
)
 
—

 
—

 
(158
)
Proceeds from the issue of shares
60

 
—

 
—

 
—

 
60

Excess tax benefits from share-based payment arrangements
—

 
—

 
5

 
—

 
5

Amounts owed by/to Group undertakings
(626
)
 
708

 
(82
)
 
—

 
—

Dividends paid
(180
)
 
—

 
(1,061
)
 
1,061

 
(180
)
Acquisition of noncontrolling interests
—

 
(4
)
 
(5
)
 
—

 
(9
)
Dividends paid to noncontrolling interests
—

 
—

 
(13
)
 
—

 
(13
)
Net cash provided by (used in) financing activities
41

 
(160
)
 
(1,156
)
 
1,061

 
(214
)
INCREASE IN CASH AND CASH EQUIVALENTS
—

 
87

 
37

 
—

 
124

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(4
)
 
—

 
(4
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
76

 
240

 
—

 
316

CASH AND CASH EQUIVALENTS, END OF YEAR
$
—

 
$
163

 
$
273

 
$
—

 
$
436



91
Table of Contents

Notes to the financial statements

31. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2010
 
Willis
Group
Holdings —
the Parent
Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING
ACTIVITIES
$
(9
)
 
$
1,253

 
$
1,572

 
$
(2,327
)
 
$
489

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
10

 
—

 
10

Additions to fixed assets
—

 
(7
)
 
(76
)
 
—

 
(83
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
(21
)
 
—

 
(21
)
Acquisitions of investments in associates
—

 
—

 
(1
)
 
—

 
(1
)
Payments to acquire other investments
—

 
—

 
(1
)
 
—

 
(1
)
Proceeds from sale of continuing operations, net of cash disposed
—

 
—

 
2

 
—

 
2

Net cash used in investing activities
—

 
(7
)
 
(87
)
 
—

 
(94
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

Proceeds from draw down of revolving credit facility
—

 
90

 
—

 
—

 
90

Repayments of debt
—

 
(200
)
 
(9
)
 
—

 
(209
)
Proceeds from issue of shares
36

 
—

 
—

 
—

 
36

Excess tax benefits from share-based payment arrangements
—

 
—

 
2

 
—

 
2

Amounts owed by/to Group undertakings
106

 
(311
)
 
205

 
—

 
—

Dividends paid
(133
)
 
(849
)
 
(1,521
)
 
2,327

 
(176
)
Acquisition of noncontrolling interests
—

 
(4
)
 
(6
)
 
—

 
(10
)
Dividends paid to noncontrolling interests
—

 
—

 
(26
)
 
—

 
(26
)
Net cash provided by (used in) financing activities
9

 
(1,274
)
 
(1,355
)
 
2,327

 
(293
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
—

 
(28
)
 
130

 
—

 
102

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(7
)
 
—

 
(7
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
104

 
117

 
—

 
221

CASH AND CASH EQUIVALENTS, END OF YEAR
$
—

 
$
76

 
$
240

 
$
—

 
$
316



92
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Willis Group Holdings plc


32.
QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarterly financial data for 2012 and 2011 were as follows:
 
Three Months Ended
 
March 31,
 
June 30,
 
September 30,
 
December 31,
 
(millions, except per share data)
2012
 

 
 

 
 

 
 

Total revenues
$
1,013

 
$
842

 
$
754

 
$
871

Total expenses
(696
)
 
(663
)
 
(684
)
 
(1,646
)
Net income (loss)
232

 
110

 
26

 
(801
)
Net income (loss) attributable to Willis Group Holdings
225

 
108

 
26

 
(805
)
Earnings per share — continuing operations
 

 
 

 
 

 
 

— Basic
$
1.29

 
$
0.62

 
$
0.15

 
$
(4.65
)
— Diluted
$
1.28

 
$
0.61

 
$
0.15

 
$
(4.65
)
Earnings per share — discontinued operations
 

 
 

 
 

 
 

— Basic
$
—

 
$
—

 
$
—

 
$
—

— Diluted
$
—

 
$
—

 
$
—

 
$
—

2011
 

 
 

 
 

 
 

Total revenues
$
1,007

 
$
861

 
$
760

 
$
819

Total expenses
(768
)
 
(705
)
 
(670
)
 
(738
)
Net income
42

 
89

 
60

 
29

Net income attributable to Willis Group Holdings
34

 
85

 
60

 
25

Earnings per share — continuing operations
 

 
 

 
 

 
 

— Basic
$
0.20

 
$
0.49

 
$
0.35

 
$
0.14

— Diluted
$
0.20

 
$
0.48

 
$
0.34

 
$
0.14

Earnings per share — discontinued operations
 

 
 

 
 

 
 

— Basic
$
—

 
$
—

 
$
—

 
$
—

— Diluted
$
—

 
$
—

 
$
—

 
$
—



93
Table of Contents

Notes to the financial statements

33.
FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
Trinity Acquisition plc may offer debt securities pursuant to an effective shelf registration on Form S-3. Debt securities offered('Trinity Acquisition Debt Securities'), if issued, will be guaranteed by the Company and certain of its subsidiaries. Therefore Trinity Acquisition plc is providing condensed consolidating financial information below. If Trinity Acquisition plc issues debt securities, the following 100 percent directly or indirectly owned subsidiaries of the parent could fully and unconditionally guarantee the debt securities on a joint and several basis: Willis Netherlands Holdings B.V, Willis Investment UK Holdings Limited, TA I Limited, Willis Group Limited and Willis North America Inc.
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by the Company and Willis North America (the ‘Willis North America Debt Securities’) in that Trinity Acquisition plc is the issuer and not a subsidiary guarantor, and Willis North America, Inc. is a subsidiary guarantor.
Presented below is condensed consolidating financial information for:

(i)
Willis Group Holdings, which is a guarantor, on a parent company only basis;

(ii)
the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent. Willis Netherlands Holdings B.V, Willis Investment UK Holdings Limited and TA I Limited are all direct or indirect parents of the issuer and Willis Group Limited and Willis North America Inc., are 100 percent directly or indirectly owned subsidiaries or the issuer;

(iii)
Trinity Acquisition plc, which is the issuer and is a 100 percent indirectly owned subsidiary of the parent;

(iv)
Other, which are the non-guarantor subsidiaries, on a combined basis;

(v)
Consolidating adjustments; and

(vi)
the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets of Willis Group Holdings, the Other Guarantors and the Issuer. Investments in subsidiaries in the condensed consolidating balance sheet for Other represents the cost of investment in subsidiaries recorded in the parent companies of the non-guarantor subsidiaries.
The entities included in the Other Guarantors column are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, Willis North America, TA I Limited and Willis Group Limited.


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Willis Group Holdings plc

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
REVENUES
 

 
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
—

 
$
3,458

 
$
—

 
$
3,458

Investment income
—

 
12

 
—

 
17

 
(11
)
 
18

Other income
—

 
—

 
—

 
97

 
(93
)
 
4

Total revenues
—

 
12

 
—

 
3,572

 
(104
)
 
3,480

EXPENSES
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
(2
)
 
(96
)
 
—

 
(2,377
)
 
—

 
(2,475
)
Other operating expenses
(4
)
 
(162
)
 
1

 
(419
)
 
3

 
(581
)
Depreciation expense
—

 
(16
)
 
—

 
(63
)
 
—

 
(79
)
Amortization of intangible assets
—

 
—

 
—

 
(71
)
 
12

 
(59
)
Goodwill impairment charge
—

 
—

 
—

 
(492
)
 
—

 
(492
)
Net loss on disposal of operations
—

 
—

 
—

 
(28
)
 
25

 
(3
)
Total expenses
(6
)
 
(274
)
 
1

 
(3,450
)
 
40

 
(3,689
)
OPERATING (LOSS) INCOME
(6
)
 
(262
)
 
1

 
122

 
(64
)
 
(209
)
Investment income from Group undertakings
6

 
2,322

 
742

 
220

 
(3,290
)
 
—

Interest expense
(43
)
 
(359
)
 
(35
)
 
(277
)
 
586

 
(128
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(43
)
 
1,701

 
708

 
65

 
(2,768
)
 
(337
)
Income taxes
—

 
73

 
(11
)
 
(166
)
 
3

 
(101
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(43
)
 
1,774

 
697

 
(101
)
 
(2,765
)
 
(438
)
Interest in earnings of associates, net of tax
—

 
—

 
—

 
(4
)
 
9

 
5

Equity account for subsidiaries
(403
)
 
(2,163
)
 
(1,124
)
 
—

 
3,690

 
—

LOSS FROM CONTINUING OPERATIONS
(446
)
 
(389
)
 
(427
)
 
(105
)
 
934

 
(433
)
Discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

 
—

NET LOSS
(446
)
 
(389
)
 
(427
)
 
(105
)
 
934

 
(433
)
Less: Net loss attributable to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
NET LOSS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
(446
)
 
$
(389
)
 
$
(427
)
 
$
(118
)
 
$
934

 
$
(446
)



95
Table of Contents

Notes to the financial statements

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
Comprehensive loss
$
(552
)
 
$
(486
)
 
$
(528
)
 
$
(213
)
 
$
1,240

 
$
(539
)
Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
Comprehensive loss attributable to Willis Group Holdings
$
(552
)
 
$
(486
)
 
$
(528
)
 
$
(226
)
 
$
1,240

 
$
(552
)


96
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Willis Group Holdings plc

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
REVENUES
 

 
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
—

 
$
3,414

 
$
—

 
$
3,414

Investment income
—

 
13

 
—

 
29

 
(11
)
 
31

Other income
—

 
—

 
—

 
24

 
(22
)
 
2

Total revenues
—

 
13

 
—

 
3,467

 
(33
)
 
3,447

EXPENSES
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
(3
)
 
(69
)
 
—

 
(2,015
)
 
—

 
(2,087
)
Other operating expenses
(17
)
 
(70
)
 
4

 
(571
)
 
(2
)
 
(656
)
Depreciation expense
—

 
(14
)
 
—

 
(60
)
 
—

 
(74
)
Amortization of intangible assets
—

 
—

 
—

 
(74
)
 
6

 
(68
)
Net gain on disposal of operations
—

 
—

 
—

 
7

 
(3
)
 
4

Total expenses
(20
)
 
(153
)
 
4

 
(2,713
)
 
1

 
(2,881
)
OPERATING (LOSS) INCOME
(20
)
 
(140
)
 
4

 
754

 
(32
)
 
566

Investment income from Group undertakings
35

 
682

 
112

 
(157
)
 
(672
)
 
—

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

 
—

 
(171
)
 
—

 
—

 
(171
)
Interest expense
(34
)
 
(367
)
 
(43
)
 
(332
)
 
620

 
(156
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(19
)
 
175

 
(98
)
 
265

 
(84
)
 
239

Income taxes
—

 
44

 
39

 
(117
)
 
2

 
(32
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(19
)
 
219

 
(59
)
 
148

 
(82
)
 
207

Interest in earnings of associates, net of tax
—

 
—

 
—

 
4

 
8

 
12

Equity account for subsidiaries
223

 
(45
)
 
277

 
—

 
(455
)
 
—

INCOME FROM CONTINUING OPERATIONS
204

 
174

 
218

 
152

 
(529
)
 
219

Discontinued operations, net of tax
—

 
—

 
—

 
1

 
—

 
1

NET INCOME
204

 
174

 
218

 
153

 
(529
)
 
220

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(16
)
 
—

 
(16
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
204

 
$
174

 
$
218

 
$
137

 
$
(529
)
 
$
204


97
Table of Contents

Notes to the financial statements

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
Comprehensive income (loss)
$
1

 
$
(24
)
 
$
21

 
$
(50
)
 
$
68

 
$
16

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(15
)
 
—

 
(15
)
Comprehensive income (loss) attributable to Willis Group Holdings
$
1

 
$
(24
)
 
$
21

 
$
(65
)
 
$
68

 
$
1



98
Table of Contents

Willis Group Holdings plc

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
Year Ended December 31, 2010
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
REVENUES
 

 
 

 
 

 
 

 
 

 
 

Commissions and fees
$
—

 
$
—

 
$
—

 
$
3,293

 
$
—

 
$
3,293

Investment income
—

 
12

 
—

 
36

 
(10
)
 
38

Other income
—

 
—

 
—

 
1

 
—

 
1

Total revenues
—

 
12

 
—

 
3,330

 
(10
)
 
3,332

EXPENSES
 

 
 

 
 

 
 

 
 

 
 

Salaries and benefits
—

 
(65
)
 
—

 
(1,818
)
 
15

 
(1,868
)
Other operating expenses
335

 
(64
)
 
9

 
(825
)
 
(19
)
 
(564
)
Depreciation expense
—

 
(9
)
 
—

 
(54
)
 
—

 
(63
)
Amortization of intangible assets
—

 
—

 
—

 
(82
)
 
—

 
(82
)
Net (loss) gain on disposal of operations
(347
)
 
2,610

 
(1,528
)
 
350

 
(1,087
)
 
(2
)
Total expenses
(12
)
 
2,472

 
(1,519
)
 
(2,429
)
 
(1,091
)
 
(2,579
)
OPERATING (LOSS) INCOME
(12
)
 
2,484

 
(1,519
)
 
901

 
(1,101
)
 
753

Investment income from Group undertakings
—

 
1,701

 
4,634

 
952

 
(7,287
)
 
—

Interest expense
—

 
(481
)
 
(99
)
 
(374
)
 
788

 
(166
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
3,704

 
3,016

 
1,479

 
(7,600
)
 
587

Income taxes
—

 
8

 
37

 
(186
)
 
1

 
(140
)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
3,712

 
3,053

 
1,293

 
(7,599
)
 
447

Interest in earnings of associates, net of tax
—

 
—

 
—

 
16

 
7

 
23

Equity account for subsidiaries
467

 
(3,259
)
 
(2,048
)
 
—

 
4,840

 
—

INCOME FROM CONTINUING OPERATIONS
455

 
453

 
1,005

 
1,309

 
(2,752
)
 
470

Discontinued operations, net of tax
—

 
—

 
—

 
—

 
—

 
—

NET INCOME
455

 
453

 
1,005

 
1,309

 
(2,752
)
 
470

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(15
)
 
—

 
(15
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
455

 
$
453

 
$
1,005

 
$
1,294

 
$
(2,752
)
 
$
455














99
Table of Contents

Notes to the financial statements

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Year Ended December 31, 2010
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
Comprehensive income
$
508

 
$
501

 
$
1,054

 
$
1,375

 
$
(2,917
)
 
$
521

Less: Comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
Comprehensive income attributable to Willis Group Holdings
$
508

 
$
501

 
$
1,054

 
$
1,362

 
$
(2,917
)
 
$
508














100
Table of Contents

Willis Group Holdings plc

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As at December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
ASSETS
 

 
 

 
 

 
 

 
 

 
 

CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
1

 
$
—

 
$
—

 
$
499

 
$
—

 
$
500

Accounts receivable, net
—

 
—

 
—

 
904

 
29

 
933

Fiduciary assets
—

 
—

 
—

 
10,071

 
(800
)
 
9,271

Deferred tax assets
1

 
—

 
—

 
18

 
(6
)
 
13

Other current assets
1

 
102

 
1

 
241

 
(164
)
 
181

Total current assets
3

 
102

 
1

 
11,733

 
(941
)
 
10,898

Investments in subsidiaries
(1,542
)
 
3,025

 
2,548

 
3,824

 
(7,855
)
 
—

Amounts owed by (to) Group undertakings
4,091

 
(3,581
)
 
309

 
(819
)
 
—

 
—

NON-CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Fixed assets, net
—

 
74

 
—

 
395

 
(1
)
 
468

Goodwill
—

 
—

 
—

 
1,226

 
1,601

 
2,827

Other intangible assets, net
—

 
—

 
—

 
484

 
(99
)
 
385

Investments in associates
—

 
—

 
—

 
(53
)
 
227

 
174

Deferred tax assets
—

 
—

 
—

 
42

 
(24
)
 
18

Pension benefits asset
—

 
—

 
—

 
136

 
—

 
136

Other non-current assets
5

 
172

 
3

 
157

 
(131
)
 
206

Total non-current assets
5

 
246

 
3

 
2,387

 
1,573

 
4,214

TOTAL ASSETS
$
2,557

 
$
(208
)
 
$
2,861

 
$
17,125

 
$
(7,223
)
 
$
15,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
10,071

 
$
(800
)
 
$
9,271

Deferred revenue and accrued expenses
2

 
—

 
—

 
543

 
(4
)
 
541

Income taxes payable
—

 
14

 
11

 
120

 
(126
)
 
19

Short-term debt and current portion of long-term debt
—

 
—

 
15

 
—

 
—

 
15

Deferred tax liabilities
1

 
—

 
—

 
25

 
(5
)
 
21

Other current liabilities
60

 
73

 
—

 
216

 
(22
)
 
327

Total current liabilities
63

 
87

 
26

 
10,975

 
(957
)
 
10,194

NON-CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Long-term debt
795

 
1,268

 
274

 
1

 
—

 
2,338

Liabilities for pension benefits
—

 
—

 
—

 
282

 
—

 
282

Deferred tax liabilities
—

 
—

 
—

 
42

 
(24
)
 
18

Provisions for liabilities
—

 
—

 
—

 
188

 
(8
)
 
180

Other non-current liabilities
—

 
12

 
—

 
363

 
—

 
375

Total non-current liabilities
795

 
1,280

 
274

 
876

 
(32
)
 
3,193

TOTAL LIABILITIES
$
858

 
$
1,367

 
$
300

 
$
11,851

 
$
(989
)
 
$
13,387

EQUITY
 

 
 

 
 

 
 

 
 

 
 

Total Willis Group Holdings stockholders’ equity
1,699

 
(1,575
)
 
2,561

 
5,248

 
(6,234
)
 
1,699

Noncontrolling interests
—

 
—

 
—

 
26

 
—

 
26

Total equity
1,699

 
(1,575
)
 
2,561

 
5,274

 
(6,234
)
 
1,725

TOTAL LIABILITIES AND EQUITY
$
2,557

 
$
(208
)
 
$
2,861

 
$
17,125

 
$
(7,223
)
 
$
15,112



101
Table of Contents

Notes to the financial statements

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As at December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
ASSETS
CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
—

 
$
163

 
$
—

 
$
273

 
$
—

 
$
436

Accounts receivable, net
2

 
3

 
—

 
877

 
28

 
910

Fiduciary assets
—

 
—

 
—

 
9,941

 
(603
)
 
9,338

Deferred tax assets
—

 
1

 
—

 
43

 
—

 
44

Other current assets
1

 
31

 
42

 
271

 
(86
)
 
259

Total current assets
3

 
198

 
42

 
11,405

 
(661
)
 
10,987

Investments in subsidiaries
(1,023
)
 
4,213

 
4,389

 
3,848

 
(11,427
)
 
—

Amounts owed by (to) Group undertakings
4,354

 
(4,359
)
 
119

 
(114
)
 
—

 
—

NON-CURRENT ASSETS
 

 
 

 
 

 
 

 
 

 
 

Fixed assets, net
—

 
63

 
—

 
345

 
(2
)
 
406

Goodwill
—

 
—

 
—

 
1,704

 
1,591

 
3,295

Other intangible assets, net
—

 
—

 
—

 
435

 
(15
)
 
420

Investments in associates
—

 
—

 
—

 
(45
)
 
215

 
170

Deferred tax assets
—

 
—

 
—

 
22

 
—

 
22

Pension benefits asset
—

 
—

 
—

 
145

 
—

 
145

Other non-current assets
5

 
213

 
—

 
192

 
(127
)
 
283

Total non-current assets
5

 
276

 
—

 
2,798

 
1,662

 
4,741

TOTAL ASSETS
$
3,339

 
$
328

 
$
4,550

 
$
17,937

 
$
(10,426
)
 
$
15,728

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
9,941

 
$
(603
)
 
$
9,338

Deferred revenue and accrued expenses
2

 
—

 
—

 
318

 
—

 
320

Income taxes payable
—

 
40

 
—

 
30

 
(55
)
 
15

Short-term debt and current portion of long-term debt
—

 
—

 
11

 
4

 
—

 
15

Deferred tax liabilities
—

 
1

 
—

 
25

 
—

 
26

Other current liabilities
56

 
68

 
—

 
185

 
(27
)
 
282

Total current liabilities
58

 
109

 
11

 
10,503

 
(685
)
 
9,996

NON-CURRENT LIABILITIES
 

 
 

 
 

 
 

 
 

 
 

Long-term debt
795

 
1,270

 
289

 
—

 
—

 
2,354

Liabilities for pension benefits
—

 
—

 
—

 
270

 
—

 
270

Deferred tax liabilities
—

 
7

 
33

 
(9
)
 
1

 
32

Provisions for liabilities
—

 
—

 
—

 
198

 
(2
)
 
196

Other non-current liabilities
—

 
18

 
—

 
345

 
—

 
363

Total non-current liabilities
795

 
1,295

 
322

 
804

 
(1
)
 
3,215

TOTAL LIABILITIES
$
853

 
$
1,404

 
$
333

 
$
11,307

 
$
(686
)
 
$
13,211

EQUITY
 

 
 

 
 

 
 

 
 

 
 

Total Willis Group Holdings stockholders’ equity
2,486

 
(1,076
)
 
4,217

 
6,599

 
(9,740
)
 
2,486

Noncontrolling interests
—

 
—

 
—

 
31

 
—

 
31

Total equity
2,486

 
(1,076
)
 
4,217

 
6,630

 
(9,740
)
 
2,517

TOTAL LIABILITIES AND EQUITY
$
3,339

 
$
328

 
$
4,550

 
$
17,937

 
$
(10,426
)
 
$
15,728



102
Table of Contents

Willis Group Holdings plc

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(42
)
 
$
1,869

 
$
1,269

 
$
431

 
$
(3,002
)
 
$
525

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
5

 
—

 
5

Additions to fixed assets
—

 
(26
)
 
—

 
(109
)
 
 
 
(135
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(33
)
 
—

 
(33
)
Payments to acquire other investments
—

 
—

 
—

 
(7
)
 
—

 
(7
)
Additions to intangible assets
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Proceeds from sale of continuing operations, net of cash disposed
—

 
—

 
—

 
—

 
—

 
—

Net cash used in investing activities
—

 
(26
)
 
—

 
(146
)
 
—

 
(172
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds from issue of other debt
—

 
—

 
1

 
—

 
—

 
1

Repayments of debt
—

 
(4
)
 
(11
)
 
—

 
—

 
(15
)
Repurchase of shares
(100
)
 
—

 
—

 
—

 
—

 
(100
)
Proceeds from issue of shares
53

 
—

 
—

 
—

 
—

 
53

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
2

 
—

 
2

Amounts owed by/to Group undertakings
275

 
(782
)
 
(190
)
 
697

 
—

 
—

Dividends paid
(185
)
 
(1,220
)
 
(1,069
)
 
(713
)
 
3,002

 
(185
)
Proceeds from sale of noncontrolling interests
—

 
—

 
—

 
3

 
—

 
3

Acquisition of noncontrolling interests
—

 
—

 
—

 
(39
)
 
—

 
(39
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(11
)
 
—

 
(11
)
Net cash provided by (used in) financing activities
43

 
(2,006
)
 
(1,269
)
 
(61
)
 
3,002

 
(291
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1

 
(163
)
 
—

 
224

 
—

 
62

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
2

 
—

 
2

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
163

 
—

 
273

 
—

 
436

CASH AND CASH EQUIVALENTS, END OF YEAR
$
1

 
$
—

 
$
—

 
$
499

 
$
—

 
$
500



103
Table of Contents

Notes to the financial statements

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2011
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(41
)
 
$
209

 
$
110

 
$
1,269

 
$
(1,108
)
 
$
439

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
13

 
—

 
13

Additions to fixed assets
—

 
(25
)
 
—

 
(86
)
 
—

 
(111
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(10
)
 
—

 
(10
)
Acquisitions of investments in associates
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Payments to acquire other investments
—

 
—

 
—

 
(5
)
 
—

 
(5
)
Proceeds from sale of discontinued operations, net of cash disposed
—

 
—

 
—

 
14

 
—

 
14

Net cash used in investing activities
—

 
(25
)
 
—

 
(76
)
 
—

 
(101
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds from draw down of revolving credit facility
—

 
(90
)
 
—

 
—

 
—

 
(90
)
Senior notes issued
794

 
—

 
—

 
—

 
—

 
794

Debt issuance costs
(7
)
 
—

 
(5
)
 
—

 
—

 
(12
)
Proceeds from issue of term loan
—

 
—

 
300

 
—

 
—

 
300

Repayments of debt
—

 
(411
)
 
(500
)
 
—

 
—

 
(911
)
Make-whole on repurchase and redemption of senior notes
—

 
—

 
(158
)
 
—

 
—

 
(158
)
Proceeds from issue of shares
60

 
—

 
—

 
—

 
—

 
60

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
5

 
—

 
5

Amounts owed by/to Group undertakings
(626
)
 
455

 
253

 
(82
)
 
—

 
—

Dividends paid
(180
)
 
(47
)
 
—

 
(1,061
)
 
1,108

 
(180
)
Acquisition of noncontrolling interests
—

 
(4
)
 
—

 
(5
)
 
—

 
(9
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(13
)
 
—

 
(13
)
Net cash provided by (used in) financing activities
41

 
(97
)
 
(110
)
 
(1,156
)
 
1,108

 
(214
)
INCREASE IN CASH AND CASH EQUIVALENTS
—

 
87

 
—

 
37

 
—

 
124

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(4
)
 
—

 
(4
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
76

 
—

 
240

 
—

 
316

CASH AND CASH EQUIVALENTS, END OF YEAR
$
—

 
$
163

 
$
—

 
$
273

 
$
—

 
$
436



104
Table of Contents

Willis Group Holdings plc

33. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Year Ended December 31, 2010
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The
Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
 
 
 
 
(millions)
 
 
 
 
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(9
)
 
$
2,650

 
$
2,899

 
$
1,572

 
$
(6,623
)
 
$
489

CASH FLOWS FROM INVESTING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
10

 
—

 
10

Additions to fixed assets
—

 
(7
)
 
—

 
(76
)
 
—

 
(83
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(21
)
 
—

 
(21
)
Acquisitions of investments in associates
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Payments to acquire other investments
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Proceeds from sale of continuing operations, net of cash disposed
—

 
—

 
—

 
2

 
—

 
2

Net cash used in investing activities
—

 
(7
)
 
—

 
(87
)
 
—

 
(94
)
CASH FLOWS FROM FINANCING ACTIVITIES
 

 
 

 
 

 
 

 
 

 
 

Proceeds from draw down of revolving credit facility
—

 
90

 
—

 
—

 
—

 
90

Repayments of debt
—

 
(200
)
 
—

 
(9
)
 
—

 
(209
)
Proceeds from issue of shares
36

 
—

 
—

 
—

 
—

 
36

Amounts owed by/to Group undertakings
106

 
2,472

 
(2,783
)
 
205

 
—

 
—

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
2

 
—

 
2

Dividends paid
(133
)
 
(5,029
)
 
(116
)
 
(1,521
)
 
6,623

 
(176
)
Acquisition of noncontrolling interests
—

 
(4
)
 
—

 
(6
)
 
—

 
(10
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(26
)
 
—

 
(26
)
Net cash provided by (used in) financing activities
9

 
(2,671
)
 
(2,899
)
 
(1,355
)
 
6,623

 
(293
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
—

 
(28
)
 
—

 
130

 
—

 
102

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(7
)
 
—

 
(7
)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
—

 
104

 
—

 
117

 
—

 
221

CASH AND CASH EQUIVALENTS, END OF YEAR
$
—

 
$
76

 
$
—

 
$
240

 
$
—

 
$
316



105
Exhibit 99.2 Financial Statements Q2 2013
Exhibit 99.2 Financial Statements and Supplementary Data Q2 2013




















(This page has been intentionally left blank)

Table of Contents

Willis Group Holdings plc


PART I — FINANCIAL INFORMATION
Item 1 — Financial Statements
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
Note
 
2013
 
2012
 
2013
 
2012
 
 
 
(millions, except per share data)
REVENUES
 
 
 
 
 
 
 
 
 
Commissions and fees
 
 
$
885

 
$
837

 
$
1,931

 
$
1,842

Investment income
 
 
3

 
5

 
7

 
10

Other income
 
 
2

 
—

 
3

 
3

Total revenues
 
 
890

 
842

 
1,941

 
1,855

EXPENSES
 
 
 
 
 
 
 
 
 
Salaries and benefits
3

 
(529
)
 
(500
)
 
(1,097
)
 
(1,006
)
Other operating expenses
 
 
(155
)
 
(129
)
 
(311
)
 
(285
)
Depreciation expense
 
 
(21
)
 
(19
)
 
(47
)
 
(38
)
Amortization of intangible assets
11

 
(14
)
 
(15
)
 
(28
)
 
(30
)
Total expenses
 
 
(719
)
 
(663
)
 
(1,483
)
 
(1,359
)
OPERATING INCOME
 
 
171

 
179

 
458

 
496

Interest expense
 
 
(32
)
 
(33
)
 
(63
)
 
(65
)
INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
 
 
139

 
146

 
395

 
431

Income taxes
4

 
(29
)
 
(36
)
 
(77
)
 
(104
)
INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
 
 
110

 
110

 
318

 
327

Interest in earnings of associates, net of tax
 
 
(3
)
 
(1
)
 
12

 
14

INCOME FROM CONTINUING OPERATIONS
 
 
107

 
109

 
330

 
341

Discontinued operations, net of tax
 
 
—

 
1

 
—

 
1

NET INCOME
 
 
107

 
110

 
330

 
342

Less: net income attributable to noncontrolling interests
 
 
(2
)
 
(2
)
 
(6
)
 
(9
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
 
 
$
105

 
$
108

 
$
324

 
$
333

AMOUNTS ATTRIBUTABLE TO WILLIS GROUP HOLDINGS SHAREHOLDERS
 
 
 
 
 
 
 
 
 
Income from continuing operations, net of tax
 
 
$
105

 
$
107

 
$
324

 
$
332

Income from discontinued operations, net of tax
 
 
—

 
1

 
—

 
1

NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
 
 
$
105

 
$
108

 
$
324

 
$
333


EARNINGS PER SHARE — BASIC AND DILUTED
 
 
 
 
 
 
 
 
 
— Basic earnings per share - continuing operations
5

 
$
0.60

 
$
0.62

 
$
1.86

 
$
1.91

— Diluted earnings per share - continuing operations
5

 
$
0.59

 
$
0.61

 
$
1.83

 
$
1.89

 
 
 
 
 
 
 
 
 
 
CASH DIVIDENDS DECLARED PER SHARE
 
 
$
0.28

 
$
0.27

 
$
0.56

 
$
0.54

The accompanying notes are an integral part of these condensed consolidated financial statements. 

2
Table of Contents
Financial statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
 
 
Three months ended June 30,
 
Six months ended June 30,
 
Note
 
2013
 
2012
 
2013
 
2012
 
 
 
(millions)
Comprehensive income
 
 
$
113

 
$
78

 
$
299

 
$
342

Less: comprehensive income attributable to noncontrolling interests
 
 
(2
)
 
(1
)
 
(5
)
 
(9
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
17

 
$
111

 
$
77

 
$
294

 
$
333


The accompanying notes are an integral part of these condensed consolidated financial statements.


3
Table of Contents

Willis Group Holdings plc


UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 
 
Note
 
June 30,
2013
 
December 31, 2012
 
 
 
(millions, except share data)
ASSETS
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
Cash and cash equivalents
 
 
$
503

 
$
500

Accounts receivable, net
 
 
1,044

 
933

Fiduciary assets
 
 
9,910

 
9,271

Deferred tax assets
 
 
10

 
13

Other current assets
12

 
207

 
181

Total current assets
 
 
11,674

 
10,898

NON-CURRENT ASSETS
 
 
 
 
 
Fixed assets, net
 
 
452

 
468

Goodwill
10

 
2,829

 
2,827

Other intangible assets, net
11

 
373

 
385

Investments in associates
 
 
177

 
174

Deferred tax assets
 
 
15

 
18

Pension benefits asset
 
 
213

 
136

Other non-current assets
12

 
205

 
206

Total non-current assets
 
 
4,264

 
4,214

TOTAL ASSETS
 
 
$
15,938

 
$
15,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
Fiduciary liabilities
 
 
$
9,910

 
$
9,271

Deferred revenue and accrued expenses
 
 
414

 
541

Income taxes payable
 
 
34

 
19

Short-term debt and current portion of long-term debt
14

 
17

 
15

Deferred tax liabilities
 
 
32

 
21

Other current liabilities
13

 
358

 
327

Total current liabilities
 
 
10,765

 
10,194

NON-CURRENT LIABILITIES
 
 
 
 
 
Long-term debt
14

 
2,326

 
2,338

Liability for pension benefits
 
 
256

 
282

Deferred tax liabilities
 
 
18

 
18

Provisions for liabilities
 
 
202

 
180

Other non-current liabilities
13

 
371

 
375

Total non-current liabilities
 
 
3,173

 
3,193

Total liabilities
 
 
13,938

 
13,387


(Continued on next page)


4
Table of Contents
Financial statements

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)

 
Note
 
June 30,
2013
 
December 31, 2012
 
 
 
(millions, except share data)
COMMITMENTS AND CONTINGENCIES
7

 

 

EQUITY
 
 
 
 
 
Ordinary shares, $0.000115 nominal value; Authorized: 4,000,000,000; Issued 175,276,936 shares in 2013 and 173,178,733 shares in 2012
 
 
—

 
—

Ordinary shares, €1 nominal value; Authorized: 40,000; Issued 40,000 shares in 2013 and 2012
 
 
—

 
—

Preference shares, $0.000115 nominal value; Authorized: 1,000,000,000; Issued nil shares in 2013 and 2012
 
 
—

 
—

Additional paid-in capital
 
 
1,207

 
1,125

Retained earnings
 
 
1,653

 
1,427

Accumulated other comprehensive loss, net of tax
16

 
(880
)
 
(850
)
Treasury shares, at cost, 46,408 shares, $0.000115 nominal value, in 2013 and 2012 and 40,000 shares, €1 nominal value, in 2013 and 2012
 
 
(3
)
 
(3
)
Total Willis Group Holdings stockholders’ equity
17

 
1,977

 
1,699

Noncontrolling interests
17

 
23

 
26

Total equity
 
 
2,000

 
1,725

TOTAL LIABILITIES AND EQUITY
 
 
$
15,938

 
$
15,112


The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5
Table of Contents

Willis Group Holdings plc


UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 
 
 
 
Six months ended June 30,
 
Note
 
2013
 
2012
 
 
 
(millions)
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
 
 
Net income
 
 
$
330

 
$
342

Adjustments to reconcile net income to total net cash provided by operating activities:
 
 
 
 
 
Income from discontinued operations
 
 
—

 
(1
)
Net gain on disposal of operations and fixed and intangible assets
 
 
(3
)
 
(3
)
Depreciation expense
 
 
47

 
38

Amortization of intangible assets
11

 
28

 
30

Amortization of cash retention awards
 
 
3

 
116

Net periodic (income) cost of defined benefit pension plans
6

 
(2
)
 
1

Provision for doubtful debts
 
 
2

 
6

Provision for deferred income taxes
 
 
11

 
16

Excess tax benefits from share-based payment arrangements
 
 
(1
)
 
(1
)
Share-based compensation
 
 
21

 
17

Gain (loss) on derivative instruments
 
 
(5
)
 
1

Undistributed earnings of associates
 
 
(4
)
 
(10
)
Effect of exchange rate changes on net income
 
 
(9
)
 
(13
)
Change in operating assets and liabilities, net of effects from purchase of subsidiaries:
 
 
 
 
 
Accounts receivable
 
 
(124
)
 
(111
)
Fiduciary assets
 
 
(803
)
 
(1,607
)
Fiduciary liabilities
 
 
803

 
1,607

Cash incentives paid
 
 
(300
)
 
(279
)
Funding of defined benefit pension plans
 
 
(77
)
 
(66
)
Other assets
 
 
(21
)
 
(10
)
Other liabilities
 
 
214

 
100

Movement on provisions
 
 
27

 
(15
)
Net cash provided by operating activities
 
 
137

 
158

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
Proceeds on disposal of fixed and intangible assets
 
 
8

 
5

Additions to fixed assets
 
 
(51
)
 
(63
)
Additions to intangible assets
 
 
(1
)
 
—

Acquisitions of subsidiaries, net of cash acquired
 
 
(29
)
 
(4
)
Payments to acquire other investments
 
 
(2
)
 
(4
)
Net cash used in investing activities
 
 
(75
)
 
(66
)

(Continued on next page)


6
Table of Contents
Financial statements

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)

 
 
 
Six months ended June 30,
 
Note
 
2013
 
2012
 
 
 
(millions)
INCREASE IN CASH AND CASH EQUIVALENTS FROM OPERATING AND INVESTING ACTIVITIES
 
 
$
62

 
$
92

CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
Proceeds from draw down of revolving credit facilities
14

 
2

 
50

Repayments of debt
14

 
(8
)
 
(9
)
Repurchase of shares
17

 
—

 
(56
)
Proceeds from issue of shares
 
 
62

 
23

Excess tax benefits from share-based payment arrangements
 
 
1

 
1

Dividends paid
 
 
(95
)
 
(93
)
Proceeds from sale of noncontrolling interests
 
 
—

 
3

Acquisition of noncontrolling interests
 
 
(4
)
 
(29
)
Dividends paid to noncontrolling interests
 
 
(8
)
 
(10
)
Net cash used in financing activities
 
 
(50
)
 
(120
)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
 
 
12

 
(28
)
Effect of exchange rate changes on cash and cash equivalents
 
 
(9
)
 
(1
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
 
 
500

 
436

CASH AND CASH EQUIVALENTS, END OF PERIOD
 
 
$
503

 
$
407


The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7
Table of Contents

Willis Group Holdings plc



1.    NATURE OF OPERATIONS
Willis provides a broad range of insurance and reinsurance broking and risk management consulting services to its clients worldwide, both directly and indirectly through its associates. The Company provides both specialized risk management advisory and consulting services on a global basis to clients engaged in specific industrial and commercial activities, and services to small, medium and large corporations through its retail operations.
In its capacity as an advisor, insurance and reinsurance broker, the Company acts as an intermediary between clients and insurance carriers by advising clients on risk management requirements, helping clients determine the best means of managing risk, and negotiating and placing insurance risk with insurance carriers through the Company’s global distribution network.
2.    BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The accompanying condensed consolidated financial statements (‘Interim Financial Statements’) have been prepared in accordance with accounting principles generally accepted in the United States of America (‘US GAAP’).
The Interim Financial Statements are unaudited but include all adjustments (consisting of normal recurring adjustments) which the Company’s management considers necessary for a fair presentation of the financial position as of such dates and the operating results and cash flows for those periods. Certain information and footnote disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted. However, the Company believes that the disclosures are adequate to make the information presented not misleading. The results of operations for the six months ended June 30, 2013 may not necessarily be indicative of the operating results for the entire fiscal year.
These Interim Financial Statements should be read in conjunction with the Company’s consolidated balance sheets as of December 31, 2012 and 2011, and the related consolidated statements of operations, comprehensive income, cash flows and changes in equity for each of the three years in the period ended December 31, 2012 included in the Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 28, 2013 (‘2012 10-K’).

In February 2013, the Financial Accounting Standards Board ('FASB') issued Accounting Standards Update ('ASU') No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02). This guidance is the culmination of the FASB's deliberation on reporting reclassification adjustments from accumulated other comprehensive income (AOCI). The amendments in ASU 2013-02 do not change the current requirements for reporting net income or other comprehensive income but do require disclosure of amounts reclassified out of AOCI in its entirety, by component, on the face of the statement of operations or in the notes thereto. Amounts that are not required to be reclassified in their entirety to net income must be cross-referenced to other disclosures that provide additional detail. This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2012 and has been applied for this second quarter 2013 - see Note 16 - 'Comprehensive Income'.

In July 2013, the FASB issued ASU No. 2013-11, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists - a consensus of the FASB Emerging Issues Task Force (ASU 2013-11) which provides guidance on financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward (NOL), or similar tax loss, or a tax credit carryforward exists. Such unrecognized tax benefits are required to be presented as a reduction of a deferred tax asset for a NOL or other tax credit carryforward whenever the NOL or tax credit carryforward would be available to reduce the additional taxable income or tax due if the tax position is disallowed.
This standard is effective prospectively for annual and interim reporting periods beginning after December 15, 2013 although early adoption is permitted. The Company is currently evaluating the impact that adoption of this guidance will have on the consolidated financial statements.


8
Table of Contents
Notes to the financial statements
 (Unaudited)

3.    SALARIES AND BENEFITS EXPENSE
Severance Costs
Severance costs arise in the normal course of business and these charges amounted to $2 million in the six months ended June 30, 2013 (six months ended June 30, 2012: $2 million). Of these costs, $2 million was incurred in the three months ended June 30, 2013 (three months ended June 30, 2012: $2 million).

During the six months ended June 30, 2013, the Company incurred additional salaries and benefits costs of $29 million, of which $28 million related to severance costs, in relation to an Expense Reduction Initiative in the first quarter. These costs related to 207 positions that have been or are in the process of being eliminated.


4.    INCOME TAXES
The tables below reflect the components of the three and six months ended June 30, 2013 and 2012 tax charge:
 
Income
before tax
 
Tax
 
Effective tax
rate
 
(millions, except percentages)
Three months ended June 30, 2013
 
 
 
 
 
Non-US ordinary income taxed at estimated annual effective tax rate
$
123

 
$
(26
)
 
21
%
US ordinary income and tax charge
16

 
(3
)
 
19
%
As reported
$
139

 
$
(29
)
 
21
%
Three months ended June 30, 2012
 
 
 
 
 
Ordinary income taxed at estimated annual effective tax rate
$
146

 
$
(36
)
 
25
%
As reported
$
146

 
$
(36
)
 
25
%
 
 
 
 
 
 
 
Income
before tax
 
Tax
 
Effective tax
rate
 
(millions, except percentages)
Six months ended June 30, 2013
 
 
 
 
 
Non-US ordinary income taxed at estimated annual effective tax rate
$
341

 
$
(71
)
 
21
%
US ordinary income and tax charge
54

 
(6
)
 
11
%
As reported
$
395

 
$
(77
)
 
19
%
Six months ended June 30, 2012
 
 
 
 
 
Ordinary income taxed at estimated annual effective tax rate
$
443

 
$
(109
)
 
25
%
Items where tax effect is treated discretely:
 
 
 
 
 
Write-off of uncollectible accounts receivable balance in North America
(12
)
 
5

 
41
%
As reported
$
431

 
$
(104
)
 
24
%
For interim income tax reporting purposes, the Company generally determines its best estimate of an annual effective tax rate and applies that rate to its year-to-date ordinary income. The Company's estimated annual effective tax rate excludes significant, unusual or infrequently occurring items and certain other items excluded pursuant to the US GAAP authoritative guidance where applicable. The income tax expense (or benefit) related to all other items is individually computed and recognized when the items occur.
The tax rate in second quarter 2013 was 21 percent compared with 25 percent for the same period of 2012. The tax rate in first half 2013 was 19 percent, compared with 24 percent for the same period of 2012. The reason both the quarter to date and year to date tax rates are lower in 2013 compared to 2012, is primarily due to the impact of a valuation allowance maintained against US deferred tax assets, which results in a smaller tax charge on US profits in the current interim period compared with prior interim periods.

9
Table of Contents

Willis Group Holdings plc

4. INCOME TAXES (Continued)

The Company's tax rate differs from the US statutory income tax rate of 35 percent primarily due to income being subject to tax in numerous non-US jurisdictions with varying tax rates, as well as the valuation allowance maintained in the US due to losses incurred in recent years.

5.    EARNINGS PER SHARE
Basic and diluted earnings per share are calculated by dividing net income attributable to Willis Group Holdings by the average number of shares outstanding during each period. The computation of diluted earnings per share reflects the potential dilution that could occur if dilutive securities and other contracts to issue shares were exercised or converted into shares or resulted in the issuance of shares that then shared in the net income of the Company.
At June 30, 2013, time-based and performance-based options to purchase 8.8 million and 6.0 million shares (June 30, 2012: 8.7 million and 6.9 million), respectively, and 2.4 million restricted stock units (June 30, 2012: 1.2 million) were outstanding.
Basic and diluted earnings per share are as follows: 
 
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(millions, except per share data)
Net income attributable to Willis Group Holdings
$
105

 
$
108

 
$
324

 
$
333

 
 
 
 
 
 
 
 
Basic average number of shares outstanding
175

 
173

 
174

 
174

Dilutive effect of potentially issuable shares
3

 
3

 
3

 
2

Diluted average number of shares outstanding
178

 
176

 
177

 
176

Basic earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
0.60

 
$
0.62

 
$
1.86

 
$
1.91

Discontinued operations
—

 
—

 
—

 
—

Net income attributable to Willis Group Holdings shareholders
$
0.60

 
$
0.62

 
$
1.86

 
$
1.91

 
 
 
 
 
 
 
 
Dilutive effect of potentially issuable shares
(0.01
)
 
(0.01
)
 
(0.03
)
 
(0.02
)
Diluted earnings per share:
 
 
 
 
 
 
 
Continuing operations
$
0.59

 
$
0.61

 
$
1.83

 
$
1.89

Discontinued operations
—

 
—

 
—

 
—

Net income attributable to Willis Group Holdings shareholders
$
0.59

 
$
0.61

 
$
1.83

 
$
1.89

Options to purchase 2.4 million and 5.1 million shares were not included in the computation of the dilutive effect of stock options for the three and six months ended June 30, 2013 respectively because the effect was antidilutive (three and six months ended June 30, 2012: 6.5 million and 6.2 million).


10
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Notes to the financial statements
 (Unaudited)

6.    PENSION PLANS
The components of the net periodic benefit (income) cost of the UK, US and international and US non-qualified defined benefit plans are as follows:
 
 
Three months ended June 30,
 
UK Pension
Benefits
 
US Pension
Benefits
 
International and US non-qualified Pension
Benefits
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(millions)
Components of net periodic benefit (income) cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
9

 
$
9

 
$
—

 
$
—

 
$
1

 
$
1

Interest cost
27

 
27

 
9

 
10

 
2

 
1

Expected return on plan assets
(47
)
 
(45
)
 
(12
)
 
(12
)
 
(2
)
 
(1
)
Amortization of unrecognized prior service gain
(2
)
 
(2
)
 
—

 
—

 
—

 
—

Amortization of unrecognized actuarial loss
11

 
10

 
2

 
2

 
1

 
—

Net periodic benefit (income) cost
$
(2
)
 
$
(1
)
 
$
(1
)
 
$
—

 
$
2

 
$
1

 
 
Six months ended June 30,
 
UK Pension
Benefits
 
US Pension
Benefits
 
International and US non-qualified Pension
Benefits
 
2013
 
2012
 
2013
 
2012
 
2013
 
2012
 
(millions)
Components of net periodic benefit (income) cost:
 
 
 
 
 
 
 
 
 
 
 
Service cost
$
18

 
$
17

 
$
—

 
$
—

 
$
2

 
$
2

Interest cost
54

 
54

 
19

 
20

 
3

 
3

Expected return on plan assets
(94
)
 
(90
)
 
(25
)
 
(23
)
 
(3
)
 
(3
)
Amortization of unrecognized prior service gain
(3
)
 
(3
)
 
—

 
—

 
—

 
—

Amortization of unrecognized actuarial loss
22

 
20

 
4

 
4

 
1

 
—

Net periodic benefit (income) cost
$
(3
)
 
$
(2
)
 
$
(2
)
 
$
1

 
$
3

 
$
2


During the six months ended June 30, 2013, the Company made cash contributions of $49 million (2012: $40 million) into the UK defined benefit pension plan. This includes a $10 million payment that arose as a result of the share-buy back program discussed below. In addition to this, a further payment of $6 million (2012: $6 million) was made in respect of employees’ salary sacrifice contributions. Cash contributions of $18 million and $4 million (2012: $16 million and $4 million) were made to the US plan and international and US non-qualified defined benefit pension plans, respectively.
Contributions to the UK defined benefit pension plan in 2013 are expected to total $87 million, of which approximately $22 million relates to on-going contributions calculated as 15.9 percent of active plan members’ pensionable salaries, approximately $55 million relates to contributions towards funding the deficit and $10 million relates to 10 percent of the $100 million share buy-back program completed during 2012, as required under the current agreed schedule of contributions.
In addition, under the current schedule of contributions, further contributions will be payable based on a profit share calculation (equal to 20 percent of EBITDA in excess of $900 million per annum as defined by the revised schedule of contributions) and an exceptional return calculation (equal to 10 percent of any exceptional returns made to shareholders, for example, share buybacks and special dividends). Aggregate contributions under the deficit funding contribution and the profit share calculation are capped at £312 million ($473 million) over the six-year period ended December 31, 2017.
The schedule of contributions is automatically renegotiated after three years and at any earlier time jointly agreed by the Company and the Trustee.

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Willis Group Holdings plc

6. PENSION PLANS (Continued)

In addition, for full year 2013, the Company will contribute approximately $12 million to the UK defined benefit pension plan related to employees’ salary sacrifice contributions. The Company also expects to contribute approximately $40 million to the US plan and $11 million to the international and US non-qualified plans for the full year 2013 (inclusive of amounts contributed in the year to date).

7.     COMMITMENTS AND CONTINGENCIES
Contractual Obligations
Pensions
The Company’s pension funding obligations are set out in Note 6 — ‘Pension Plans’.
Other Contractual Obligations
In July 2010, the Company made a capital commitment of $25 million to Trident V Parallel Fund, LP. As of June 30, 2013 there had been approximately $12 million of capital contributions.
In May 2011, the Company made a capital commitment of $10 million to Dowling Capital Partners I, LP. As of June 30, 2013 there had been approximately $2 million of capital contributions.
Claims, Lawsuits and Other Proceedings
In the ordinary course of business, the Company is subject to various actual and potential claims, lawsuits, and other proceedings relating principally to alleged errors and omissions in connection with the placement of insurance and reinsurance. Similar to other corporations, the Company is also subject to a variety of other claims, including those relating to the Company’s employment practices. Some of the claims, lawsuits and other proceedings seek damages in amounts which could, if assessed, be significant.
Errors and omissions claims, lawsuits, and other proceedings arising in the ordinary course of business are covered in part by professional indemnity or other appropriate insurance. The terms of this insurance vary by policy year and self-insured risks have increased significantly in recent years. Regarding self-insured risks, the Company has established provisions which are believed to be adequate in the light of current information and legal advice, and the Company adjusts such provisions from time to time according to developments.
On the basis of current information, the Company does not expect that the actual claims, lawsuits and other proceedings to which the Company is subject, or potential claims, lawsuits, and other proceedings relating to matters of which it is aware, will ultimately have a material adverse effect on the Company’s financial condition, results of operations or liquidity. Nonetheless, given the large or indeterminate amounts sought in certain of these actions, and the inherent unpredictability of litigation and disputes with insurance companies, it is possible that an adverse outcome in certain matters could, from time to time, have a material adverse effect on the Company’s results of operations or cash flows in particular quarterly or annual periods.
The material actual or potential claims, lawsuits, and other proceedings, of which the Company is currently aware, are:
Stanford Financial Group Litigation
The Company has been named as a defendant in 12 similar lawsuits relating to the collapse of The Stanford Financial Group (‘Stanford’), for which Willis of Colorado, Inc. acted as broker of record on certain lines of insurance. The complaints in these actions generally allege that the defendants actively and materially aided Stanford’s alleged fraud by providing Stanford with certain letters regarding coverage that they knew would be used to help retain or attract actual or prospective Stanford client investors. The complaints further allege that these letters, which contain statements about Stanford and the insurance policies that the defendants placed for Stanford, contained untruths and omitted material facts and were drafted in this manner to help Stanford promote and sell its allegedly fraudulent certificates of deposit.
The 12 actions are as follows:

12
Table of Contents
Notes to the financial statements
 (Unaudited)
7. COMMITMENTS AND CONTINGENCIES (Continued)

•
Troice, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1274-N, was filed on July 2, 2009 in the U.S. District Court for the Northern District of Texas against Willis Group Holdings plc, Willis of Colorado, Inc. and a Willis associate, among others. On April 1, 2011, plaintiffs filed the operative Third Amended Class Action Complaint individually and on behalf of a putative, worldwide class of Stanford investors, adding Willis Limited as a defendant and alleging claims under Texas statutory and common law and seeking damages in excess of $1 billion, punitive damages and costs. On May 2, 2011, the defendants filed motions to dismiss the Third Amended Class Action Complaint, arguing, inter alia, that the plaintiffs’ claims are precluded by the Securities Litigation Uniform Standards Act of 1998 (‘SLUSA’).
On May 10, 2011, the court presiding over the Stanford-related actions in the Northern District of Texas entered an order providing that it would consider the applicability of SLUSA to the Stanford-related actions based on the decision in a separate Stanford action not involving a Willis entity, Roland v. Green, Civil Action No. 3:10-CV-0224-N. On August 31, 2011, the court issued its decision in Roland, dismissing that action with prejudice under SLUSA.
On October 27, 2011, the court in Troice entered an order (i) dismissing with prejudice those claims asserted in the Third Amended Class Action Complaint on a class basis on the grounds set forth in the Roland decision discussed above and (ii) dismissing without prejudice those claims asserted the Third Amended Class Action Complaint on an individual basis. Also on October 27, 2011, the court entered a final judgment in the action.
On October 28, 2011, the plaintiffs in Troice filed a notice of appeal to the U.S. Court of Appeals for the Fifth Circuit. Subsequently, Troice, Roland and a third action captioned Troice, et al. v. Proskauer Rose LLP, Civil Action No. 3:09-CV-01600-N, which also was dismissed on the grounds set forth in the Roland decision discussed above and on appeal to the U.S. Court of Appeals for the Fifth Circuit, were consolidated for purposes of briefing and oral argument. Following the completion of briefing and oral argument, on March 19, 2012, the Fifth Circuit reversed and remanded the actions. On April 2, 2012, the defendants-appellees filed petitions for rehearing en banc.  On April 19, 2012, the petitions for rehearing en banc were denied. On July 18, 2012, defendants-appellees filed a petition for writ of certiorari with the United States Supreme Court regarding the Fifth Circuit's reversal in Troice. On January 18, 2013, the Supreme Court granted our petition and will hear our appeal. Opening briefs were filed on May 3, 2013. Oral argument has been scheduled for October 7, 2013 and we expect a ruling in late 2013 or early 2014.
•
Ranni v. Willis of Colorado, Inc., et al., C.A. No. 9-22085, was filed on July 17, 2009 against Willis Group Holdings plc and Willis of Colorado, Inc. in the U.S. District Court for the Southern District of Florida. The complaint was filed on behalf of a putative class of Venezuelan and other South American Stanford investors and alleges claims under Section 10(b) of the Securities Exchange Act of 1934 (and Rule 10b-5 thereunder) and Florida statutory and common law and seeks damages in an amount to be determined at trial. On October 6, 2009, Ranni was transferred, for consolidation or coordination with other Stanford-related actions (including Troice), to the Northern District of Texas by the U.S. Judicial Panel on Multidistrict Litigation (the ‘JPML’). The defendants have not yet responded to the complaint in Ranni.
•
Canabal, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:9-CV-1474-D, was filed on August 6, 2009 against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate named as a defendant in Troice, among others, also in the Northern District of Texas. The complaint was filed individually and on behalf of a putative class of Venezuelan Stanford investors, alleged claims under Texas statutory and common law and sought damages in excess of $1 billion, punitive damages, attorneys’ fees and costs. On December 18, 2009, the parties in Troice and Canabal stipulated to the consolidation of those actions (under the Troice civil action number), and, on December 31, 2009, the plaintiffs in Canabal filed a notice of dismissal, dismissing the action without prejudice.
•
Rupert, et al. v. Winter, et al., Case No. 2009C115137, was filed on September 14, 2009 on behalf of 97 Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under the Securities Act of 1933, Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $300 million, attorneys’ fees and costs. On October 20, 2009, certain defendants, including Willis of Colorado, Inc., (i) removed Rupert to the U.S. District Court for the Western District of Texas, (ii) notified the JPML of the pendency of this related action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. On April 1, 2010, the JPML issued a final transfer order for the transfer of Rupert to the Northern District of Texas. On January 24, 2012, the court remanded Rupert to Texas State Court (Bexar County), but stayed the action until further order of the court. The defendants have not yet responded to the complaint in Rupert.

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Willis Group Holdings plc

7. COMMITMENTS AND CONTINGENCIES (Continued)

•
Casanova, et al. v. Willis of Colorado, Inc., et al., C.A. No. 3:10-CV-1862-O, was filed on September 16, 2010 on behalf of seven Stanford investors against Willis Group Holdings plc, Willis Limited, Willis of Colorado, Inc. and the same Willis associate, among others, also in the Northern District of Texas. The complaint alleges claims under Texas statutory and common law and seeks actual damages in excess of $5 million, punitive damages, attorneys’ fees and costs. The defendants have not yet responded to the complaint in Casanova.
•
Rishmague, et ano. v. Winter, et al., Case No. 2011CI2585, was filed on March 11, 2011 on behalf of two Stanford investors, individually and as representatives of certain trusts, against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Bexar County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks special, consequential and treble damages of more than $37 million and attorneys’ fees and costs. On April 11, 2011, certain defendants, including Willis of Colorado, Inc., (i) removed Rishmague to the Western District of Texas, (ii) notified the JPML of the pendency of this related action and (iii) moved to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. On August 8, 2011, the JPML issued a final transfer order for the transfer of Rishmague to the Northern District of Texas, where it is currently pending. The defendants have not yet responded to the complaint in Rishmague.
•
MacArthur v. Winter, et al., Case No. 2013-07840, was filed on February 8, 2013 on behalf of two Stanford investors against Willis Group Holdings plc, Willis of Colorado, Inc., Willis of Texas, Inc. and the same Willis associate, among others, in Texas state court (Harris County). The complaint alleges claims under Texas and Colorado statutory law and Texas common law and seeks actual, special, consequential and treble damages of approximately $4 million and attorneys' fees and costs. On March 29, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. (i) removed MacArthur to the U.S. District Court for the Southern District of Texas and (ii) notified the JPML of the pendency of this related action. On April 2, 2013, Willis of Colorado, Inc. and Willis of Texas, Inc. filed a motion in the Southern District of Texas to stay the action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. Also on April 2, 2013, the court presiding over MacArthur in the Southern District of Texas transferred the action to the Northern District of Texas for consolidation or coordination with the other Stanford-related actions. The defendants have not yet responded to the complaint in MacArthur.
•
Florida suits: On February 14, 2013, five law suits were filed against Willis Group Holdings plc, Willis Limited and Willis of Colorado, Inc. in Florida state court (Miami-Dade County) alleging violations of Florida common law. The five suits are: (1) Barbar, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05666CA27, filed on behalf of 35 Stanford investors seeking compensatory damages in excess of $30 million; (2) de Gadala-Maria, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05669CA30, filed on behalf of 64 Stanford investors seeking compensatory damages in excess of $83.5 million; (3) Ranni, et ano. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05673CA06, filed on behalf of two Stanford investors seeking compensatory damages in excess of $3 million; (4) Tisminesky, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05676CA09, filed on behalf of 11 Stanford investors seeking compensatory damages in excess of $6.5 million; and (5) Zacarias, et al. v. Willis Group Holdings Public Limited Company, et al., Case No. 13-05678CA11, filed on behalf of 10 Stanford investors seeking compensatory damages in excess of $12.5 million. On June 3, 2013, Willis of Colorado, Inc. removed all five cases to the Southern District of Florida and, on June 4, 2013, notified the JPML of the pendency of these related actions. On June 10, 2013, the court in Tisminesky issued an order sua sponte staying and administratively closing that action pending a determination by the JPML as to whether it should be transferred to the Northern District of Texas for consolidation and coordination with the other Stanford-related actions. On June 11, 2013, Willis of Colorado, Inc. moved to stay the other four actions pending the JPML's transfer decision. On June 20, 2013, the JPML issued a conditional transfer order for the transfer of the five actions to the Northern District of Texas, the transmittal of which was stayed for seven days to allow for any opposition to be filed. On June 28, 2013, with no opposition having been filed, the JPML lifted the stay, enabling the transfer to go forward. The defendants have not yet responded to the complaints in these actions.

Additional actions could be brought in the future by other investors in certificates of deposit issued by Stanford and its affiliates, including by the Stanford Receiver and/or the Stanford Investor Committee, with whom we have a tolling agreement that expires on August 31, 2013. If that tolling agreement is not extended, the Receiver and/or the Stanford Investor Committee may file suit based on substantially similar allegations to those above. The Company disputes these allegations and intends to defend itself vigorously against these actions. The outcomes of these actions, however, including any losses or other payments that may occur as a result, cannot be predicted at this time.


14
Table of Contents
Notes to the financial statements
 (Unaudited)
7. COMMITMENTS AND CONTINGENCIES (Continued)

European Commission Sector Inquiry

In 2006, the European Commission ('EC') issued questionnaires pursuant to its Sector Inquiry (or, in respect of Norway, the European Free Trade Association Surveillance Authority ('EFTAS')), related to insurance business practices, including compensation arrangements for brokers, to at least 150 European brokers including our operations in nine European countries. The Company filed responses to the questionnaires. On September 25, 2007, the EC and EFTAS issued a joint report expressing concerns over potential conflicts of interest in the industry relating to remuneration and binding authorities and also over the nature of the coinsurance market.
The Company cooperated with both the EC and the EFTAS to resolve issues raised in their final joint report regarding coinsurance. In 2012, the EC appointed Ernst & Young to conduct a review of the coinsurance market and Ernst & Young approached one broking firm in each Member State. Three of our European subsidiaries (UK, Spain and the Netherlands) either met with Ernst & Young or received questionnaires from them on this matter in 2012. The EC published Ernst & Young's report on February 11, 2013, which described the nature and benefits of the coinsurance and subscription markets. The EC intends to consult further on these findings during 2013 before determining next steps.
Regulatory Investigation
In 2011, we and the UK Financial Services Authority (the 'FSA') announced a settlement for lapses by Willis Limited, our UK brokerage subsidiary, in its implementation and documentation of its controls to counter the risks of improper payments being made to non-FSA authorized overseas third parties engaged to help win business, particularly in high risk jurisdictions.
As a result of an FSA settlement in 2011, we conducted a further internal review of certain high-risk payments made by our UK subsidiary between 2005 and 2009. We do not believe that this further internal review will result in any material fines or sanctions, but there can be no assurance that any resolution will not have an adverse impact on us or our ability to conduct our business in certain jurisdictions. While we believe that our current systems and controls are adequate and in accordance with all applicable laws and regulations, we cannot assure that such systems and controls will prevent any violations of applicable laws and regulations.

8.    DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES
Fair Value of Derivative Financial Instruments
In addition to the note below, see Note 9 — ‘Fair Value Measurement’ for information about the fair value hierarchy of derivatives.
Primary Risks Managed by Derivative Financial Instruments
The main risks managed by derivative financial instruments are interest rate risk and foreign currency risk. The Company’s board of directors reviews and approves policies for managing each of these risks as summarized below.
The Company enters into derivative transactions (principally interest rate swaps and forward foreign currency contracts) in order to manage interest rate and foreign currency risks arising from the Company’s operations and its sources of finance. The Company does not hold financial or derivative instruments for trading purposes.
Interest Rate Risk — Investment Income
As a result of the Company’s operating activities, the Company receives cash for premiums and claims which it deposits in short-term investments denominated in US dollars and other currencies. The Company earns interest on these funds, which is included in the Company’s financial statements as investment income. These funds are regulated in terms of access and the instruments in which they may be invested, most of which are short-term in maturity.
In order to manage interest rate risk arising from these financial assets, the Company entered into interest rate swaps to receive a fixed rate of interest and pay a variable rate of interest denominated in the various currencies related to the short-term investments. The use of interest rate contracts essentially converted groups of short-term variable rate investments to fixed rate investments. The fair value of these contracts was recorded in other assets and other liabilities. For contracts that qualified as

15
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Willis Group Holdings plc

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

cash flow hedges for accounting purposes, the effective portions of changes in fair value were recorded as a component of other comprehensive income, to the extent that the hedge relationships were highly effective.
From the fourth quarter of 2011, the Company stopped entering into any new hedging transactions relating to interest rate risk from investments, given the flat yield curve environment at that time. Further to this, during second quarter 2012, the Company closed out its legacy position for these interest rate swap contracts.
 
The fair value of these swaps at the close out date was $16 million, representing a cash settlement amount on termination. In connection with the terminated swaps, the Company retained a gain of $15 million in other comprehensive income as the forecasted short-term investment transactions in relation to which the swaps qualified as cash flow hedges were still considered probable. These amounts are reclassified into earnings consistent with when the forecasted swap transactions affect earnings. We expect approximately $5 million of the gain to be recognized in the consolidated statement of operations in 2013 including $3 million already recognized in the six months ended June 30, 2013.
At June 30, 2013, the Company had no derivative financial instruments that were designated as cash flow hedges of interest rate risk on investments.
Interest Rate Risk — Interest Expense
The Company's operations are financed principally by $2,050 million fixed rate senior notes and $281 million under a 5-year term loan facility. The Company also has access to $522 million under three revolving credit facilities.
The 5-year term loan facility bears interest at LIBOR plus 1.50%. As of June 30, 2013, $nil was drawn on the $500 million revolving credit facility. Drawings under that facility bear interest at LIBOR plus 1.50%. These margins apply while the Company’s debt rating remains BBB-/Baa3. Should the Company’s debt rating change, then the margin will change in accordance with the credit facilities agreements. The fixed rate senior notes bear interest at various rates as detailed in Note 14 — ‘Debt’.
During the three months ended March 31, 2010, the Company entered into a series of interest rate swaps for a total notional amount of $350 million to receive a fixed rate and pay a variable rate on a semi-annual basis, with a maturity date of July 15, 2015. The Company had previously designated and accounted for these instruments as fair value hedges against its $350 million 5.625% senior notes due 2015 until the first quarter of 2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting. The fair value of the interest rate swaps continues to be included within other assets and the fair value of the hedged element of the senior notes previously recognized within long-term debt will be amortized through interest expense over the period to maturity.
To hedge against the potential variability in benchmark interest rates ahead of future debt financing transactions, during the quarter ended June 30, 2013 the Company entered into two short-term treasury locks, having an aggregate notional amount of $440 million. Both treasury locks were designated as being in cash flow hedging relationships.
The treasury lock contracts are recorded at fair value in other assets and other liabilities; to the extent that the hedges are highly effective and qualify for hedge accounting, a gain or loss will be recognized as a component of other comprehensive income; any ineffectiveness will be recognized within interest expense.
Any gain or loss accumulated in other comprehensive income, will be amortized as an adjustment to interest expense over the life of the corresponding debt, when issued.
Foreign Currency Risk
The Company’s primary foreign exchange risks arise:
•
from changes in the exchange rate between US dollars and Pounds sterling as its London market operations earn the majority of their revenues in US dollars and incur expenses predominantly in Pounds sterling, and may also hold a significant net sterling asset or liability position on the balance sheet. In addition, the London market operations earn significant revenues in Euros and Japanese yen; and
•
from the translation into US dollars of the net income and net assets of its foreign subsidiaries, excluding the London market operations which are US dollar denominated.

16
Table of Contents
Notes to the financial statements
 (Unaudited)
8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

The foreign exchange risks in its London market operations are hedged as follows:
•
to the extent that forecast Pounds sterling expenses exceed Pounds sterling revenues, the Company limits its exposure to this exchange rate risk by the use of forward contracts matched to specific, clearly identified cash outflows arising in the ordinary course of business; and
•
to the extent the UK operations earn significant revenues in Euros and Japanese yen, the Company limits its exposure to changes in the exchange rate between the US dollar and these currencies by the use of forward contracts matched to a percentage of forecast cash inflows in specific currencies and periods. In addition, we are also exposed to foreign exchange risk on any net sterling asset or liability position in our London market operations.
The fair value of foreign currency contracts is recorded in other assets and other liabilities. For contracts that qualify as accounting hedges, changes in fair value resulting from movements in the spot exchange rate are recorded as a component of other comprehensive income while changes resulting from a movement in the time value are recorded in interest expense. For contracts that do not qualify for hedge accounting, the total change in fair value is recorded in interest expense. Amounts held in comprehensive income are reclassified into earnings when the hedged exposure affects earnings.
At June 30, 2013 and December 31, 2012, the Company’s foreign currency contracts were all designated as hedging instruments except those relating to short-term cash flows and hedges of certain intercompany loans.
 
The table below summarizes by major currency the contractual amounts of the Company’s forward contracts to exchange foreign currencies for Pounds sterling in the case of US dollars and US dollars for Euro and Japanese yen. Foreign currency notional amounts are reported in US dollars translated at contracted exchange rates.
 
 
Sell
 
Fair value
 
(millions)
US dollar
$
205

 
$
(13
)
Euro
87

 
2

Japanese yen
38

 
4

In addition to forward exchange contracts we undertake short-term foreign exchange swaps for liquidity purposes. These are not designated as hedges and do not qualify for hedge accounting. The fair values at June 30, 2013 and December 31, 2012 were immaterial.

During the six months ended June 30, 2013, the Company entered into a number of foreign currency transactions in order to hedge certain intercompany loans.  These derivatives were not designated as hedging instruments and were for a total notional amount of $123 million (December 31, 2012: $63 million).  In respect of these transactions, an immaterial amount has been recognized as an asset within other current assets and a nominal gain has been recognized in other operating expenses for the period.

17
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Willis Group Holdings plc

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Derivative Financial Instruments
The table below presents the fair value of the Company’s derivative financial instruments and their balance sheet classification at June 30, 2013 and December 31, 2012:
 
 
 
 
 
Fair value
Derivative financial instruments designated as hedging instruments:
 
Balance sheet
classification
 
June 30,
2013
 
December 31, 2012
 
 
 
 
(millions)
Assets:
 
 
 
 
 
 
Forward exchange contracts
 
Other assets
 
$
7

 
$
9

Interest rate swaps (fair value hedges)
 
Other assets
 
—

 
22

Treasury locks (cash flow hedges)
 
Other assets
 
17

 
—

Total derivatives designated as hedging instruments
 
 
 
$
24

 
$
31

Liabilities:
 
 
 
 
 
 
Forward exchange contracts
 
Other liabilities
 
$
14

 
$
—

Treasury locks (cash flow hedges)
 
Other liabilities
 
—

 
—

Total derivatives designated as hedging instruments
 
 
 
$
14

 
$
—

The table below presents the fair value of the Company’s derivative financial instruments that are no longer in a hedging relationship and their balance sheet classification at June 30, 2013 and December 31, 2012:

 
 
 
 
Fair value
Derivative financial instruments no longer designated as hedging instruments:
 
Balance sheet
classification
 
June 30,
2013
 
December 31, 2012
 
 
 
 
(millions)
Assets:
 
 
 
 
 
 
Interest rate swaps
 
Other assets
 
$
19

 
$
—



18
Table of Contents
Notes to the financial statements
 (Unaudited)
8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Cash Flow Hedges
The table below presents the effects of derivative financial instruments in cash flow hedging relationships on the consolidated statements of operations and the consolidated statements of equity for the three and six months ended June 30, 2013 and 2012:
 
Derivatives in cash flow
hedging relationships
 
Amount of
gain (loss)
recognized
in OCI(i)on derivative (effective
element)
 
Location of gain (loss)
reclassified from
accumulated OCI(i) into
income (effective element)
 
Amount of
gain (loss)
reclassified
from
accumulated
OCI(i) into
income
(effective
element)
 
Location of gain (loss)
recognized in income on derivative
(ineffective hedges and ineffective
element of effective hedges)
 
Amount of
gain (loss)
recognized
in income on derivative
(ineffective
hedges
and
ineffective
element of
effective
hedges)
 
 
(millions)
 
 
 
(millions)
 
 
 
(millions)
Three months ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
—

 
Investment income
 
$
(2
)
 
Other operating expenses
 
$
—

Treasury locks
 
16

 
Interest expense
 
—

 
Interest expense
 
1

Forward exchange contracts
 
(1
)
 
Other operating expenses
 
1

 
Interest expense
 
—

Total
 
$
15

 
 
 
$
(1
)
 
 
 
$
1

Three months ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
5

 
Investment income
 
$
(5
)
 
Other operating expenses
 
$
—

Forward exchange contracts
 
4

 
Other operating expenses
 
(2
)
 
Interest expense
 
(1
)
Total
 
$
9

 
 
 
$
(7
)
 
 
 
$
(1
)
Six months ended June 30, 2013
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
—

 
Investment income
 
$
(3
)
 
Other operating expenses
 
$
—

Treasury locks
 
16

 
Interest expense
 
—

 
Interest expense
 
1

Forward exchange contracts
 
(14
)
 
Other operating expenses
 
(1
)
 
Interest expense
 
—

Total
 
$
2

 
 
 
$
(4
)
 
 
 
$
1

Six months ended June 30, 2012
 
 
 
 
 
 
 
 
 
 
Interest rate swaps
 
$
3

 
Investment income
 
$
(3
)
 
Other operating expenses
 
$
—

Forward exchange contracts
 
7

 
Other operating expenses
 
—

 
Interest expense
 
—

Total
 
$
10

 
 
 
$
(3
)
 
 
 
$
—

 ____________________
Amounts above shown gross of tax.
(i) Other Comprehensive Income

For interest rate swaps, all components of each derivative’s gain or loss were included in the assessment of hedge effectiveness. For foreign exchange contracts, only the changes in fair value resulting from movements in the spot exchange rates are included in this assessment. In instances where the timing of expected cash flows can be matched exactly to the maturity of the foreign exchange contract, then changes in fair value attributable to movement in the forward points are also included.
At June 30, 2013, the Company estimates there will be $3 million of net derivative gains reclassified from accumulated comprehensive income into earnings within the next twelve months as the forecasted transactions affect earnings.
Fair Value Hedges
The Company had previously designated and accounted for interest rate swaps as fair value hedges against its $350 million 5.625% senior notes due 2015 until the first quarter of 2013 at which point these swaps, although remaining as economic hedges, no longer qualified for hedge accounting.
The table below presents the effects of derivative financial instruments in fair value hedging relationships on the consolidated statements of operations for the three and six months ended June 30, 2013 and 2012.

19
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Willis Group Holdings plc

8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

 
Derivative in fair value hedging relationships
 
Hedged item in fair value hedging
relationship
 
(Loss) gain
recognized
for
derivative
 
Gain (loss) recognized for hedged item
 
Ineffectiveness recognized in interest expense
 
 
 
 
(millions)
Three months ended June 30, 2013
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
—

 
$
—

 
$
—

Three months ended June 30, 2012
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
—

 
$
(1
)
 
$
(1
)
Six months ended June 30, 2013
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
—

 
$
—

 
$
—

Six months ended June 30, 2012
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
—

 
$
(1
)
 
$
(1
)
All components of each derivative’s gain or loss were included in the assessment of hedge effectiveness.
The table below presents the effects of derivative financial instruments no longer in fair value hedging relationships on the consolidated statements of operations for the three and six months ended June 30, 2013 and 2012.
 
Derivative no longer in fair value hedging relationships
 
Hedged item no longer in fair value hedging relationship
 
(Loss) gain
recognized
for
derivative
 
Amortization of prior loss recognized on hedged item
 
Net (loss) gain recognized in interest expense
 
 
 
 
(millions)
Three months ended June 30, 2013
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
(3
)
 
$
(2
)
 
$
(1
)
Three months ended June 30, 2012
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
—

 
$
—

 
$
—

Six months ended June 30, 2013
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
(3
)
 
$
(4
)
 
$
1

Six months ended June 30, 2012
 
 
 
 
 
 
 
 
Interest rate swaps
 
5.625% senior notes due 2015
 
$
—

 
$
—

 
$
—


Credit Risk and Concentrations of Credit Risk
Credit risk represents the loss that would be recognized at the reporting date if counterparties failed to perform as contracted and from movements in interest rates and foreign exchange rates. The Company currently does not anticipate non-performance by its counterparties. The Company generally does not require collateral or other security to support financial instruments with credit risk.
Concentrations of credit risk that arise from financial instruments exist for groups of customers or counterparties when they have similar economic characteristics that would cause their ability to meet contractual obligations to be similarly affected by changes in economic or other conditions. Financial instruments on the balance sheet that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, accounts receivable and derivatives which are recorded at fair value.
The Company maintains a policy providing for the diversification of cash and cash equivalent investments and places such investments in an extensive number of financial institutions to limit the amount of credit risk exposure. These financial institutions are monitored on an ongoing basis for credit quality predominantly using information provided by credit agencies.

20
Table of Contents
Notes to the financial statements
 (Unaudited)
8. DERIVATIVE FINANCIAL INSTRUMENTS AND HEDGING ACTIVITIES (Continued)

Concentrations of credit risk with respect to receivables are limited due to the large number of clients and markets in which the Company does business, as well as the dispersion across many geographic areas. Management does not believe significant risk exists in connection with the Company's concentrations of credit as of June 30, 2013.

9.    FAIR VALUE MEASUREMENT
The Company has categorized its assets and liabilities that are measured at fair value on a recurring basis into a three-level fair value hierarchy, based on the reliability of the inputs used to determine fair value as follows:
•
Level 1: refers to fair values determined based on quoted market prices in active markets for identical assets;
•
Level 2: refers to fair values estimated using observable market based inputs or unobservable inputs that are corroborated by market data; and
•
Level 3: includes fair values estimated using unobservable inputs that are not corroborated by market data.

The following methods and assumptions were used by the Company in estimating its fair value disclosure for financial instruments:

•
Long-term debt excluding the fair value hedge - Fair values are based on quoted market values and so classified as Level 1 measurements.
•
Derivative financial instruments - Market values have been used to determine the fair value of interest rate swaps and forward foreign exchange contracts based on estimated amounts the Company would receive or have to pay to terminate the agreements, taking into account the current interest rate environment or current foreign currency forward rates.

Recurring basis

The following table presents, for each of the fair value hierarchy levels, the Company's assets and liabilities that are measured at fair value on a recurring basis.

 
June 30, 2013
 
Quoted
prices in
active
markets
for
identical
assets
 
Significant
other
observable
inputs
 
Significant
other
unobservable
inputs
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(millions)
Assets at fair value:
 
 
 
 
 
 
 
Cash and cash equivalents
$
503

 
$
—

 
$
—

 
$
503

Fiduciary funds (included within Fiduciary assets)
1,950

 
—

 
—

 
1,950

Derivative financial instruments
—

 
43

 
—

 
43

Total assets
$
2,453

 
$
43

 
$
—

 
$
2,496

 

21
Table of Contents

Willis Group Holdings plc

9. FAIR VALUE MEASUREMENT (Continued)

 
December 31, 2012
 
Quoted
prices in
active
markets
for
identical
assets
 
Significant
other
observable
inputs
 
Significant
other
unobservable
inputs
 
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
(millions)
Assets at fair value:
 
 
 
 
 
 
 
Cash and cash equivalents
$
500

 
$
—

 
$
—

 
$
500

Fiduciary funds (included within Fiduciary assets)
1,796

 
—

 
—

 
1,796

Derivative financial instruments
—

 
31

 
—

 
31

Total assets
$
2,296

 
$
31

 
$
—

 
$
2,327

Liabilities at fair value:
 
 
 
 
 
 
 
Changes in fair value of hedged debt (i)
$
—

 
$
18

 
$
—

 
$
18

Total liabilities
$
—

 
$
18

 
$
—

 
$
18

____________________ 
(i) 
Changes in the fair value of the underlying hedged debt instrument since inception of the hedging relationship are included in long-term debt.

The estimated fair value of the Company’s financial instruments held or issued to finance the Company’s operations is summarized below. Certain estimates and judgments were required to develop the fair value amounts. The fair value amounts shown below are not necessarily indicative of the amounts that the Company would realize upon disposition nor do they indicate the Company’s intent or ability to dispose of the financial instrument.
 
 
June 30, 2013
 
December 31, 2012
 
Carrying
amount
 
Fair
value
 
Carrying
amount
 
Fair
value
 
(millions)
Assets:
 
 
 
 
 
 
 
Derivative financial instruments
$
43

 
$
43

 
$
31

 
$
31

Liabilities:
 
 
 
 
 
 
 
Short-term debt
$
17

 
$
17

 
$
15

 
$
15

Long-term debt
2,326

 
2,509

 
2,338

 
2,576

Derivative financial instruments
14

 
14

 
—

 
—


10.    GOODWILL
Goodwill represents the excess of the cost of businesses acquired over the fair market value of identifiable net assets at the dates of acquisition. Goodwill is not amortized but is subject to impairment testing annually and whenever facts or circumstances indicate that the carrying amounts may not be recoverable.

The Company has determined that its reporting units are consistent with its operating segments: North America; International and Global. Goodwill is allocated to these reporting units based on the original purchase price allocation for acquisitions within the reporting units. When a business entity is sold, goodwill is allocated to the disposed entity based on the fair value of that entity compared with the fair value of the reporting unit in which it is included.
 

22
Table of Contents
Notes to the financial statements
 (Unaudited)
10. GOODWILL (Continued)

The changes in the carrying amount of goodwill by segment for the six months ended June 30, 2013 and the year ended December 31, 2012 are as follows:
 
 
Global
 
North
America
 
International
 
Total
 
(millions)
Balance at January 1, 2012:


 


 


 


Goodwill, gross
$
1,122

 
$
1,782

 
$
391

 
$
3,295

Accumulated impairment losses
—

 
—

 
—

 
—

Goodwill, net
$
1,122

 
$
1,782

 
$
391

 
$
3,295

Purchase price allocation adjustments
—

 
—

 
2

 
2

Goodwill acquired during the year
—

 
10

 
2

 
12

Goodwill disposed of during the year
—

 
—

 
(1
)
 
(1
)
Goodwill impairment charge
—

 
(492
)
 
—

 
(492
)
Foreign exchange
5

 
—

 
6

 
11

Balance at December 31, 2012:
 
 
 
 
 
 
 
Goodwill, gross
$
1,127

 
$
1,792

 
$
400

 
$
3,319

Accumulated impairment losses
—

 
(492
)
 
—

 
(492
)
Goodwill, net
$
1,127

 
$
1,300

 
$
400

 
$
2,827

Goodwill acquired during the period
16

 
—

 
1

 
17

Foreign exchange
(7
)
 
—

 
(8
)
 
(15
)
Balance at June 30, 2013:
 
 
 
 
 
 
 
Goodwill, gross
$
1,136

 
$
1,792

 
$
393

 
$
3,321

Accumulated impairment losses
—

 
(492
)
 
—

 
(492
)
Goodwill, net
$
1,136

 
$
1,300

 
$
393

 
$
2,829




11.    OTHER INTANGIBLE ASSETS, NET
Other intangible assets are classified into the following categories:
•
‘Customer and Marketing Related’, including:
•
client relationships;
•
client lists;
•
non-compete agreements;
•
trade names; and
•
‘Contract based, Technology and Other’ includes all other purchased intangible assets.

23
Table of Contents

Willis Group Holdings plc

11. OTHER INTANGIBLE ASSETS, NET (Continued)

The major classes of amortizable intangible assets are as follows:
 
 
June 30, 2013
 
December 31, 2012
 
Gross
carrying
amount
 
Accumulated
amortization
 
Net
carrying
amount
 
Gross
carrying
amount
 
Accumulated
amortization
 
Net
carrying
amount
 
(millions)
Customer and Marketing Related:
 
 
 
 
 
 
 
 
 
 
 
Client Relationships
$
690

 
$
(326
)
 
$
364

 
$
717

 
$
(340
)
 
$
377

Client Lists
3

 
(1
)
 
2

 
3

 
(1
)
 
2

Non-compete Agreements
4

 
—

 
4

 
3

 
—

 
3

Trade Names
2

 
(1
)
 
1

 
11

 
(10
)
 
1

Total Customer and Marketing Related
699

 
(328
)
 
371

 
734

 
(351
)
 
383

Contract based, Technology and Other
5

 
(3
)
 
2

 
4

 
(2
)
 
2

Total amortizable intangible assets
$
704

 
$
(331
)
 
$
373

 
$
738

 
$
(353
)
 
$
385

 
The aggregate amortization of intangible assets for the six months ended June 30, 2013 was $28 million (six months ended June 30, 2012: $30 million), of which $14 million was recognized in the three months ended June 30, 2013 (three months ended June 30, 2012: $15 million). The estimated aggregate amortization of intangible assets for each of the next five years ended December 31 is as follows:
 
Remainder of
2013
 
2014
 
2015
 
2016
 
2017
 
Thereafter
 
Total
 
(millions)
Amortization of intangible assets
$
29

 
$
49

 
$
41

 
$
36

 
$
31

 
$
187

 
$
373


24
Table of Contents
Notes to the financial statements
 (Unaudited)

12.    OTHER ASSETS
An analysis of other assets is as follows:
 
June 30,
2013
 
December 31,
2012
 
(millions)
Other current assets
 
 
 
Prepayments and accrued income
$
75

 
$
61

Income tax receivable
32

 
50

Derivatives
26

 
14

Debt issuance costs
3

 
3

Other
71

 
53

Total other current assets
$
207

 
$
181

Other non-current assets
 
 
 
Deferred compensation plan assets
$
97

 
$
97

Derivatives
17

 
17

Prepayments and accrued income
21

 
24

Debt issuance costs
11

 
12

Other receivables
59

 
56

Total other non-current assets
$
205

 
$
206

Total other assets
$
412

 
$
387


13.    OTHER LIABILITIES
An analysis of other liabilities is as follows: 
 
June 30,
2013
 
December 31,
2012
 
(millions)
Other current liabilities
 
 
 
Accounts payable
$
88

 
$
88

Accrued dividends payable
50

 
47

Other taxes payable
52

 
44

Accrued interest payable
37

 
34

Derivatives
9

 
—

Other payables
122

 
114

Total other current liabilities
$
358

 
$
327

Other non-current liabilities
 
 
 
Incentives from lessors
$
168

 
$
173

Deferred compensation plan liability
97

 
101

Capital lease obligation
25

 
28

Other payables
81

 
73

Total other non-current liabilities
$
371

 
$
375

Total other liabilities
$
729

 
$
702


25
Table of Contents

Willis Group Holdings plc


14.    DEBT
Short-term debt and current portion of the long-term debt consists of the following: 
 
June 30,
2013
 
December 31,
2012
 
(millions)
Current portion of 5-year term loan facility expires 2016
$
15

 
$
15

Revolving credit facility
2

 
—

 
$
17

 
$
15

Long-term debt consists of the following:
 
June 30,
2013
 
December 31,
2012
 
(millions)
 
 
 
 
5-year term loan facility expires 2016
$
266

 
$
274

5.625% senior notes due 2015
350

 
350

Fair value adjustment on 5.625% senior notes due 2015
14

 
18

4.125% senior notes due 2016
299

 
299

6.200% senior notes due 2017
600

 
600

7.000% senior notes due 2019
300

 
300

5.750% senior notes due 2021
496

 
496

3-year term loan facility expires 2015
1

 
1

 
$
2,326

 
$
2,338

The 5-year term loan facility expiring 2016 bears interest at LIBOR plus 1.50% and is repayable in quarterly installments and a final repayment of $225 million is due in the fourth quarter of 2016. Drawings under the revolving $500 million credit facility bear interest at LIBOR plus 1.50% and the facility expires on December 16, 2016. These margins apply while the Company’s debt rating remains BBB-/Baa3. As of June 30, 2013 $nil was outstanding under this revolving credit facility.

On July 23, 2013 we entered into an amendment to our existing credit facilities to extend both the amount of financing and the maturity date of the facilities. As a result of this amendment, our revolving credit facility has been increased from $500 million to $800 million. There has been no increase to the remaining $281 million outstanding on the $300 million term loan. The maturity date has been extended to July 23, 2018, from December 16, 2016.

There were no changes to the previously disclosed interest rates or on-going fees payable with respect to the term loan or the revolving credit facility.

The amended term loan is repayable in quarterly installments and a final repayment of $186 million is due in the third quarter of 2018.

The agreements relating to these facilities continue to contain requirements to maintain maximum levels of consolidated funded indebtedness in relation to consolidated EBITDA and minimum levels of consolidated EBITDA to consolidated interest expense, subject to certain adjustments. In connection with the amendment discussed above, we can request an increase in the maximum consolidated leverage ratio for up to four fiscal quarters following the completion of one or more acquisitions in a 15 month period where the aggregate consideration equals or exceeds an agreed threshold.
On July 25, 2013 the Company commenced cash tender offers for (1) any of its 5.625% Senior Notes due 2015 and (2) up to a maximum amount of the 6.200% Senior Notes due 2017 and 7.000% Senior Notes due 2019 such that the aggregate principal amount of the notes tendered and accepted for purchase is equal to $500 million principal amount of Notes less the aggregate principal amount of the 5.625% Senior Note due 2015 tendered and accepted for purchase.

26
Table of Contents
Notes to the financial statements
 (Unaudited)
14. DEBT (Continued)


On August 8, 2013 the maximum tender offer notes tendered and accepted for purchase was increased to $525 million.
15.    SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Supplemental disclosures regarding cash flow information and non-cash flow investing and financing activities are as follows:
 
 
Six months ended June 30,
 
2013
 
2012
 
(millions)
Supplemental disclosures of cash flow information:
 
 
 
Cash payments for income taxes, net
$
26

 
$
21

Cash payments for interest
59

 
57

Acquisitions:
 
 
 
Fair value of assets acquired
$
46

 
$
—

Less: Liabilities assumed
(30
)
 
—

Net assets acquired, net of cash acquired
$
16

 
$
—


16.    COMPREHENSIVE INCOME
 
The components of comprehensive income are as follows:
 
 
Three months ended June 30, 2013
 
Three months ended June 30, 2012
 
Before tax amount
 
Tax
 
Net of tax amount
 
Before tax amount
 
Tax
 
Net of tax amount
 
(millions)
 
(millions)
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(15
)
 
$
—

 
$
(15
)
 
$
(49
)
 
$
—

 
$
(49
)
Pension funding adjustments:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation on pension funding adjustments
1

 
(2
)
 
(1
)
 
13

 
(4
)
 
9

Amortization of unrecognized actuarial loss
14

 
(2
)
 
12

 
12

 
(4
)
 
8

Amortization of unrecognized prior service gain
(2
)
 
1

 
(1
)
 
(2
)
 
1

 
(1
)
 
13

 
(3
)
 
10

 
23

 
(7
)
 
16

Derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
Gain on interest rate swaps (effective element)
—

 
—

 
—

 
5

 
(1
)
 
4

Interest rate swap reclassification adjustment
(2
)
 
1

 
(1
)
 
(5
)
 
1

 
(4
)
Gain on forward exchange contracts (effective element)
(1
)
 
—

 
(1
)
 
4

 
(1
)
 
3

Forward exchange contracts reclassification adjustment
1

 
(1
)
 
—

 
(2
)
 
—

 
(2
)
Gain on treasury lock (effective element)
16

 
(3
)
 
13

 
—

 
—

 
—

 
14

 
(3
)
 
11

 
2

 
(1
)
 
1

Other comprehensive income (loss)
12

 
(6
)
 
6

 
(24
)
 
(8
)
 
(32
)
Less: Other comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
1

 
—

 
1

Other comprehensive income (loss) attributable to Willis Group Holdings
$
12

 
$
(6
)
 
$
6

 
$
(23
)
 
$
(8
)
 
$
(31
)



27
Table of Contents

Willis Group Holdings plc

16. COMPREHENSIVE INCOME (Continued)

 
Six months ended June 30, 2013
 
Six months ended June 30, 2012
 
Before tax amount
 
Tax
 
Net of tax amount
 
Before tax amount
 
Tax
 
Net of tax amount
 
(millions)
 
(millions)
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
$
(89
)
 
$
—

 
$
(89
)
 
$
(14
)
 
$
—

 
$
(14
)
Pension funding adjustments:
 
 
 
 
 
 
 
 
 
 
 
Foreign currency translation on pension funding adjustments
54

 
(15
)
 
39

 
(8
)
 
2

 
(6
)
Amortization of unrecognized actuarial loss
27

 
(5
)
 
22

 
24

 
(7
)
 
17

Amortization of unrecognized prior service gain
(3
)
 
1

 
(2
)
 
(3
)
 
1

 
(2
)
 
78

 
(19
)
 
59

 
13

 
(4
)
 
9

Derivative instruments:
 
 
 
 
 
 
 
 
 
 
 
Gain on interest rate swaps (effective element)
—

 
—

 
—

 
3

 
(1
)
 
2

Interest rate swap reclassification adjustment
(3
)
 
1

 
(2
)
 
(3
)
 
1

 
(2
)
Gain on forward exchange contracts (effective element)
(14
)
 
3

 
(11
)
 
7

 
(2
)
 
5

Forward exchange contracts reclassification adjustment
(1
)
 
—

 
(1
)
 
—

 
—

 
—

Gain on treasury lock (effective element)
16

 
(3
)
 
13

 
—

 
—

 
—

 
(2
)
 
1

 
(1
)
 
7

 
(2
)
 
5

Other comprehensive (loss) income
(13
)
 
(18
)
 
(31
)
 
6

 
(6
)
 
—

Less: Other comprehensive income attributable to noncontrolling interests
1

 
—

 
1

 
—

 
—

 
—

Other comprehensive (loss) income attributable to Willis Group Holdings
$
(12
)
 
$
(18
)
 
$
(30
)
 
$
6

 
$
(6
)
 
$
—



The components of accumulated other comprehensive loss, net of tax, are as follows:
 
 
 
Net foreign currency translation adjustment
 
Pension funding adjustment
 
Net unrealized gain on derivative instruments
 
Total
 
 
(millions)
Balance at December 31, 2012
 
$
(34
)
 
$
(831
)
 
$
15

 
$
(850
)
Other comprehensive income before reclassifications
 
(88
)
 
39

 
2

 
(47
)
Amounts reclassified from accumulated other comprehensive income
 
—

 
20

 
(3
)
 
17

Net current-period other comprehensive income, net of tax and noncontrolling interests
 
(88
)
 
59

 
(1
)
 
(30
)
Balance at June 30, 2013
 
$
(122
)
 
$
(772
)
 
$
14

 
$
(880
)



28
Table of Contents
Notes to the financial statements
 (Unaudited)
16. COMPREHENSIVE INCOME (Continued)

Amounts reclassified out of accumulated other comprehensive income into the statement of operations are as follows:
Details about accumulated other comprehensive income components
 
Amount reclassified from accumulated other comprehensive income
 
Affected line item in the statement of operations
 
 
Three months ended June 30,
 
 
 
 
2013
 
2012
 
 
 
 
(millions)
 
 
Gains and losses on cash flow hedges (Note 8)
 
 
 
 
 
 
Interest rate swaps
 
$
(2
)
 
$
(5
)
 
Investment income
Foreign exchange contracts
 
1

 
(2
)
 
Other operating expenses
 
 
(1
)
 
(7
)
 
Total before tax
Tax
 
—

 
1

 
 
 
 
$
(1
)
 
$
(6
)
 
Net of tax
Amortization of defined benefit pension items (Note 6)
 
 
 
 
 
 
Prior service gain
 
$
(2
)
 
$
(2
)
 
Salaries and benefits
Net actuarial loss
 
14

 
12

 
Salaries and benefits
 
 
12

 
10

 
Total before tax
Tax
 
(1
)
 
(3
)
 
 
 
 
$
11

 
$
7

 
Net of tax
 
 
 
 
 
 
 
Total reclassifications for the period
 
$
10

 
$
1

 
 

Details about accumulated other comprehensive income components
 
Amount reclassified from accumulated other comprehensive income
 
Affected line item in the statement of operations
 
 
Six months ended June 30,
 
 
 
 
2013
 
2012
 
 
 
 
(millions)
 
 
Gains and losses on cash flow hedges (Note 8)
 
 
 
 
 
 
Interest rate swaps
 
$
(3
)
 
$
(3
)
 
Investment income
Foreign exchange contracts
 
(1
)
 
—

 
Other operating expenses
 
 
(4
)
 
(3
)
 
Total before tax
Tax
 
1

 
1

 

 
 
$
(3
)
 
$
(2
)
 
Net of tax
Amortization of defined benefit pension items (Note 6)
 
 
 
 
 
 
Prior service gain
 
$
(3
)
 
$
(3
)
 
Salaries and benefits
Net actuarial loss
 
27

 
24

 
Salaries and benefits
 
 
24

 
21

 
Total before tax
Tax
 
(4
)
 
(6
)
 

 
 
$
20

 
$
15

 
Net of tax
 
 
 
 
 
 
 
Total reclassifications for the period
 
$
17

 
$
13

 
 

29
Table of Contents

Willis Group Holdings plc


17.    EQUITY AND NONCONTROLLING INTERESTS
The components of stockholders’ equity and noncontrolling interests are as follows:
 
 
June 30, 2013
 
June 30, 2012
 
Willis
Group
Holdings
stockholders
 
Noncontrolling
interests
 
Total
equity
 
Willis
Group
Holdings
stockholders
 
Noncontrolling
interests
 
Total
equity
 
(millions)
Balance at beginning of period
$
1,699

 
$
26

 
$
1,725

 
$
2,486

 
$
31

 
$
2,517

Comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
Net income
324

 
6

 
330

 
333

 
9

 
342

Other comprehensive income, net of tax
(30
)
 
(1
)
 
(31
)
 
—

 
—

 
—

Comprehensive income
294

 
5

 
299

 
333

 
9

 
342

Dividends
(98
)
 
(8
)
 
(106
)
 
(94
)
 
(11
)
 
(105
)
Additional paid-in capital
86

 
—

 
86

 
39

 
—

 
39

Repurchase of shares (i)
—

 
—

 
—

 
(56
)
 
—

 
(56
)
Additional noncontrolling interests
—

 
—

 
—

 
2

 
1

 
3

Purchase of subsidiary shares from noncontrolling interests
(4
)
 
—

 
(4
)
 
(23
)
 
(6
)
 
(29
)
Balance at end of period
$
1,977

 
$
23

 
$
2,000

 
$
2,687

 
$
24

 
$
2,711

 _________________________________
(i) 
Based on settlement date we repurchased 1,579,849 shares at an average price of $35.31 in the six months ended June 30, 2012.
The effects on equity of changes in Willis Group Holdings ownership interest in its subsidiaries are as follows:
 
 
June 30, 2013
 
June 30, 2012
 
(millions)
Net income attributable to Willis Group Holdings
$
324

 
$
333

Transfers from noncontrolling interest:
 
 
 
Decrease in Willis Group Holdings paid-in capital for purchase of noncontrolling interests
(4
)
 
(23
)
Increase in Willis Group Holdings paid-in capital for sale of noncontrolling interests
—

 
2

Net transfers to noncontrolling interests
(4
)
 
(21
)
Change from net income attributable to Willis Group Holdings and transfers from noncontrolling interests
$
320

 
$
312


30
Table of Contents
Notes to the financial statements
 (Unaudited)

18.    SEGMENT INFORMATION
During the periods presented, the Company operated through three segments: Global, North America and International. Global provides specialist brokerage and consulting services to clients worldwide for specific industrial and commercial activities and is organized by specialism. North America and International predominantly comprise our retail operations which provide services to small, medium and large corporations, accessing Global’s specialist expertise when required.
The Company evaluates the performance of its segments based on organic commissions and fees growth and operating income. For internal reporting and segmental reporting, the following items for which segmental management are not held accountable are excluded from segmental expenses:

(i)
foreign exchange hedging activities, foreign exchange movements on the UK pension plan asset, foreign exchange gains and losses from currency purchases and sales, and foreign exchange movements on internal exposures;
(ii)
amortization of intangible assets;
(iii)
write-off of uncollectible accounts receivable balance and associated legal fees and insurance recoveries arising in Chicago due to fraudulent overstatement of commissions and fees; and
(iv)
costs associated with the Expense Reduction Initiative.
The accounting policies of the segments are consistent with those described in Note 2 — ‘Basis of Presentation and Significant Accounting Policies’ to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012. There are no inter-segment revenues, with segments operating on a revenue-sharing basis equivalent to that used when sharing business with other third-party brokers.

31
Table of Contents

Willis Group Holdings plc

18. SEGMENT INFORMATION (Continued)

Selected information regarding the Company’s segments is as follows:
 
 
Three months ended June 30, 2013
 
Commissions
and fees
 
Investment
income
 
Other
income
 
Total
revenues
 
Depreciation
and
amortization
 
Operating
income
 
Interest in
earnings of
associates,
net of tax
 
(millions)
Global
$
305

 
$
1

 
$
—

 
$
306

 
$
7

 
$
106

 
$
—

North America
333

 
—

 
2

 
335

 
9

 
57

 
—

International
247

 
2

 
—

 
249

 
5

 
27

 
(3
)
Total Retail
580

 
2

 
2

 
584

 
14

 
84

 
(3
)
Total Segments
885

 
3

 
2

 
890

 
21

 
190

 
(3
)
Corporate and Other (i)
—

 
—

 
—

 
—

 
14

 
(19
)
 
—

Total Consolidated
$
885

 
$
3

 
$
2

 
$
890

 
$
35

 
$
171

 
$
(3
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Three months ended June 30, 2012
 
Commissions
and fees
 
Investment
income
 
Other
income
 
Total
revenues
 
Depreciation
and
amortization
 
Operating
income
 
Interest in
earnings of
associates,
net of tax
 
(millions)
Global
$
282

 
$
1

 
$
—

 
$
283

 
$
6

 
$
94

 
$
—

North America
314

 
1

 
—

 
315

 
8

 
48

 
—

International
241

 
3

 
—

 
244

 
5

 
40

 
(1
)
Total Retail
555

 
4

 
—

 
559

 
13

 
88

 
(1
)
Total Segments
837

 
5

 
—

 
842

 
19

 
182

 
(1
)
Corporate and Other (i)
—

 
—

 
—

 
—

 
15

 
(3
)
 
—

Total Consolidated
$
837

 
$
5

 
$
—

 
$
842

 
$
34

 
$
179

 
$
(1
)
_________________________________ 
(i) 
See the following table for an analysis of the ‘Corporate and Other’ line.
 
Three months ended June 30,
 
2013
 
2012
 
(millions)
Amortization of intangible assets
$
(14
)
 
$
(15
)
Foreign exchange gain on the UK pension plan asset
1

 
(2
)
Insurance recovery (a)
—

 
5

Other
(6
)
 
9

Total Corporate and Other
$
(19
)
 
$
(3
)
 _________________________________
(a) 
Insurance recovery, recorded in Other operating expenses, related to a previously disclosed fraudulent activity in a stand-alone North America business.


32
Table of Contents

Notes to the financial statements
(Unaudited)
18. SEGMENT INFORMATION (Continued)

 
Six months ended June 30, 2013
 
Commissions
and fees
 
Investment
income
 
Other
income
 
Total
revenues
 
Depreciation
and
amortization
 
Operating
income
 
Interest in
earnings of
associates,
net of tax
 
(millions)
Global
$
688

 
$
2

 
$
—

 
$
690

 
$
14

 
$
277

 
$
—

North America
696

 
1

 
3

 
700

 
18

 
146

 
—

International
547

 
4

 
—

 
551

 
10

 
113

 
12

Total Retail
1,243

 
5

 
3

 
1,251

 
28

 
259

 
12

Total Segments
1,931

 
7

 
3

 
1,941

 
42

 
536

 
12

Corporate and Other (i)
—

 
—

 
—

 
—

 
33

 
(78
)
 
—

Total Consolidated
$
1,931

 
$
7

 
$
3

 
$
1,941

 
$
75

 
$
458

 
$
12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Six months ended June 30, 2012
 
Commissions
and fees
 
Investment
income
 
Other
income
 
Total
revenues
 
Depreciation
and
amortization
 
Operating
income
 
Interest in
earnings of
associates,
net of tax
 
(millions)
Global
$
652

 
$
3

 
$
—

 
$
655

 
$
13

 
$
273

 
$
—

North America
660

 
1

 
3

 
664

 
16

 
130

 
—

International
530

 
6

 
—

 
536

 
9

 
121

 
14

Total Retail
1,190

 
7

 
3

 
1,200

 
25

 
251

 
14

Total Segments
1,842

 
10

 
3

 
1,855

 
38

 
524

 
14

Corporate and Other (i)
—

 
—

 
—

 
—

 
30

 
(28
)
 
—

Total Consolidated
$
1,842

 
$
10

 
$
3

 
$
1,855

 
$
68

 
$
496

 
$
14

_________________________________ 
(i) 
See the following table for an analysis of the ‘Corporate and Other’ line.
 
Six months ended June 30,
 
2013
 
2012
 
(millions)
Amortization of intangible assets
$
(28
)
 
$
(30
)
Foreign exchange hedging
—

 
2

Foreign exchange gain on the UK pension plan asset
1

 
(1
)
Write-off of uncollectible accounts receivable balance in Chicago and associated legal fees (a)
—

 
(13
)
Expense reduction initiative (b)
(46
)
 
—

Insurance recovery (c)
—

 
5

Other
(5
)
 
9

Total Corporate and Other
$
(78
)
 
$
(28
)
 _________________________________
(a) 
Write-off of uncollectible accounts receivable balance in relation to a previously disclosed fraudulent overstatement of Commissions and fees.
(b) 
Charge related to the assessment of the Company's organizational design.
(c) 
Insurance recovery, recorded in Other operating expenses, related to a previously disclosed fraudulent activity in a stand-alone North America business.


33
Table of Contents

Willis Group Holdings plc

18. SEGMENT INFORMATION (Continued)

The following table reconciles total consolidated operating income, as disclosed in the segment tables above, to consolidated income before income taxes and interest in earnings of associates:
 
Three months ended June 30,
 
Six months ended June 30,
 
2013
 
2012
 
2013
 
2012
 
(millions)
Total consolidated operating income
$
171

 
$
179

 
$
458

 
$
496

Interest expense
(32
)
 
(33
)
 
(63
)
 
(65
)
Income before income taxes and interest in earnings of associates
$
139

 
$
146

 
$
395

 
$
431

 


19.
FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
Willis North America Inc. (‘Willis North America’) has $350 million senior notes outstanding that were issued on July 1, 2005. Willis North America issued an additional $600 million of senior notes on March 28, 2007 and $300 million of senior notes on September 29, 2009.
All direct obligations under the senior notes were jointly and severally, irrevocably and fully and unconditionally guaranteed by Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc and Willis Group Limited, collectively the ‘Other Guarantors’, and with Willis Group Holdings, the ‘Guarantor Companies’.
The debt securities that were issued by Willis North America and guaranteed by the entities described above, and for which the disclosures set forth below relate and are required under applicable SEC rules, were issued under an effective registration statement.
Presented below is condensed consolidating financial information for:
(i)
Willis Group Holdings, which is a guarantor, on a parent company only basis;
(ii)
the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent and are all direct or indirect parents of the issuer;
(iii)
the Issuer, Willis North America;
(iv)
Other, which are the non-guarantor subsidiaries, on a combined basis;
(v)
Consolidating adjustments; and
(vi)
the Consolidated Company.
The equity method has been used for investments in subsidiaries in the unaudited condensed consolidating balance sheets as of June 30, 2013 of Willis Group Holdings, the Other Guarantors and the Issuer. Investments in subsidiaries in the unaudited condensed consolidating balance sheet for Other represents the cost of investment in subsidiaries recorded in the parent companies of the non-guarantor subsidiaries.
The entities included in the Other Guarantors column as of June 30, 2013 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc and Willis Group Limited.

 

34
Table of Contents
Notes to the financial statements
 (Unaudited)

Condensed Consolidating Statement of Operations
 
 
Three months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
885

 
$
—

 
$
885

Investment income
—

 
3

 
—

 
3

 
(3
)
 
3

Other income
—

 
—

 
—

 
2

 
—

 
2

Total revenues
—

 
3

 
—

 
890

 
(3
)
 
890

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
—

 
(22
)
 
(506
)
 
—

 
(529
)
Other operating expenses
(1
)
 
(26
)
 
(42
)
 
(142
)
 
56

 
(155
)
Depreciation expense
—

 
(1
)
 
(7
)
 
(13
)
 
—

 
(21
)
Amortization of intangible assets
—

 
—

 
—

 
(16
)
 
2

 
(14
)
Net gain on disposal of operations
—

 
—

 
—

 
3

 
(3
)
 
—

Total expenses
(2
)
 
(27
)
 
(71
)
 
(674
)
 
55

 
(719
)
OPERATING (LOSS) INCOME
(2
)
 
(24
)
 
(71
)
 
216

 
52

 
171

Investment income from Group undertakings
—

 
88

 
73

 
5

 
(166
)
 
—

Interest expense
(10
)
 
(50
)
 
(36
)
 
(88
)
 
152

 
(32
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
14

 
(34
)
 
133

 
38

 
139

Income taxes
—

 
5

 
—

 
(40
)
 
6

 
(29
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
19

 
(34
)
 
93

 
44

 
110

Interest in earnings of associates, net of tax
—

 
—

 
—

 
(5
)
 
2

 
(3
)
Equity account for subsidiaries
117

 
93

 
48

 
—

 
(258
)
 
—

NET INCOME
105

 
112

 
14

 
88

 
(212
)
 
107

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
105

 
$
112

 
$
14

 
$
86

 
$
(212
)
 
$
105


 

35
Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Three months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
111

 
$
118

 
$
16

 
$
80

 
$
(212
)
 
$
113

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
111

 
$
118

 
$
16

 
$
78

 
$
(212
)
 
$
111



36
Table of Contents
Notes to the financial statements
 (Unaudited)
19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
 
Three months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
837

 
$
—

 
$
837

Investment income
—

 
3

 
—

 
5

 
(3
)
 
5

Other income
—

 
—

 
—

 
—

 
—

 
—

Total revenues
—

 
3

 
—

 
842

 
(3
)
 
842

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
—

 
—

 
(6
)
 
(494
)
 
—

 
(500
)
Other operating expenses
(10
)
 
(2
)
 
(33
)
 
(87
)
 
3

 
(129
)
Depreciation expense
—

 
(1
)
 
(4
)
 
(14
)
 
—

 
(19
)
Amortization of intangible assets
—

 
—

 
—

 
(19
)
 
4

 
(15
)
Net loss on disposal of operations
—

 
—

 
—

 
(7
)
 
7

 
—

Total expenses
(10
)
 
(3
)
 
(43
)
 
(621
)
 
14

 
(663
)
OPERATING (LOSS) INCOME
(10
)
 
—

 
(43
)
 
221

 
11

 
179

Investment income from Group undertakings
—

 
93

 
66

 
19

 
(178
)
 
—

Interest expense
(10
)
 
(64
)
 
(37
)
 
(73
)
 
151

 
(33
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(20
)
 
29

 
(14
)
 
167

 
(16
)
 
146

Income taxes
5

 
1

 
5

 
(41
)
 
(6
)
 
(36
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(15
)
 
30

 
(9
)
 
126

 
(22
)
 
110

Interest in earnings of associates, net of tax
—

 
—

 
—

 
(3
)
 
2

 
(1
)
Equity account for subsidiaries
123

 
92

 
18

 
—

 
(233
)
 
—

INCOME FROM CONTINUING OPERATIONS
108

 
122

 
9

 
123

 
(253
)
 
109

Discontinued operations, net of tax
—

 
—

 
—

 
1

 
—

 
1

NET INCOME
108

 
122

 
9

 
124

 
(253
)
 
110

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
108

 
$
122

 
$
9

 
$
122

 
$
(253
)
 
$
108



37
Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 Condensed Consolidating Statement of Comprehensive Income
 
Three months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
77

 
$
94

 
$
12

 
$
79

 
$
(184
)
 
$
78

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(1
)
 
—

 
(1
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
77

 
$
94

 
$
12

 
$
78

 
$
(184
)
 
$
77

 









































38
Table of Contents
Notes to the financial statements
 (Unaudited)
19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations

 
Six months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
1,931

 
$
—

 
$
1,931

Investment income
—

 
6

 
—

 
7

 
(6
)
 
7

Other income
—

 
—

 
—

 
(183
)
 
186

 
3

Total revenues
—

 
6

 
—

 
1,755

 
180

 
1,941

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
—

 
(45
)
 
(1,051
)
 
—

 
(1,097
)
Other operating expenses
(5
)
 
(31
)
 
(85
)
 
(246
)
 
56

 
(311
)
Depreciation expense
—

 
(1
)
 
(11
)
 
(35
)
 
—

 
(47
)
Amortization of intangible assets
—

 
—

 
—

 
(32
)
 
4

 
(28
)
Net gain on disposal of operations
—

 
—

 
—

 
3

 
(3
)
 
—

Total expenses
(6
)
 
(32
)
 
(141
)
 
(1,361
)
 
57

 
(1,483
)
OPERATING (LOSS) INCOME
(6
)
 
(26
)
 
(141
)
 
394

 
237

 
458

Investment income from Group undertakings
—

 
172

 
135

 
48

 
(355
)
 
—

Interest expense
(21
)
 
(99
)
 
(66
)
 
(173
)
 
296

 
(63
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(27
)
 
47

 
(72
)
 
269

 
178

 
395

Income taxes
—

 
6

 
—

 
(87
)
 
4

 
(77
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(27
)
 
53

 
(72
)
 
182

 
182

 
318

Interest in earnings of associates, net of tax
—

 
—

 
—

 
8

 
4

 
12

Equity account for subsidiaries
351

 
295

 
122

 
—

 
(768
)
 
—

NET INCOME
324

 
348

 
50

 
190

 
(582
)
 
330

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(6
)
 
—

 
(6
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
324

 
$
348

 
$
50

 
$
184

 
$
(582
)
 
$
324















39
Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
294

 
$
318

 
$
54

 
$
143

 
$
(510
)
 
$
299

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(5
)
 
—

 
(5
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
294

 
$
318

 
$
54

 
$
138

 
$
(510
)
 
$
294











































40
Table of Contents
Notes to the financial statements
 (Unaudited)
19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations

 
Six months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
1,842

 
$
—

 
$
1,842

Investment income
—

 
6

 
—

 
10

 
(6
)
 
10

Other income
—

 
—

 
—

 
96

 
(93
)
 
3

Total revenues
—

 
6

 
—

 
1,948

 
(99
)
 
1,855

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
—

 
(22
)
 
(983
)
 
—

 
(1,006
)
Other operating expenses
(7
)
 
1

 
(55
)
 
(228
)
 
4

 
(285
)
Depreciation expense
—

 
(1
)
 
(7
)
 
(30
)
 
—

 
(38
)
Amortization of intangible assets
—

 
—

 
—

 
(36
)
 
6

 
(30
)
Net loss on disposal of operations
—

 
—

 
—

 
(23
)
 
23

 
—

Total expenses
(8
)
 
—

 
(84
)
 
(1,300
)
 
33

 
(1,359
)
OPERATING (LOSS) INCOME
(8
)
 
6

 
(84
)
 
648

 
(66
)
 
496

Investment income from Group undertakings
—

 
186

 
130

 
14

 
(330
)
 
—

Interest expense
(21
)
 
(127
)
 
(74
)
 
(142
)
 
299

 
(65
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(29
)
 
65

 
(28
)
 
520

 
(97
)
 
431

Income taxes
7

 
3

 
10

 
(117
)
 
(7
)
 
(104
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(22
)
 
68

 
(18
)
 
403

 
(104
)
 
327

Interest in earnings of associates, net of tax
—

 
—

 
—

 
10

 
4

 
14

Equity account for subsidiaries
355

 
285

 
53

 
—

 
(693
)
 
—

INCOME FROM CONTINUING OPERATIONS
333

 
353

 
35

 
413

 
(793
)
 
341

Discontinued operations, net of tax
—

 
—

 
—

 
1

 
—

 
1

NET INCOME
333

 
353

 
35

 
414

 
(793
)
 
342

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(9
)
 
—

 
(9
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
333

 
$
353

 
$
35

 
$
405

 
$
(793
)
 
$
333











41
Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
333

 
$
354

 
$
39

 
$
430

 
$
(814
)
 
$
342

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(9
)
 
—

 
(9
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
333

 
$
354

 
$
39

 
$
421

 
$
(814
)
 
$
333











































42
Table of Contents
Notes to the financial statements
 (Unaudited)
19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Balance Sheet 
 
As of June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1

 
$
5

 
$
—

 
$
497

 
$
—

 
$
503

Accounts receivable, net
—

 
—

 
2

 
1,015

 
27

 
1,044

Fiduciary assets
—

 
—

 
—

 
10,799

 
(889
)
 
9,910

Deferred tax assets
—

 
—

 
—

 
11

 
(1
)
 
10

Other current assets
1

 
91

 
25

 
263

 
(173
)
 
207

Total current assets
2

 
96

 
27

 
12,585

 
(1,036
)
 
11,674

Investments in subsidiaries
(1,215
)
 
2,763

 
646

 
3,807

 
(6,001
)
 
—

Amounts owed by (to) Group undertakings
4,047

 
(3,926
)
 
653

 
(774
)
 
—

 
—

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 

Fixed assets, net
—

 
12

 
57

 
385

 
(2
)
 
452

Goodwill
—

 
—

 
—

 
1,211

 
1,618

 
2,829

Other intangible assets, net
—

 
—

 
—

 
502

 
(129
)
 
373

Investments in associates
—

 
—

 
—

 
(48
)
 
225

 
177

Deferred tax assets
—

 
—

 
—

 
40

 
(25
)
 
15

Pension benefits asset
—

 
—

 
—

 
213

 
—

 
213

Other non-current assets
4

 
138

 
34

 
165

 
(136
)
 
205

Total non-current assets
4

 
150

 
91

 
2,468

 
1,551

 
4,264

TOTAL ASSETS
$
2,838

 
$
(917
)
 
$
1,417

 
$
18,086

 
$
(5,486
)
 
$
15,938

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
10,799

 
$
(889
)
 
$
9,910

Deferred revenue and accrued expenses
3

 
—

 
15

 
397

 
(1
)
 
414

Income taxes payable
—

 
34

 
—

 
137

 
(137
)
 
34

Short-term debt and current portion of long-term debt
—

 
15

 
—

 
2

 
—

 
17

Deferred tax liabilities
1

 
4

 
—

 
28

 
(1
)
 
32

Other current liabilities
62

 
—

 
49

 
277

 
(30
)
 
358

Total current liabilities
66

 
53

 
64

 
11,640

 
(1,058
)
 
10,765

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 

Long-term debt
795

 
266

 
1,264

 
1

 
—

 
2,326

Liabilities for pension benefits
—

 
—

 
—

 
256

 
—

 
256

Deferred tax liabilities
—

 
—

 
—

 
43

 
(25
)
 
18

Provisions for liabilities
—

 
—

 
—

 
213

 
(11
)
 
202

Other non-current liabilities
—

 
5

 
6

 
361

 
(1
)
 
371

Total non-current liabilities
795

 
271

 
1,270

 
874

 
(37
)
 
3,173

TOTAL LIABILITIES
$
861

 
$
324

 
$
1,334

 
$
12,514

 
$
(1,095
)
 
$
13,938

EQUITY
 
 
 
 
 
 
 
 
 
 
 
Total Willis Group Holdings stockholders’ equity
1,977

 
(1,241
)
 
83

 
5,549

 
(4,391
)
 
1,977

Noncontrolling interests
—

 
—

 
—

 
23

 
—

 
23

Total equity
1,977

 
(1,241
)
 
83

 
5,572

 
(4,391
)
 
2,000

TOTAL LIABILITIES AND EQUITY
$
2,838

 
$
(917
)
 
$
1,417

 
$
18,086

 
$
(5,486
)
 
$
15,938


43
Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 Condensed Consolidating Balance Sheet
 
As of December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1

 
$
—

 
$
—

 
$
499

 
$
—

 
$
500

Accounts receivable, net
—

 
—

 
—

 
904

 
29

 
933

Fiduciary assets
—

 
—

 
—

 
10,071

 
(800
)
 
9,271

Deferred tax assets
1

 
—

 
—

 
18

 
(6
)
 
13

Other current assets
1

 
65

 
38

 
241

 
(164
)
 
181

Total current assets
3

 
65

 
38

 
11,733

 
(941
)
 
10,898

Investments in subsidiaries
(1,542
)
 
2,493

 
553

 
3,824

 
(5,328
)
 
—

Amounts owed by (to) Group undertakings
4,091

 
(3,959
)
 
687

 
(819
)
 
—

 
—

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 

Fixed assets, net
—

 
11

 
63

 
395

 
(1
)
 
468

Goodwill
—

 
—

 
—

 
1,226

 
1,601

 
2,827

Other intangible assets, net
—

 
—

 
—

 
484

 
(99
)
 
385

Investments in associates
—

 
—

 
—

 
(53
)
 
227

 
174

Deferred tax assets
—

 
—

 
—

 
42

 
(24
)
 
18

Pension benefits asset
—

 
—

 
—

 
136

 
—

 
136

Other non-current assets
5

 
134

 
41

 
157

 
(131
)
 
206

Total non-current assets
5

 
145

 
104

 
2,387

 
1,573

 
4,214

TOTAL ASSETS
$
2,557

 
$
(1,256
)
 
$
1,382

 
$
17,125

 
$
(4,696
)
 
$
15,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
10,071

 
$
(800
)
 
$
9,271

Deferred revenue and accrued expenses
2

 
—

 
—

 
543

 
(4
)
 
541

Income taxes payable
—

 
25

 
—

 
120

 
(126
)
 
19

Short-term debt and current portion of long-term debt
—

 
15

 
—

 
—

 
—

 
15

Deferred tax liabilities
1

 
—

 
—

 
25

 
(5
)
 
21

Other current liabilities
60

 
—

 
73

 
216

 
(22
)
 
327

Total current liabilities
63

 
40

 
73

 
10,975

 
(957
)
 
10,194

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 

Long-term debt
795

 
274

 
1,268

 
1

 
—

 
2,338

Liabilities for pension benefits
—

 
—

 
—

 
282

 
—

 
282

Deferred tax liabilities
—

 
—

 
—

 
42

 
(24
)
 
18

Provisions for liabilities
—

 
—

 
—

 
188

 
(8
)
 
180

Other non-current liabilities
—

 
5

 
7

 
363

 
—

 
375

Total non-current liabilities
795

 
279

 
1,275

 
876

 
(32
)
 
3,193

TOTAL LIABILITIES
$
858

 
$
319

 
$
1,348

 
$
11,851

 
$
(989
)
 
$
13,387

EQUITY
 
 
 
 
 
 
 
 
 
 
 
Total Willis Group Holdings stockholders’ equity
1,699

 
(1,575
)
 
34

 
5,248

 
(3,707
)
 
1,699

Noncontrolling interests
—

 
—

 
—

 
26

 
—

 
26

Total equity
1,699

 
(1,575
)
 
34

 
5,274

 
(3,707
)
 
1,725

TOTAL LIABILITIES AND EQUITY
$
2,557

 
$
(1,256
)
 
$
1,382

 
$
17,125

 
$
(4,696
)
 
$
15,112


44
Table of Contents
Notes to the financial statements
 (Unaudited)
19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Six months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(26
)
 
$
41

 
$
(25
)
 
$
147

 
$
—

 
$
137

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
Proceeds on disposal of fixed and intangible assets
—

 
—

 
2

 
6

 
—

 
8

Additions to fixed assets
—

 
(1
)
 
(8
)
 
(42
)
 
—

 
(51
)
Additions to intangible assets
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(29
)
 
—

 
(29
)
Payments to acquire other investments
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Net cash used in investing activities
—

 
(1
)
 
(6
)
 
(68
)
 
—

 
(75
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 

Proceeds from draw down of revolving credit facility
—

 
—

 
—

 
2

 
—

 
2

Repayments of debt
—

 
(8
)
 
—

 
—

 
—

 
(8
)
Proceeds from issue of shares
62

 
—

 
—

 
—

 
—

 
62

Amounts owed by (to) Group undertakings
58

 
(27
)
 
31

 
(62
)
 
—

 
—

Excess tax benefits from share-based payment arrangements
1

 
—

 
—

 
—

 
—

 
1

Dividends paid
(95
)
 
—

 
—

 
—

 
—

 
(95
)
Acquisition of noncontrolling interests
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(8
)
 
—

 
(8
)
Net cash provided by (used in) financing activities
26

 
(35
)
 
31

 
(72
)
 
—

 
(50
)
INCREASE IN CASH AND CASH EQUIVALENTS
—

 
5

 
—

 
7

 
—

 
12

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(9
)
 
—

 
(9
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
1

 
—

 
—

 
499

 
—

 
500

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
1

 
$
5

 
$
—

 
$
497

 
$
—

 
$
503

 

45
Table of Contents

Willis Group Holdings plc

19. FINANCIAL INFORMATION FOR PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Six months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(25
)
 
$
59

 
$
35

 
$
142

 
$
(53
)
 
$
158

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
5

 
—

 
5

Additions to fixed assets
—

 
(5
)
 
(7
)
 
(51
)
 
—

 
(63
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Payments to acquire other investments
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Net cash used in investing activities
—

 
(5
)
 
(7
)
 
(54
)
 
—

 
(66
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
Proceeds from draw down of revolving credit facility
—

 
50

 
—

 
—

 
—

 
50

Repayments of debt
—

 
(5
)
 
—

 
(4
)
 
—

 
(9
)
Repurchase of shares
(56
)
 
—

 
—

 
—

 
—

 
(56
)
Proceeds from issue of shares
23

 
—

 
—

 
—

 
—

 
23

Amounts owed by (to) Group undertakings
151

 
(99
)
 
(191
)
 
139

 
—

 
—

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
1

 
—

 
1

Dividends paid
(93
)
 
—

 
—

 
(53
)
 
53

 
(93
)
Proceeds from sale of noncontrolling interests
—

 
—

 
—

 
3

 
—

 
3

Acquisition of noncontrolling interests
—

 
—

 
—

 
(29
)
 
—

 
(29
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(10
)
 
—

 
(10
)
Net cash provided by (used in) financing activities
25

 
(54
)
 
(191
)
 
47

 
53

 
(120
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
—

 
—

 
(163
)
 
135

 
—

 
(28
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(1
)
 
—

 
(1
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
—

 
—

 
163

 
273

 
—

 
436

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
—

 
$
—

 
$
—

 
$
407

 
$
—

 
$
407


46
Table of Contents
Notes to the financial statements
 (Unaudited)

20.
FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
On March 17, 2011, the Company issued senior notes totaling $800 million in a registered public offering. These debt securities are issued by Willis Group Holdings (‘Holdings Debt Securities’) and are guaranteed by certain of the Company’s subsidiaries. Therefore, the Company is providing the unaudited condensed consolidating financial information below. The following 100 percent directly or indirectly owned subsidiaries fully and unconditionally guarantee the Holdings Debt Securities on a joint and several basis: Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America (the ‘Guarantors’).
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by Willis North America (the ‘Willis North America Debt Securities’) (and for which unaudited condensed consolidating financial information is presented in Note 19) in that Willis Group Holdings is the Parent Issuer and Willis North America is a subsidiary guarantor.
Presented below is condensed consolidating financial information for:
 
(i)
Willis Group Holdings, which is the Parent Issuer;
(ii)
the Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent;
(iii)
Other, which are the non-guarantor subsidiaries, on a combined basis;
(iv)
Consolidating adjustments; and
(v)
the Consolidated Company.
The equity method has been used for investments in subsidiaries in the unaudited condensed consolidating balance sheets as of June 30, 2013 of Willis Group Holdings and the Guarantors. Investments in subsidiaries in the unaudited condensed consolidating balance sheet for Other represents the cost of investment in subsidiaries recorded in the parent companies of the non-guarantor subsidiaries.
The entities included in the Guarantors column as of June 30, 2013 are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, TA I Limited, Trinity Acquisition plc, Willis Group Limited and Willis North America.

 

47
Table of Contents

Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
 
Three months ended June 30, 2013
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
885

 
$
—

 
$
885

Investment income
—

 
3

 
3

 
(3
)
 
3

Other income
—

 
—

 
2

 
—

 
2

Total revenues
—

 
3

 
890

 
(3
)
 
890

EXPENSES
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
(22
)
 
(506
)
 
—

 
(529
)
Other operating expenses
(1
)
 
(68
)
 
(142
)
 
56

 
(155
)
Depreciation expense
—

 
(8
)
 
(13
)
 
—

 
(21
)
Amortization of intangible assets
—

 
—

 
(16
)
 
2

 
(14
)
Net gain on disposal of operations
—

 
—

 
3

 
(3
)
 
—

Total expenses
(2
)
 
(98
)
 
(674
)
 
55

 
(719
)
OPERATING (LOSS) INCOME
(2
)
 
(95
)
 
216

 
52

 
171

Investment income from Group undertakings
—

 
161

 
5

 
(166
)
 
—

Interest expense
(10
)
 
(86
)
 
(88
)
 
152

 
(32
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
(20
)
 
133

 
38

 
139

Income taxes
—

 
5

 
(40
)
 
6

 
(29
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
(15
)
 
93

 
44

 
110

Interest in earnings of associates, net of tax
—

 
—

 
(5
)
 
2

 
(3
)
Equity account for subsidiaries
117

 
127

 
—

 
(244
)
 
—

NET INCOME
105

 
112

 
88

 
(198
)
 
107

Less: Net income attributable to noncontrolling interests
—

 
—

 
(2
)
 
—

 
(2
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
105

 
$
112

 
$
86

 
$
(198
)
 
$
105



48
Table of Contents
Notes to the financial statements
 (Unaudited)
20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 Condensed Consolidating Statement of Comprehensive Income
 
Three months ended June 30, 2013
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
111

 
$
118

 
$
80

 
$
(196
)
 
$
113

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
(2
)
 
—

 
(2
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
111

 
$
118

 
$
78

 
$
(196
)
 
$
111



49
Table of Contents

Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
 
Three months ended June 30, 2012
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
837

 
$
—

 
$
837

Investment income
—

 
3

 
5

 
(3
)
 
5

Other income
—

 
—

 
—

 
—

 
—

Total revenues
—

 
3

 
842

 
(3
)
 
842

EXPENSES
 
 
 
 
 
 
 
 
 
Salaries and benefits
—

 
(6
)
 
(494
)
 
—

 
(500
)
Other operating expenses
(10
)
 
(35
)
 
(87
)
 
3

 
(129
)
Depreciation expense
—

 
(5
)
 
(14
)
 
—

 
(19
)
Amortization of intangible assets
—

 
—

 
(19
)
 
4

 
(15
)
Net loss on disposal of operations
—

 
—

 
(7
)
 
7

 
—

Total expenses
(10
)
 
(46
)
 
(621
)
 
14

 
(663
)
OPERATING (LOSS) INCOME
(10
)
 
(43
)
 
221

 
11

 
179

Investment income from Group undertakings
—

 
159

 
19

 
(178
)
 
—

Interest expense
(10
)
 
(101
)
 
(73
)
 
151

 
(33
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(20
)
 
15

 
167

 
(16
)
 
146

Income taxes
5

 
6

 
(41
)
 
(6
)
 
(36
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(15
)
 
21

 
126

 
(22
)
 
110

Interest in earnings of associates, net of tax
—

 
—

 
(3
)
 
2

 
(1
)
Equity account for subsidiaries
123

 
101

 
—

 
(224
)
 
—

INCOME FROM CONTINUING OPERATIONS
108

 
122

 
123

 
(244
)
 
109

Discontinued operations, net of tax
—

 
—

 
1

 
—

 
1

NET INCOME
108

 
122

 
124

 
(244
)
 
110

Less: Net income attributable to noncontrolling interests
—

 
—

 
(2
)
 
—

 
(2
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
108

 
$
122

 
$
122

 
$
(244
)
 
$
108


 

50
Table of Contents
Notes to the financial statements
 (Unaudited)
20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
 
Three months ended June 30, 2012
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
77

 
$
94

 
$
79

 
$
(172
)
 
$
78

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
(1
)
 
—

 
(1
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
77

 
$
94

 
$
78

 
$
(172
)
 
$
77


















































51
Table of Contents

Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 Condensed Consolidating Statement of Operations
 
Six months ended June 30, 2013
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
1,931

 
$
—

 
$
1,931

Investment income
—

 
6

 
7

 
(6
)
 
7

Other income
—

 
—

 
(183
)
 
186

 
3

Total revenues
—

 
6

 
1,755

 
180

 
1,941

EXPENSES
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
(45
)
 
(1,051
)
 
—

 
(1,097
)
Other operating expenses
(5
)
 
(116
)
 
(246
)
 
56

 
(311
)
Depreciation expense
—

 
(12
)
 
(35
)
 
—

 
(47
)
Amortization of intangible assets
—

 
—

 
(32
)
 
4

 
(28
)
Net gain on disposal of operations
—

 
—

 
3

 
(3
)
 
—

Total expenses
(6
)
 
(173
)
 
(1,361
)
 
57

 
(1,483
)
OPERATING (LOSS) INCOME
(6
)
 
(167
)
 
394

 
237

 
458

Investment income from Group undertakings
—

 
307

 
48

 
(355
)
 
—

Interest expense
(21
)
 
(165
)
 
(173
)
 
296

 
(63
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(27
)
 
(25
)
 
269

 
178

 
395

Income taxes
—

 
6

 
(87
)
 
4

 
(77
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(27
)
 
(19
)
 
182

 
182

 
318

Interest in earnings of associates, net of tax
—

 
—

 
8

 
4

 
12

Equity account for subsidiaries
351

 
367

 
—

 
(718
)
 
—

NET INCOME
324

 
348

 
190

 
(532
)
 
330

Less: Net income attributable to noncontrolling interests
—

 
—

 
(6
)
 
—

 
(6
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
324

 
$
348

 
$
184

 
$
(532
)
 
$
324




















52
Table of Contents
Notes to the financial statements
 (Unaudited)
20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)



 Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2013
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
294

 
$
318

 
$
143

 
$
(456
)
 
$
299

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
(5
)
 
—

 
(5
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
294

 
$
318

 
$
138

 
$
(456
)
 
$
294


















































53
Table of Contents

Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)


Condensed Consolidating Statement of Operations
 
Six months ended June 30, 2012
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
1,842

 
$
—

 
$
1,842

Investment income
—

 
6

 
10

 
(6
)
 
10

Other income
—

 
—

 
96

 
(93
)
 
3

Total revenues
—

 
6

 
1,948

 
(99
)
 
1,855

EXPENSES
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
(22
)
 
(983
)
 
—

 
(1,006
)
Other operating expenses
(7
)
 
(54
)
 
(228
)
 
4

 
(285
)
Depreciation expense
—

 
(8
)
 
(30
)
 
—

 
(38
)
Amortization of intangible assets
—

 
—

 
(36
)
 
6

 
(30
)
Net loss on disposal of operations
—

 
—

 
(23
)
 
23

 
—

Total expenses
(8
)
 
(84
)
 
(1,300
)
 
33

 
(1,359
)
OPERATING (LOSS) INCOME
(8
)
 
(78
)
 
648

 
(66
)
 
496

Investment income from Group undertakings
—

 
316

 
14

 
(330
)
 
—

Interest expense
(21
)
 
(201
)
 
(142
)
 
299

 
(65
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(29
)
 
37

 
520

 
(97
)
 
431

Income taxes
7

 
13

 
(117
)
 
(7
)
 
(104
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(22
)
 
50

 
403

 
(104
)
 
327

Interest in earnings of associates, net of tax
—

 
—

 
10

 
4

 
14

Equity account for subsidiaries
355

 
303

 
—

 
(658
)
 
—

INCOME FROM CONTINUING OPERATIONS
333

 
353

 
413

 
(758
)
 
341

Discontinued operations, net of tax
—

 
—

 
1

 
—

 
1

NET INCOME
333

 
353

 
414

 
(758
)
 
342

Less: Net income attributable to noncontrolling interests
—

 
—

 
(9
)
 
—

 
(9
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
333

 
$
353

 
$
405

 
$
(758
)
 
$
333













54
Table of Contents
Notes to the financial statements
 (Unaudited)
20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2012
 
Willis
Group
Holdings - the Parent Issuer
 
The
Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
333

 
$
354

 
$
430

 
$
(775
)
 
$
342

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
(9
)
 
—

 
(9
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
333

 
$
354

 
$
421

 
$
(775
)
 
$
333










































55
Table of Contents

Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As of June 30, 2013
 
Willis
Group
Holdings - the Parent Issuer
 
The Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1

 
$
5

 
$
497

 
$
—

 
$
503

Accounts receivable, net
—

 
2

 
1,015

 
27

 
1,044

Fiduciary assets
—

 
—

 
10,799

 
(889
)
 
9,910

Deferred tax assets
—

 
—

 
11

 
(1
)
 
10

Other current assets
1

 
116

 
263

 
(173
)
 
207

Total current assets
2

 
123

 
12,585

 
(1,036
)
 
11,674

Investments in subsidiaries
(1,215
)
 
3,326

 
3,807

 
(5,918
)
 
—

Amounts owed by (to) Group undertakings
4,047

 
(3,273
)
 
(774
)
 
—

 
—

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
Fixed assets, net
—

 
69

 
385

 
(2
)
 
452

Goodwill
—

 
—

 
1,211

 
1,618

 
2,829

Other intangible assets, net
—

 
—

 
502

 
(129
)
 
373

Investments in associates
—

 
—

 
(48
)
 
225

 
177

Deferred tax assets
—

 
—

 
40

 
(25
)
 
15

Pension benefits asset
—

 
—

 
213

 
—

 
213

Other non-current assets
4

 
172

 
165

 
(136
)
 
205

Total non-current assets
4

 
241

 
2,468

 
1,551

 
4,264

TOTAL ASSETS
$
2,838

 
$
417

 
$
18,086

 
$
(5,403
)
 
$
15,938

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
Fiduciary liabilities
$
—

 
$
—

 
$
10,799

 
$
(889
)
 
$
9,910

Deferred revenue and accrued expenses
3

 
15

 
397

 
(1
)
 
414

Income taxes payable
—

 
34

 
137

 
(137
)
 
34

Short-term debt and current portion of long-term debt
—

 
15

 
2

 
—

 
17

Deferred tax liabilities
1

 
4

 
28

 
(1
)
 
32

Other current liabilities
62

 
49

 
277

 
(30
)
 
358

Total current liabilities
66

 
117

 
11,640

 
(1,058
)
 
10,765

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
Long-term debt
795

 
1,530

 
1

 
—

 
2,326

Liabilities for pension benefits
—

 
—

 
256

 
—

 
256

Deferred tax liabilities
—

 
—

 
43

 
(25
)
 
18

Provisions for liabilities
—

 
—

 
213

 
(11
)
 
202

Other non-current liabilities
—

 
11

 
361

 
(1
)
 
371

Total non-current liabilities
795

 
1,541

 
874

 
(37
)
 
3,173

TOTAL LIABILITIES
$
861

 
$
1,658

 
$
12,514

 
$
(1,095
)
 
$
13,938

EQUITY
 
 
 
 
 
 
 
 
 
Total Willis Group Holdings stockholders’ equity
1,977

 
(1,241
)
 
5,549

 
(4,308
)
 
1,977

Noncontrolling interests
—

 
—

 
23

 
—

 
23

Total equity
1,977

 
(1,241
)
 
5,572

 
(4,308
)
 
2,000

TOTAL LIABILITIES AND EQUITY
$
2,838

 
$
417

 
$
18,086

 
$
(5,403
)
 
$
15,938


56
Table of Contents
Notes to the financial statements
 (Unaudited)
20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As of December 31, 2012
 
Willis
Group
Holdings - the Parent Issuer
 
The Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1

 
$
—

 
$
499

 
$
—

 
$
500

Accounts receivable, net
—

 
—

 
904

 
29

 
933

Fiduciary assets
—

 
—

 
10,071

 
(800
)
 
9,271

Deferred tax assets
1

 
—

 
18

 
(6
)
 
13

Other current assets
1

 
103

 
241

 
(164
)
 
181

Total current assets
3

 
103

 
11,733

 
(941
)
 
10,898

Investments in subsidiaries
(1,542
)
 
3,012

 
3,824

 
(5,294
)
 
—

Amounts owed by (to) Group undertakings
4,091

 
(3,272
)
 
(819
)
 
—

 
—

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
Fixed assets, net
—

 
74

 
395

 
(1
)
 
468

Goodwill
—

 
—

 
1,226

 
1,601

 
2,827

Other intangible assets, net
—

 
—

 
484

 
(99
)
 
385

Investments in associates
—

 
—

 
(53
)
 
227

 
174

Deferred tax assets
—

 
—

 
42

 
(24
)
 
18

Pension benefits asset
—

 
—

 
136

 
—

 
136

Other non-current assets
5

 
175

 
157

 
(131
)
 
206

Total non-current assets
5

 
249

 
2,387

 
1,573

 
4,214

TOTAL ASSETS
$
2,557

 
$
92

 
$
17,125

 
$
(4,662
)
 
$
15,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
Fiduciary liabilities
$
—

 
$
—

 
$
10,071

 
$
(800
)
 
$
9,271

Deferred revenue and accrued expenses
2

 
—

 
543

 
(4
)
 
541

Income taxes payable
—

 
25

 
120

 
(126
)
 
19

Short-term debt and current portion of long-term debt
—

 
15

 
—

 
—

 
15

Deferred tax liabilities
1

 
—

 
25

 
(5
)
 
21

Other current liabilities
60

 
73

 
216

 
(22
)
 
327

Total current liabilities
63

 
113

 
10,975

 
(957
)
 
10,194

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 

Long-term debt
795

 
1,542

 
1

 
—

 
2,338

Liabilities for pension benefits
—

 
—

 
282

 
—

 
282

Deferred tax liabilities
—

 
—

 
42

 
(24
)
 
18

Provisions for liabilities
—

 
—

 
188

 
(8
)
 
180

Other non-current liabilities
—

 
12

 
363

 
—

 
375

Total non-current liabilities
795

 
1,554

 
876

 
(32
)
 
3,193

TOTAL LIABILITIES
$
858

 
$
1,667

 
$
11,851

 
$
(989
)
 
$
13,387

EQUITY
 
 
 
 
 
 
 
 
 
Total Willis Group Holdings stockholders’ equity
1,699

 
(1,575
)
 
5,248

 
(3,673
)
 
1,699

Noncontrolling interests
—

 
—

 
26

 
—

 
26

Total equity
1,699

 
(1,575
)
 
5,274

 
(3,673
)
 
1,725

TOTAL LIABILITIES AND EQUITY
$
2,557

 
$
92

 
$
17,125

 
$
(4,662
)
 
$
15,112

 

57
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Willis Group Holdings plc

20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
 
Six months ended June 30, 2013
 
Willis
Group
Holdings - the Parent Issuer
 
The Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(26
)
 
$
16

 
$
147

 
$
—

 
$
137

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
Proceeds on disposal of fixed and intangible assets
—

 
2

 
6

 
—

 
8

Additions to fixed assets
—

 
(9
)
 
(42
)
 
—

 
(51
)
Additions to intangible assets
—

 
—

 
(1
)
 
—

 
(1
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
(29
)
 
—

 
(29
)
Payments to acquire other investments
—

 
—

 
(2
)
 
—

 
(2
)
Net cash used in investing activities
—

 
(7
)
 
(68
)
 
—

 
(75
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
Proceeds from draw down of revolving credit facility
—

 
—

 
2

 
—

 
2

Repayments of debt
—

 
(8
)
 
—

 
—

 
(8
)
Proceeds from issue of shares
62

 
—

 
—

 
—

 
62

Amounts owed by (to) Group undertakings
58

 
4

 
(62
)
 
—

 
—

Excess tax benefits from share-based payment arrangement
1

 
—

 
—

 
—

 
1

Dividends paid
(95
)
 
—

 
—

 
—

 
(95
)
Acquisition of noncontrolling interests
—

 
—

 
(4
)
 
—

 
(4
)
Dividends paid to noncontrolling interests
—

 
—

 
(8
)
 
—

 
(8
)
Net cash provided by (used in) financing activities
26

 
(4
)
 
(72
)
 
—

 
(50
)
INCREASE IN CASH AND CASH EQUIVALENTS
—

 
5

 
7

 
—

 
12

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(9
)
 
—

 
(9
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
1

 
—

 
499

 
—

 
500

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
1

 
$
5

 
$
497

 
$
—

 
$
503


 

58
Table of Contents
Notes to the financial statements
 (Unaudited)
20. FINANCIAL INFORMATION FOR PARENT ISSUER, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
 
Six months ended June 30, 2012
 
Willis
Group
Holdings - the Parent Issuer
 
The Guarantors
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(25
)
 
$
94

 
$
142

 
$
(53
)
 
$
158

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
Proceeds on disposal of fixed and intangible assets
—

 
—

 
5

 
—

 
5

Additions to fixed assets
—

 
(12
)
 
(51
)
 
—

 
(63
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
(4
)
 
—

 
(4
)
Payments to acquire other investments
—

 
—

 
(4
)
 
—

 
(4
)
Net cash used in investing activities
—

 
(12
)
 
(54
)
 
—

 
(66
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
Proceeds from draw down of revolving credit facility
—

 
50

 
—

 
—

 
50

Repayments of debt
—

 
(5
)
 
(4
)
 
—

 
(9
)
Repurchase of shares
(56
)
 
—

 
—

 
—

 
(56
)
Proceeds from issue of shares
23

 
—

 
—

 
—

 
23

Amounts owed by (to) Group undertakings
151

 
(290
)
 
139

 
—

 
—

Excess tax benefits from share-based payment arrangement
—

 
—

 
1

 
—

 
1

Dividends paid
(93
)
 
—

 
(53
)
 
53

 
(93
)
Proceeds from sale of noncontrolling interests
—

 
—

 
3

 
—

 
3

Acquisition of noncontrolling interests
—

 
—

 
(29
)
 
—

 
(29
)
Dividends paid to noncontrolling interests
—

 
—

 
(10
)
 
—

 
(10
)
Net cash provided by (used in) financing activities
25

 
(245
)
 
47

 
53

 
(120
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
—

 
(163
)
 
135

 
—

 
(28
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
(1
)
 
—

 
(1
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
—

 
163

 
273

 
—

 
436

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
—

 
$
—

 
$
407

 
$
—

 
$
407

 

59
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Willis Group Holdings plc


21.
FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, OTHER GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES
Trinity Acquisition plc may offer debt securities pursuant to an effective shelf registration on Form S-3. Debt securities offered('Trinity Acquisition Debt Securities'), if issued, will be guaranteed by the Company and certain of its subsidiaries. Therefore Trinity Acquisition plc is providing condensed consolidating financial information below. If Trinity Acquisition plc issues debt securities, the following 100 percent directly or indirectly owned subsidiaries of the parent could fully and unconditionally guarantee the debt securities on a joint and several basis: Willis Netherlands Holdings B.V, Willis Investment UK Holdings Limited, TA I Limited, Willis Group Limited and Willis North America, Inc..
The guarantor structure described above differs from the guarantor structure associated with the senior notes issued by the Company and Willis North America (the ‘Willis North America Debt Securities’) in that Trinity Acquisition plc is the issuer and not a subsidiary guarantor, and Willis North America, Inc. is a subsidiary guarantor.
Presented below is condensed consolidating financial information for:

(i)
Willis Group Holdings, which is a guarantor, on a parent company only basis;

(ii)
the Other Guarantors, which are all 100 percent directly or indirectly owned subsidiaries of the parent. Willis Netherlands Holdings B.V, Willis Investment UK Holdings Limited and TA I Limited are all direct or indirect parents of the issuer and Willis Group Limited and Willis North America Inc., are 100 percent directly or indirectly owned subsidiaries or the issuer;

(iii)
Trinity Acquisition plc, which is the issuer and is a 100 percent indirectly owned subsidiary of the parent;

(iv)
Other, which are the non-guarantor subsidiaries, on a combined basis;

(v)
Consolidating adjustments; and

(vi)
the Consolidated Company.
The equity method has been used for investments in subsidiaries in the condensed consolidating balance sheets of Willis Group Holdings, the Other Guarantors and the Issuer. Investments in subsidiaries in the condensed consolidating balance sheet for Other represents the cost of investment in subsidiaries recorded in the parent companies of the non-guarantor subsidiaries.
The entities included in the Other Guarantors column are Willis Netherlands Holdings B.V., Willis Investment UK Holdings Limited, Willis North America, TA I Limited and Willis Group Limited.

 

60
Table of Contents
Notes to the financial statements
 (Unaudited)
21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
 
Three months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
885

 
$
—

 
$
885

Investment income
—

 
3

 
—

 
3

 
(3
)
 
3

Other income
—

 
—

 
—

 
2

 
—

 
2

Total revenues
—

 
3

 
—

 
890

 
(3
)
 
890

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
(22
)
 
—

 
(506
)
 
—

 
(529
)
Other operating expenses
(1
)
 
(68
)
 
—

 
(142
)
 
56

 
(155
)
Depreciation expense
—

 
(8
)
 
—

 
(13
)
 
—

 
(21
)
Amortization of intangible assets
—

 
—

 
—

 
(16
)
 
2

 
(14
)
Net gain on disposal of operations
—

 
—

 
—

 
3

 
(3
)
 
—

Total expenses
(2
)
 
(98
)
 
—

 
(674
)
 
55

 
(719
)
OPERATING (LOSS) INCOME
(2
)
 
(95
)
 
—

 
216

 
52

 
171

Investment income from Group undertakings
—

 
145

 
16

 
5

 
(166
)
 
—

Interest expense
(10
)
 
(77
)
 
(9
)
 
(88
)
 
152

 
(32
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
(27
)
 
7

 
133

 
38

 
139

Income taxes
—

 
7

 
(2
)
 
(40
)
 
6

 
(29
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(12
)
 
(20
)
 
5

 
93

 
44

 
110

Interest in earnings of associates, net of tax
—

 
—

 
—

 
(5
)
 
2

 
(3
)
Equity account for subsidiaries
117

 
132

 
92

 
—

 
(341
)
 
—

NET INCOME
105

 
112

 
97

 
88

 
(295
)
 
107

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
105

 
$
112

 
$
97

 
$
86

 
$
(295
)
 
$
105


 

61
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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Three months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
111

 
$
118

 
$
103

 
$
80

 
$
(299
)
 
$
113

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
111

 
$
118

 
$
103

 
$
78

 
$
(299
)
 
$
111



62
Table of Contents
Notes to the financial statements
 (Unaudited)
21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations
 
 
Three months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
837

 
$
—

 
$
837

Investment income
—

 
3

 
—

 
5

 
(3
)
 
5

Other income
—

 
—

 
—

 
—

 
—

 
—

Total revenues
—

 
3

 
—

 
842

 
(3
)
 
842

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
—

 
(6
)
 
—

 
(494
)
 
—

 
(500
)
Other operating expenses
(10
)
 
(35
)
 
—

 
(87
)
 
3

 
(129
)
Depreciation expense
—

 
(5
)
 
—

 
(14
)
 
—

 
(19
)
Amortization of intangible assets
—

 
—

 
—

 
(19
)
 
4

 
(15
)
Net loss on disposal of operations
—

 
—

 
—

 
(7
)
 
7

 
—

Total expenses
(10
)
 
(46
)
 
—

 
(621
)
 
14

 
(663
)
OPERATING (LOSS) INCOME
(10
)
 
(43
)
 
—

 
221

 
11

 
179

Investment income from Group undertakings
—

 
144

 
18

 
19

 
(181
)
 
—

Interest expense
(10
)
 
(93
)
 
(8
)
 
(73
)
 
151

 
(33
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(20
)
 
8

 
10

 
167

 
(19
)
 
146

Income taxes
5

 
9

 
(3
)
 
(41
)
 
(6
)
 
(36
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(15
)
 
17

 
7

 
126

 
(25
)
 
110

Interest in earnings of associates, net of tax
—

 
—

 
—

 
(3
)
 
2

 
(1
)
Equity account for subsidiaries
123

 
105

 
103

 
—

 
(331
)
 
—

INCOME FROM CONTINUING OPERATIONS
108

 
122

 
110

 
123

 
(354
)
 
109

Discontinued operations, net of tax
—

 
—

 
—

 
1

 
—

 
1

NET INCOME
108

 
122

 
110

 
124

 
(354
)
 
110

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(2
)
 
—

 
(2
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
108

 
$
122

 
$
110

 
$
122

 
$
(354
)
 
$
108



63
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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

 Condensed Consolidating Statement of Comprehensive Income
 
Three months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
77

 
$
94

 
$
84

 
$
79

 
$
(256
)
 
$
78

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(1
)
 
—

 
(1
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
77

 
$
94

 
$
84

 
$
78

 
$
(256
)
 
$
77

 









































64
Table of Contents
Notes to the financial statements
 (Unaudited)
21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations

 
Six months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
1,931

 
$
—

 
$
1,931

Investment income
—

 
6

 
—

 
7

 
(6
)
 
7

Other income
—

 
—

 
—

 
(183
)
 
186

 
3

Total revenues
—

 
6

 
—

 
1,755

 
180

 
1,941

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
(45
)
 
—

 
(1,051
)
 
—

 
(1,097
)
Other operating expenses
(5
)
 
(116
)
 
—

 
(246
)
 
56

 
(311
)
Depreciation expense
—

 
(12
)
 
—

 
(35
)
 
—

 
(47
)
Amortization of intangible assets
—

 
—

 
—

 
(32
)
 
4

 
(28
)
Net gain on disposal of operations
—

 
—

 
—

 
3

 
(3
)
 
—

Total expenses
(6
)
 
(173
)
 
—

 
(1,361
)
 
57

 
(1,483
)
OPERATING (LOSS) INCOME
(6
)
 
(167
)
 
—

 
394

 
237

 
458

Investment income from Group undertakings
—

 
278

 
29

 
48

 
(355
)
 
—

Interest expense
(21
)
 
(148
)
 
(17
)
 
(173
)
 
296

 
(63
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(27
)
 
(37
)
 
12

 
269

 
178

 
395

Income taxes
—

 
8

 
(2
)
 
(87
)
 
4

 
(77
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(27
)
 
(29
)
 
10

 
182

 
182

 
318

Interest in earnings of associates, net of tax
—

 
—

 
—

 
8

 
4

 
12

Equity account for subsidiaries
351

 
377

 
310

 
—

 
(1,038
)
 
—

NET INCOME
324

 
348

 
320

 
190

 
(852
)
 
330

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(6
)
 
—

 
(6
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
324

 
$
348

 
$
320

 
$
184

 
$
(852
)
 
$
324















65
Table of Contents

Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
294

 
$
318

 
$
295

 
$
143

 
$
(751
)
 
$
299

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(5
)
 
—

 
(5
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
294

 
$
318

 
$
295

 
$
138

 
$
(751
)
 
$
294










































66
Table of Contents
Notes to the financial statements
 (Unaudited)
21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Operations

 
Six months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
REVENUES
 
 
 
 
 
 
 
 
 
 
 
Commissions and fees
$
—

 
$
—

 
$
—

 
$
1,842

 
$
—

 
$
1,842

Investment income
—

 
6

 
—

 
10

 
(6
)
 
10

Other income
—

 
—

 
—

 
96

 
(93
)
 
3

Total revenues
—

 
6

 
—

 
1,948

 
(99
)
 
1,855

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
Salaries and benefits
(1
)
 
(22
)
 
—

 
(983
)
 
—

 
(1,006
)
Other operating expenses
(7
)
 
(55
)
 
1

 
(228
)
 
4

 
(285
)
Depreciation expense
—

 
(8
)
 
—

 
(30
)
 
—

 
(38
)
Amortization of intangible assets
—

 
—

 
—

 
(36
)
 
6

 
(30
)
Net loss on disposal of operations
—

 
—

 
—

 
(23
)
 
23

 
—

Total expenses
(8
)
 
(85
)
 
1

 
(1,300
)
 
33

 
(1,359
)
OPERATING (LOSS) INCOME
(8
)
 
(79
)
 
1

 
648

 
(66
)
 
496

Investment income from Group undertakings
—

 
448

 
318

 
14

 
(780
)
 
—

Interest expense
(21
)
 
(184
)
 
(17
)
 
(142
)
 
299

 
(65
)
(LOSS) INCOME BEFORE INCOME TAXES AND INTEREST IN EARNINGS OF ASSOCIATES
(29
)
 
185

 
302

 
520

 
(547
)
 
431

Income taxes
7

 
18

 
(5
)
 
(117
)
 
(7
)
 
(104
)
(LOSS) INCOME BEFORE INTEREST IN EARNINGS OF ASSOCIATES
(22
)
 
203

 
297

 
403

 
(554
)
 
327

Interest in earnings of associates, net of tax
—

 
—

 
—

 
10

 
4

 
14

Equity account for subsidiaries
355

 
150

 
36

 
—

 
(541
)
 
—

INCOME FROM CONTINUING OPERATIONS
333

 
353

 
333

 
413

 
(1,091
)
 
341

Discontinued operations, net of tax
—

 
—

 
—

 
1

 
—

 
1

NET INCOME
333

 
353

 
333

 
414

 
(1,091
)
 
342

Less: Net income attributable to noncontrolling interests
—

 
—

 
—

 
(9
)
 
—

 
(9
)
NET INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
333

 
$
353

 
$
333

 
$
405

 
$
(1,091
)
 
$
333











67
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Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Comprehensive Income
 
Six months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
 
 
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
333

 
$
354

 
$
334

 
$
430

 
$
(1,109
)
 
$
342

Less: comprehensive income attributable to noncontrolling interests
—

 
—

 
—

 
(9
)
 
—

 
(9
)
TOTAL COMPREHENSIVE INCOME ATTRIBUTABLE TO WILLIS GROUP HOLDINGS
$
333

 
$
354

 
$
334

 
$
421

 
$
(1,109
)
 
$
333











































68
Table of Contents
Notes to the financial statements
 (Unaudited)
21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet 
 
As of June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1

 
$
5

 
$
—

 
$
497

 
$
—

 
$
503

Accounts receivable, net
—

 
2

 
—

 
1,015

 
27

 
1,044

Fiduciary assets
—

 
—

 
—

 
10,799

 
(889
)
 
9,910

Deferred tax assets
—

 
—

 
—

 
11

 
(1
)
 
10

Other current assets
1

 
115

 
1

 
263

 
(173
)
 
207

Total current assets
2

 
122

 
1

 
12,585

 
(1,036
)
 
11,674

Investments in subsidiaries
(1,215
)
 
2,792

 
3,393

 
3,807

 
(8,777
)
 
—

Amounts owed by (to) Group undertakings
4,047

 
(3,030
)
 
(243
)
 
(774
)
 
—

 
—

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
Fixed assets, net
—

 
69

 
—

 
385

 
(2
)
 
452

Goodwill
—

 
—

 
—

 
1,211

 
1,618

 
2,829

Other intangible assets, net
—

 
—

 
—

 
502

 
(129
)
 
373

Investments in associates
—

 
—

 
—

 
(48
)
 
225

 
177

Deferred tax assets
—

 
—

 
—

 
40

 
(25
)
 
15

Pension benefits asset
—

 
—

 
—

 
213

 
—

 
213

Other non-current assets
4

 
170

 
2

 
165

 
(136
)
 
205

Total non-current assets
4

 
239

 
2

 
2,468

 
1,551

 
4,264

TOTAL ASSETS
$
2,838

 
$
123

 
$
3,153

 
$
18,086

 
$
(8,262
)
 
$
15,938

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
10,799

 
$
(889
)
 
$
9,910

Deferred revenue and accrued expenses
3

 
15

 
—

 
397

 
(1
)
 
414

Income taxes payable
—

 
21

 
13

 
137

 
(137
)
 
34

Short-term debt and current portion of long-term debt
—

 
—

 
15

 
2

 
—

 
17

Deferred tax liabilities
1

 
4

 
—

 
28

 
(1
)
 
32

Other current liabilities
62

 
49

 
—

 
277

 
(30
)
 
358

Total current liabilities
66

 
89

 
28

 
11,640

 
(1,058
)
 
10,765

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
795

 
1,264

 
266

 
1

 
—

 
2,326

Liabilities for pension benefits
—

 
—

 
—

 
256

 
—

 
256

Deferred tax liabilities
—

 
—

 
—

 
43

 
(25
)
 
18

Provisions for liabilities
—

 
—

 
—

 
213

 
(11
)
 
202

Other non-current liabilities
—

 
11

 
—

 
361

 
(1
)
 
371

Total non-current liabilities
795

 
1,275

 
266

 
874

 
(37
)
 
3,173

TOTAL LIABILITIES
$
861

 
$
1,364

 
$
294

 
$
12,514

 
$
(1,095
)
 
$
13,938

EQUITY
 
 
 
 
 
 
 
 
 
 
 
Total Willis Group Holdings stockholders’ equity
1,977

 
(1,241
)
 
2,859

 
5,549

 
(7,167
)
 
1,977

Noncontrolling interests
—

 
—

 
—

 
23

 
—

 
23

Total equity
1,977

 
(1,241
)
 
2,859

 
5,572

 
(7,167
)
 
2,000

TOTAL LIABILITIES AND EQUITY
$
2,838

 
$
123

 
$
3,153

 
$
18,086

 
$
(8,262
)
 
$
15,938

 

69
Table of Contents

Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Balance Sheet
 
As of December 31, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
ASSETS
 
 
 
 
 
 
 
 
 
 
 
CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
1

 
$
—

 
$
—

 
$
499

 
$
—

 
$
500

Accounts receivable, net
—

 
—

 
—

 
904

 
29

 
933

Fiduciary assets
—

 
—

 
—

 
10,071

 
(800
)
 
9,271

Deferred tax assets
1

 
—

 
—

 
18

 
(6
)
 
13

Other current assets
1

 
102

 
1

 
241

 
(164
)
 
181

Total current assets
3

 
102

 
1

 
11,733

 
(941
)
 
10,898

Investments in subsidiaries
(1,542
)
 
3,025

 
2,548

 
3,824

 
(7,855
)
 
—

Amounts owed by (to) Group undertakings
4,091

 
(3,581
)
 
309

 
(819
)
 
—

 
—

NON-CURRENT ASSETS
 
 
 
 
 
 
 
 
 
 
 
Fixed assets, net
—

 
74

 
—

 
395

 
(1
)
 
468

Goodwill
—

 
—

 
—

 
1,226

 
1,601

 
2,827

Other intangible assets, net
—

 
—

 
—

 
484

 
(99
)
 
385

Investments in associates
—

 
—

 
—

 
(53
)
 
227

 
174

Deferred tax assets
—

 
—

 
—

 
42

 
(24
)
 
18

Pension benefits asset
—

 
—

 
—

 
136

 
—

 
136

Other non-current assets
5

 
172

 
3

 
157

 
(131
)
 
206

Total non-current assets
5

 
246

 
3

 
2,387

 
1,573

 
4,214

TOTAL ASSETS
$
2,557

 
$
(208
)
 
$
2,861

 
$
17,125

 
$
(7,223
)
 
$
15,112

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
 
 
 
 
 
 
 
 
CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Fiduciary liabilities
$
—

 
$
—

 
$
—

 
$
10,071

 
$
(800
)
 
$
9,271

Deferred revenue and accrued expenses
2

 
—

 
—

 
543

 
(4
)
 
541

Income taxes payable
—

 
14

 
11

 
120

 
(126
)
 
19

Short-term debt and current portion of long-term debt
—

 
—

 
15

 
—

 
—

 
15

Deferred tax liabilities
1

 
—

 
—

 
25

 
(5
)
 
21

Other current liabilities
60

 
73

 
—

 
216

 
(22
)
 
327

Total current liabilities
63

 
87

 
26

 
10,975

 
(957
)
 
10,194

NON-CURRENT LIABILITIES
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
795

 
1,268

 
274

 
1

 
—

 
2,338

Liabilities for pension benefits
—

 
—

 
—

 
282

 
—

 
282

Deferred tax liabilities
—

 
—

 
—

 
42

 
(24
)
 
18

Provisions for liabilities
—

 
—

 
—

 
188

 
(8
)
 
180

Other non-current liabilities
—

 
12

 
—

 
363

 
—

 
375

Total non-current liabilities
795

 
1,280

 
274

 
876

 
(32
)
 
3,193

TOTAL LIABILITIES
$
858

 
$
1,367

 
$
300

 
$
11,851

 
$
(989
)
 
$
13,387

EQUITY
 
 
 
 
 
 
 
 
 
 
 
Total Willis Group Holdings stockholders’ equity
1,699

 
(1,575
)
 
2,561

 
5,248

 
(6,234
)
 
1,699

Noncontrolling interests
—

 
—

 
—

 
26

 
—

 
26

Total equity
1,699

 
(1,575
)
 
2,561

 
5,274

 
(6,234
)
 
1,725

TOTAL LIABILITIES AND EQUITY
$
2,557

 
$
(208
)
 
$
2,861

 
$
17,125

 
$
(7,223
)
 
$
15,112


70
Table of Contents
Notes to the financial statements
 (Unaudited)
21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Six months ended June 30, 2013
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(26
)
 
$
4

 
$
12

 
$
147

 
$
—

 
$
137

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
Proceeds on disposal of fixed and intangible assets
—

 
2

 
—

 
6

 
—

 
8

Additions to fixed assets
—

 
(9
)
 
—

 
(42
)
 
—

 
(51
)
Additions to intangible assets
—

 
—

 
—

 
(1
)
 
—

 
(1
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(29
)
 
—

 
(29
)
Payments to acquire other investments
—

 
—

 
—

 
(2
)
 
—

 
(2
)
Net cash used in investing activities
—

 
(7
)
 
—

 
(68
)
 
—

 
(75
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
Proceeds from draw down of revolving credit facility
—

 
—

 
—

 
2

 
—

 
2

Repayments of debt
—

 
—

 
(8
)
 
—

 
—

 
(8
)
Proceeds from issue of shares
62

 
—

 
—

 
—

 
—

 
62

Amounts owed by (to) Group undertakings
58

 
8

 
(4
)
 
(62
)
 
—

 
—

Excess tax benefits from share-based payment arrangements
1

 
—

 
—

 
—

 
—

 
1

Dividends paid
(95
)
 
—

 
—

 
—

 
—

 
(95
)
Acquisition of noncontrolling interests
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(8
)
 
—

 
(8
)
Net cash provided by (used in) financing activities
26

 
8

 
(12
)
 
(72
)
 
—

 
(50
)
INCREASE IN CASH AND CASH EQUIVALENTS
—

 
5

 
—

 
7

 
—

 
12

Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(9
)
 
—

 
(9
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
1

 
—

 
—

 
499

 
—

 
500

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
1

 
$
5

 
$
—

 
$
497

 
$
—

 
$
503

 

71
Table of Contents

Willis Group Holdings plc

21. FINANCIAL INFORMATION FOR ISSUER, PARENT GUARANTOR, GUARANTOR SUBSIDIARIES AND NON-GUARANTOR SUBSIDIARIES (Continued)

Condensed Consolidating Statement of Cash Flows
 
Six months ended June 30, 2012
 
Willis
Group
Holdings
 
The Other
Guarantors
 
The Issuer
 
Other
 
Consolidating
adjustments
 
Consolidated
 
(millions)
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
$
(25
)
 
$
239

 
$
302

 
$
142

 
$
(500
)
 
$
158

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
Proceeds on disposal of fixed and intangible assets
—

 
—

 
—

 
5

 
—

 
5

Additions to fixed assets
—

 
(12
)
 
—

 
(51
)
 
—

 
(63
)
Acquisitions of subsidiaries, net of cash acquired
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Payments to acquire other investments
—

 
—

 
—

 
(4
)
 
—

 
(4
)
Net cash used in investing activities
—

 
(12
)
 
—

 
(54
)
 
—

 
(66
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
 
 
 
 
 
 
 
 
Proceeds from draw down of revolving credit facility
—

 
—

 
50

 
—

 
—

 
50

Repayments of debt
—

 
—

 
(5
)
 
(4
)
 
—

 
(9
)
Repurchase of shares
(56
)
 
—

 
—

 
—

 
—

 
(56
)
Proceeds from issue of shares
23

 
—

 
—

 
—

 
—

 
23

Amounts owed by (to) Group undertakings
151

 
(108
)
 
(182
)
 
139

 
—

 
—

Excess tax benefits from share-based payment arrangements
—

 
—

 
—

 
1

 
—

 
1

Dividends paid
(93
)
 
(282
)
 
(165
)
 
(53
)
 
500

 
(93
)
Proceeds from sale of noncontrolling interests
—

 
—

 
—

 
3

 
—

 
3

Acquisition of noncontrolling interests
—

 
—

 
—

 
(29
)
 
—

 
(29
)
Dividends paid to noncontrolling interests
—

 
—

 
—

 
(10
)
 
—

 
(10
)
Net cash provided by (used in) financing activities
25

 
(390
)
 
(302
)
 
47

 
500

 
(120
)
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
—

 
(163
)
 
—

 
135

 
—

 
(28
)
Effect of exchange rate changes on cash and cash equivalents
—

 
—

 
—

 
(1
)
 
—

 
(1
)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
—

 
163

 
—

 
273

 
—

 
436

CASH AND CASH EQUIVALENTS, END OF PERIOD
$
—

 
$
—

 
$
—

 
$
407

 
$
—

 
$
407



72